Corporate Governance and Accountability

Lord Haskel Excerpts

Tuesday 5th July 2011 Lords Chamber

[Lord Haskel]

My Lords, my noble friend Lord Harrison outlined the benefits of good corporate governance and reporting. Do they increase profits, the rate of return or shareholder value? I do not think that anybody knows. Therefore, strong forces oppose these activities and see them as a waste of money that distracts management from dealing with competition. Because one cannot show them as assets on balance sheets, they have no effect on shareholder value. These issues change with fashion. They are unpredictable and have little impact on the short-term horizon of many managers.

A good metaphor for these conflicting views is the way in which we manage our forests. The Minister may find the subject of forests painful, but the metaphor is not mine: it came from Mark Goyder, the founder of Tomorrow’s Company. We can cut down trees and harvest wood for an immediate cash benefit; then we are left with barren land. Alternatively, we can nurture the forest, plant for the future, take out the dead wood and let new plants and wildlife thrive in the forest, and thereby open up new horizons. Many of us would like to know which companies are good at forestry so that we can deal with them, work in them or invest our savings or pension funds in them.

Many of us like to drink Fairtrade tea and coffee because we know that everybody in the value chain has had a square deal, or we may look for the Carbon Trust Standard mark that tells us that an organisation has tackled its emissions. Branding enables us to make this choice. Helpfully, as my noble friend reminded us, Tomorrow's Company has produced a stewardship code that incorporates many things that we are debating this evening. Will the Government support and facilitate a branding exercise to enable us to recognise the good companies that play such an important social and environmental role in our economy?