Corporate Insolvency and Governance Bill

Lord Hendy Excerpts

Report stage & Report stage (Hansard) & Report stage (Hansard): House of Lords
Tuesday 23rd June 2020 Lords Chamber

[Baroness Bryan of Partick (Lab) [V]]

My Lords, I too speak in support of Amendment 75. Although it is much weaker than the original amendments, it touches on an important debate that is happening not just in the UK but in most of the developed capitalist countries about the status of employees in a company.

Nearly 30 years ago, two academics wrote a paper entitled “The End of History for Corporate Law”. As often happens with such pronouncements, they were premature. The authors assumed that shareholder capitalism was unchallengeable. It is now common to hear senior executives and influential economists extol the importance of moving towards stakeholder capitalism. The chief executive of Black Rock, Larry Fink, wrote recently about climate change but said that sharing data should go

“beyond climate to questions around how each company serves its full set of stakeholders, such as the diversity of its workforce”.

The Financial Times reported that a business round table of 151 US chief executives has revised its concept of “purpose of corporation”. They have renounced shareholder value and would instead lead their companies to the benefit of all stakeholders—customers, suppliers, employees and communities. Mark Carney wrote recently in the Economist that companies would be judged on how they treated employees, suppliers and customers, by who shared and who hoarded, and that the corona crisis was

“a test of stakeholder capitalism.”

He might have had in mind companies such as easyJet, which has sought state aid after cancelling most of its flights but went ahead with a £174 million dividend payout while asking employees to take unpaid leave and face substantial changes to their terms and conditions.

This amendment should be knocking at an open door. I am sure that noble Lords will want to accept it, and that what it calls for will become common practice before too long. It is a modest proposal that does no more than require a company to consult the representatives of its employees. I am sure that many of us would want to go further than that, and no doubt this is an issue that we will return to over the coming months and years.

[Lord Hendy (Lab) [V]]

My Lords, I too shall speak to Amendment 75. In precisely one week’s time, we will celebrate the 70th anniversary of the ratification by the United Kingdom on 30 June 1950 of Convention No. 98 of the International Labour Organization, one of the two most fundamental conventions in international labour law. It has not only been expressly ratified by 167 nations but is considered part of customary international law. Article 4 reads as follows:

“Measures appropriate to national conditions shall be taken, where necessary, to encourage and promote the full development and utilisation of machinery for voluntary negotiation between employers or employers’ organisations and workers’ organisations, with a view to the regulation of terms and conditions of employment by means of collective agreements.”


Another anniversary will be commemorated on 11 July, for on that day in 1962, as a member of the Council of Europe, the United Kingdom ratified Article 6 of the 1961 European Social Charter. The article reads:

“With a view to ensuring the effective exercise of the right to bargain collectively, the Contracting Parties undertake … to promote joint consultation between workers and employers … to promote, where necessary and appropriate, machinery for voluntary negotiations between employers or employers’ organisations and workers’ organisations, with a view to the regulation of terms and conditions of employment by means of collective agreements”.


This amendment does not seek the fulfilment of the Government’s obligation to promote collective bargaining on the consequences for workers in a company that is running into financial difficulties and the measures such as a moratorium to alleviate them, but it does require the fulfilment of the more modest obligation to promote consultation between workers and employers about such consequences. It is difficult to the point of impossibility to see what objection there could be to the imposition on directors of an obligation to hear from their workers—in this case their employees—their perceptions of and suggestions for ameliorating the company’s situation. Under the Companies Act, directors already have an obligation to take into account the interests of the employees, so it is really not asking much to require them to ask their employees to express their views.

Given that the biggest impact of the moratoria and other measures relating to a company’s financial difficulties will be on the workers whose livelihoods are on the line, why not hear their voices? They will be the most ardent and innovative in finding ways of keeping the company alive. Certainly, the Minister and his team have offered no objection to the principle or the practicality of this so far. All that has been said is that employees are already protected and that the courts have a duty to ensure that arrangements are fair and equitable.

The first point is hopeless. There is no extant legal obligation to hear the voices of workers, no obligation to bargain collectively, no obligation to consult save where collective redundancy procedures apply, and no requirement to have worker directors on the board. The second point is equally without merit. There is no provision for workers to be parties to, to be represented, or even to be heard in the specific court proceedings to which this Bill relates. Without hearing from representatives of the workers in respect of the measures being proposed, how can the court be satisfied that any measure is fair and equitable to them? I urge the Government to accept the amendment and to fulfil at least partly their international legal obligations.

[Lord Hain (Lab) [V]]

My Lords, following the excellent speeches of my noble friends Lord Hendy, Lady Bryan and Lord Kerslake, I wish to support Amendment 75.

There was a moment during the response of the Minister, the noble Lord, Lord Callanan, in Committee to various amendments aimed at protecting the interests of a company’s workforce in the moratorium process when I was reminded of the Hatton Garden safe deposit robbery in 2015, the biggest burglary in British legal history. The conspirators in that crime called carving up the proceeds “the slaughter”. One of the gang nearly missed out on the slaughter. He had bailed out after the first attempt to break in because he did not want to risk returning to the scene of the crime. Some of his co-conspirators felt that he had thereby forfeited any share of the proceeds. Fortunately for him, there was honour among thieves, and they relented and gave him a cut.

The Minister argued that workers are already well protected and that consulting employees or their representatives in the moratorium process is unnecessary because the aim of the Bill is to keep companies in business. In his view, consulting employees would risk publicising a firm’s problems before it could be protected from creditor action, leading to more company failures—in short, that the workers should know their place, run along and let their betters deal with the problem. If he had patted them on the head, I would not have been surprised. Surely there should be a less patronising attitude to people who may have invested much of their working lives in a company that is now facing financial distress.

For workers, insolvency puts more than just their jobs in jeopardy. They may have back pay at risk. Their pension rights may be in danger. Their redundancy rights may be under threat and their tax and national insurance responsibilities may be in doubt. Indeed, the company may even have defaulted on payments to HMRC already deducted from their pay. Their employer may be defaulting on its equal pay and equal rights obligations.

Workers have a vital interest in the insolvency process. They deserve a voice in the consultation process and surely the Government cannot deny that; otherwise, they will be left where they are now—on the outside, at the end of a long tail of unsecured creditors, unrecognised, unheard and unwelcome, while the professional insolvency practitioners practise their black arts. Britain’s workers deserve better, and that is the purpose of Amendment 75.

The amendment is very modest, simply requiring companies to consult their workforces. It imposes no vetoes by employees on the moratorium process and specifies no hurdles that have to be surmounted; instead, it simply imposes an obligation to consult. Surely the Government must agree to that principle or, alternatively, endorse an attitude that says in effect that company owners’ rights matter, creditor and debtor rights matter but employee rights do not. I urge the Minister—and, if not, then your Lordship’s House—to support Amendment 75 or, alternatively, as I now understand he might do, at least to give some proper guarantees that employees will not be left in the lurch.