Corporate Governance and Accountability

Baroness Bottomley of Nettlestone Excerpts

Tuesday 5th July 2011 Lords Chamber

[Baroness Bottomley of Nettlestone]

My Lords, the House is grateful to the noble Lord for identifying a subject that is of such concern that we all wish that this had been an all-day debate rather than just an hour's debate. I share his view that, for all the stakeholders in the debate, the institutional community is not sufficiently well engaged currently and the stewardship code offers a serious opportunity.

The fact is that we in the UK should be proud that UK companies have been at the forefront of the process. A large majority of major UK firms publish high-quality social and environmental information on an annual basis. Many produce stand-alone reports dealing with financial and social performance. Frankly, many of them are too large, too lengthy, too detailed and sometimes irrelevant. Those of us who have been Ministers for a certain time know that the way to silence Ministers is to bombard them with paper, and a corporate report lasting 500 pages is a way of befuddling rather than informing.

Companies see the importance of good corporate ethics and strategy and of reporting properly and fully about the full nature of their activities. I agree with the noble Lord that volunteering is not the same as human rights, female empowerment and avoiding child labour. We already go further in non-financial disclosures than most other EU members. I am concerned about further stringent regulations that might impose a significant administrative burden on firms without a corresponding gain in transparency.

I declare an interest as I am on the UK advisory committee of the International Chamber of Commerce. We have drawn attention to the fact that allowing a certain degree of discretion in non-financial reporting enhances transparency by allowing companies to focus on issues of more relevance and materiality to their business operations. By contrast, the tick-box approach, which I think many of us would like to avoid, would produce a sea of data and information, at considerable cost to UK plcs, that would be impenetrable to all but the most persistent reader. I think the CBI has similar views.

It is understandable that there is a desire for greater clarity. Since the Companies Act 2006, on which I made my maiden speech in this House, we have seen great development. My honourable friend’s department, BIS, has consulted on narrative reporting. We are fortunate to have her as our Minister because she had a significant commercial business career and was also chair of the National Consumer Council, so she can balance all the interests involved. Perhaps she will let us know what the Government are doing to improve the quality of narrative reports to ensure improved disclosures on the environmental and social impact of corporate activities.

Above all, I want to emphasise that the ability of global business to be a force for good, for female empowerment, for sustainability and for anticorruption in many parts of the world, should not be underestimated. As we look for modifications, we should remember the opportunities that are there.