Businesses: Rights and Responsibilities

Lord Henley Excerpts

Thursday 8th December 2016 Lords Chamber

[Lord Henley (Con)]

My Lords, I follow other noble Lords in thanking my noble friend Lord Hodgson of Astley Abbotts for bringing forward this timely debate. It comes only a week or so after the launch of the Green Paper which has been much referred to by noble Lords, and which I will refer to in due course. I brought that Green Paper to this House on behalf of my right honourable friend only a week after my third return to the Front Bench. As my noble friend said, it was very timely; and in a debate that has covered such a wide range of subjects, it is something that we can focus on. I will return to it later.

The debate has covered a wide range of subjects. We have heard much about the Companies Act and other matters. Regarding the Companies Act, I remember doing my Bar exam some 40 years ago, and for some strange reason at that stage, if one was an Hon law graduate one was exempted from the paper on company law. I cannot remember which Companies Act it was at that stage. It was probably the Companies Act 1948, and we have gone on a long way since then. I certainly note what the noble Baroness, Lady Bowles, said about the need to amend Section 172, and no doubt that is something that can be fed into the consultation on the Green Paper in due course.

I welcome my noble friend’s Motion on rights and responsibilities in the business world. It is important to look at exactly what the rights and responsibilities are. We believe that rights are legal, social and ethical principles of freedom or entitlement about what is allowed of people or owed to them. Rights come in many forms in the economy; for example, human rights, employment and labour rights, consumer rights and intellectual property rights. Having mentioned human rights, I suppose I ought to mention one brief interest in that, having returned to the Front Bench, I have recently, sadly, left the Joint Committee on Human Rights, which at the moment is engaged in a report on human rights in the business world. I see my colleague on that committee, the noble Baroness, Lady Prosser, nodding in agreement. I am sure she will continue the work that others are engaged in on that.

The Government obviously have a role to set the framework by which individuals’ rights are realised and protected and in which businesses must operate. We have a strong legal framework in the UK of which we can be proud. It enshrines and protects the rights of everyone. It is also the corporate responsibility of businesses to respect that framework. Despite what has been said about BHS and Sports Direct—we could also go back, as my noble friend Lord Eccles said, to Polly Peck, and we all remember Maxwell and a whole range of scandals in the past—it is the corporate responsibility of businesses to respect those rights, and I believe that the vast majority do so. Some obviously do a great deal more. Where those few businesses fall short, they are rightly held to account. The Motion focuses on the role of the Government in striking that correct balance between rights and responsibilities in our economy. The UK has an international reputation for being one of the best places to do business, and a place where business is done the best. We want to keep it that way.

Noble Lords will require no reminder of just how important it is that business is conducted in a responsible way. There are more than 3 million businesses in the United Kingdom, from small start-ups to large, established businesses. On that point, my noble friend Lady Couttie talked about the treatment of little businesses by big business, and looked for protection for, if I remember her words correctly, the babies against the Goliaths—a rather mixed metaphor, but I got what she was getting at, particularly on payment practices. Obviously there is much that government can do, but government can also do much in that world by example. For instance, English public sector buyers are now required to pay within a 30-day period, and we will certainly continue to do that.

Those 3 million business also have a presence across the globe. Whether large or small, they are a critical component of our society. They are not separate in some way from the rest of society, and the decisions that management takes will have impacts on the lives of their customers, their employees, their suppliers and contractors, and on wider society too. Many leading businesses are at the vanguard of understanding their role in society. I think all members of the House would recognise that, at present, the overall reputation of business—this is obviously true of politicians and others as well—is not as high as it ought to be. There is a feeling that big business in particular is not conducted with an eye on its responsibilities to wider society.

However, the Government are taking action on a number of fronts. We have a Minister, Margot James, with a specific responsibility for the responsible business agenda. Here, I will just touch on a point that my noble friend Lord Hodgson made at the beginning about the over-rapid change of Ministers and Secretaries of State in the department. There has been this complaint about over-rapid change in all my years, in all departments. As always, it is not something that I can answer, but I will certainly refer it to higher authorities. I am sure that on this occasion my right honourable friend the Prime Minister will take note.

In addition, last Monday, the advisory panel into mission-led business published its final report, calling on all businesses to be explicit about the role they play in society. Just last week, as I mentioned earlier and as other noble Lords stated, we published the Green Paper on corporate governance, which I will come to in slightly more detail later on. I will also come on to the Green Paper we will soon be publishing on industrial strategy, which the noble Lord, Lord Stevenson, mentioned earlier. All those initiatives are part of one single overarching belief that we must strengthen business’s sense of responsibility to society.

My noble friends Lord Eccles and Lord Tugendhat talked about the need for corporate responsibility, which means businesses having regard to the impact that they have on society, going beyond just complying with the law. It has certainly been useful to hear both my noble friends on that subject. They will be fully aware that UK company law requires directors of all UK companies to promote not only the success of the companies for the benefit of their members as a whole but, in doing so, to have regard to a number of factors including the long-term consequences, the interests of their employees, the relationships with stakeholders and the impact on the community and the environment. The Government’s role in this context is to encourage those businesses that lead in good practice and to encourage others to follow suit.

