A recent private members bill saw a renewed call for mandatory reporting. In his new column on the latest political trends, Roger Cowe lays out why it never stood a chance.
There is no shortage of MPs who think the business world needs a bit of legislative help to be good. But they get short shrift from the government, as Andy King discovered when he tried to introduce the latest Bill from the CORE coalition at the end of January.
Despite success in the ballot for private Bills, the Rugby Kenilworth MP fared no better than his Labour colleague Linda Perham did last year. The government was not interested in making time for a debate, and the Bill was “talked out”.
CORE (Corporate Responsibility) brings together a growing number of NGOs, unions and charities who believe that the business case is not strong enough to ensure that companies will voluntarily do the right thing – especially in developing countries where local laws are either non-existent or not enforced.
That cuts no ice at the Department of Trade and Industry (DTI), which complains that time spent defeating this Bill has got in the way of efforts to finalise the new Operating and Financial Review (OFR). The DTI doesn’t need a Bill to introduce the OFR, and is poised to bring in the necessary regulation, which will address (though not satisfy) the CORE group’s demand for social and environmental reporting.
The coalition’s other main demand is a complete non-starter, so far as ministers are concerned. This is the old chestnut of extending directors’ responsibilities to all stakeholders, not just shareholders. The argument was lost early in the Company Law Review – which came up with the concept of the new OFR. The British government (whatever its political colour) is never going to be at the forefront of overthrowing capitalism as we know it, in which shareholders own and control companies and are the only people directors have to answer to in law.
The CORE concept is not going to go away, however. And it is hard to argue with the basic notion that public companies should be properly accountable for their impacts, wherever they operate. The question is whether that can be done sensibly through legislation. One route could be the Foreign Liability approach, which would make British companies liable in the UK for damage inflicted abroad. Another might be bypassing company law and thinking instead about some kind of environment, health and safety approach.
The government is not interested in either, preferring instead the disclosure route. But Stephen Timms has beefed up the DTI mechanism which is supposed to deal with complaints under the OECD Multinational Guidelines – the kind of soft law which could bring more accountability, even though it would not satisfy the CORE objectives.
Fact File: Mandatory reporting
Highlights from the Performance of Companies and Government Departments (Reporting) Bill include:
Duty for companies to prepare and publish reports:
1(1) It shall be the duty of every qualifying company to prepare and publish a report annually containing
(a) An assessment of the social and environmental impacts and risks of its policies, performance and procurement arrangements
(b) An assessment of the company’s employment policies and performance
Duties of Directors
(1) … it shall be the duty of the directors of any company to have due regard to –
(a) the social, environmental and economic impacts of the company’s activities and any proposed activities; and
(b) the interests of all their stakeholders
After the failure of the Bill’s second reading on January 30, it is unlikely to move into Committee Stage.
For more information, see http://www.corporate-responsibility.org
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