Corporate Governance: Reform
The question
To ask the Secretary of State for Business and Trade, whether his Department plans to consult (a) businesses, (b) trade unions, (c) investors and (d) civil society organisations on the principle of moving from shareholder primacy to stakeholder primacy.
Answered by Justin Madders
Section 172 of the Companies Act 2006 requires company directors to have regard in their decision-making to the interests of their employees and to the impact of the company's operations on the community and the environment. All large companies must report annually on how their directors have fulfilled this duty. Section 172 enshrines in statute the "enlightened shareholder value" principle, which recognises that the long-term success of a company depends in part on the ongoing consideration of wider stakeholder interests. This contrasts with the "shareholder maximisation" principle underpinning directors' duties in some other jurisdictions, in which directors owe their duty only to shareholders.
The Government welcomes suggestions on how to ensure companies consider wider stakeholder interests alongside the needs of stakeholders. I look forward to considering the clauses of the Company Directors (Duties) Bill when available.
I would be pleased to meet with the Honourable Member for Newton Abbot to discuss his Private Member's Bill.
Verbatim has judged this answer against the question that was actually asked — answered, partly answered, or evaded. Sign in to see the verdict →