I turn to the matter of diversity in business management, particularly at senior levels, which was touched on by my noble friend Lady Bottomley and the noble Lord, Lord Taylor of Warwick, both coming at it from different points of view. We are encouraging business-led moves towards a more diverse and inclusive culture in the top management of our businesses, encouraging them to set a lead for others to follow. Boardrooms should mirror wider society, and businesses should make the most of all the talent not only in their own diverse workforces but throughout the country and in wider society. We are following up the success in increasing the representation of women on the boards of our biggest companies by working with business to ensure that more talented women achieve senior executive roles. We welcome the report from the review led by Sir Philip Hampton, chairman of GlaxoSmithKline, and Dame Helen Alexander, chair of UBM, which is now pressing ahead with proposals to drive up the representation of women at senior levels.

On the remarks by the noble Lord, Lord Taylor of Warwick, last month we welcomed the report of Sir John Parker’s review and his recommendations to address the very worrying low levels, which the noble Lord referred to, of representation of black and minority ethnic directors in UK boardrooms. Diversity at the top of our business is also about trust; it shows workforces that their boards are representative of them and of wider society, and that the routes to the top are open to them. People want to believe that if they work hard then they too can get there, whatever their background.

I turn to the Green Paper that I presented to this House when I repeated the Statement made by my right honourable friend when he presented it to another place only last week. I think the word used by the noble Lord, Lord Monks, to describe it was “weedy” while the noble Lord, Lord Stevenson of Balmacara, described it as “not strong”. I have to stress that this is very much a Green Paper. A Green Paper is what it says: a paper that invites discussion. We will welcome the thoughts of noble Lords and indeed all others during the consultation that is ahead of us. This is not a White Paper that we are putting before the two Houses; as I said, it is a Green Paper. It invites views from everyone in a number of areas.

First, I make it clear that the Green Paper asks for opinions on how we can improve shareholder influence on such matters as executive pay—on which the noble Lord, Lord Monks, and my noble friends Lady Bottomley and Lord Tugendhat all had strong views—including whether shareholder voting rights might be enhanced, which my noble friend Lord Hodgson stressed. It also addresses the question whether the link between executive pay and long-term company performance can be strengthened and made clearer. It also asks whether more can be done to improve the connection between the boards of directors of companies and their employees. As I expected, the noble Lords, Lord Monks and Lord Stevenson, came back on this. They seemed to think it was an abandonment of my right honourable friend’s commitment to workers on boards.

My right honourable friend, in her July speech, said that she was committed to increasing the representation of employees and consumers in the boardroom. The Government’s policy is set out in the Green Paper and includes options to strengthen representation of employees and others in boardrooms. That includes, as the noble Lord said, the option of creating worker advisory panels or designating independent directors to speak for employees. Again, this is a matter for discussion and I stress that it was a Green Paper laid before both Houses that invites comments from noble Lords. I am sure that the views of the noble Lord, Lord Monks, will be taken into account.

It also seeks views on whether some of the features of the corporate governance regime covering quoted companies should be extended to our largest privately held companies. Again, the Green Paper will include views on those points. In asking these questions, we want to improve further the ability of UK businesses to take management decisions informed by a wide range of views, and which better support long-term company performance and sustainability.

I shall say a word or two about the industrial strategy mentioned by the noble Lord, Lord Stevenson, who set out quite a long and detailed list of what he thought ought to be in the strategy. I did not manage to take it all down but no doubt I will look at it again when I read his speech tomorrow, and no doubt others will take it into account. We are working on that industrial strategy, driving us towards an economy that works and is fair for all. We have had economic successes in recent years. We have had an open, dynamic and competitive economy since the financial crisis, with a record number of people in work, more businesses than ever, some world-class sectors, a strong science and research base, and growth.

However, we obviously face challenges. That growth has not been even across the United Kingdom, as noble Lords have stressed. Not everyone has benefited, and prospects and opportunities for people and businesses vary too much. We want to make sure we can deliver high wages, high skills and high productivity, and we want to create the right conditions for competitive business across the United Kingdom.

As the Prime Minister has said of that industrial strategy in her speech to the CBI conference, it means the Government,

“stepping up to a new, active role that backs British business and ensures more people in all corners of the country share in the benefits of your success”.

We aim to develop a modern, ambitious, long-term industrial strategy. We want to do this working with businesses, people and organisations right across the country, so we are preparing a wide-ranging discussion paper to invite views to inform our approach. I cannot give a date but we expect to publish that some time next year, just as we got the other one out this year. I look forward to debates on that in due course with the noble Lord and others.

I end by thanking my noble friend for his timely Motion, and all noble Lords for their contributions on these issues. We share all the concerns expressed about the importance of getting right the balance of rights and responsibilities within the business sphere. I commend the Motion to the House.