Norman Baker MP Member of Parliament for Lewes constituency
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Norman Baker,
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Lewes,
East Sussex,
BN7 2LJ.
Tel: (01273) 480281.
Fax: (01273) 480287.
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Company law reform - sustainable development and greater accountability
The Company Law Reform Bill mostly contains welcome, uncontroversial reforms to company law that have been consulted on for over seven years and will improve conditions especially for small business.
However, the Company Law Reform Bill is also an opportunity to improve the legal framework for sustainable development and company accountability, and in these areas Liberal Democrats believe the Bill does not go far enough. While there is some limited progress on vital social and environmental aspects of business, we are pressing the Government to go much further.
If businesses are to be held to account to both their shareholders and the wider public, not just for their financial performance but also for their impact on the community and the environment, the Lib Dems believe we need new forms of corporate reporting. Accountability will only be possible if the information on a firm's activities is not limited to balance sheet accounting, but must also provide a narrative account covering wider issues.
A basis for such enlightened corporate reporting has been developed in a form known as Operating and Financial Reviews (OFRs), and the Government had promised before the last election to legislate fully for them in the Company Law Reform Bill, with their compulsory introduction in April 2006. This would have been a major step forward.
The Lib Dems were therefore greatly disappointed by Gordon Brown's announcement at the CBI conference in November 2005 that the Government would be abandoning these OFRs. It appears he made this decision after advice received from some City investment firms. Yet by this U-turn the Chancellor was not only ignoring the wishes of environmentalists, but also going against the investment of time and money made by the majority of Britain's largest companies, the best of whom have been producing voluntary OFRs for several years, finding them useful and effective.
My Lib Dem colleagues have therefore been leading a campaign in Parliament to force Ministers to abide by their election promises, and to revive the compulsory introduction of improved corporate accountability.
The Company Law Reform Bill has been the main vehicle for these efforts. It started in the House of Lords where Lib Dem peers have led the way in putting amendments to promote corporate responsibility and transparency.
Lib Dems want OFRs in the Bill, and for them to be strong requirements. The Government's alternative proposal of Business Reviews is simply too limited, applying to only 1500 or so quoted companies, covering fewer areas and with less demanding auditing arrangements. So Lib Dem peers pressed amendments, for example, to include non-quoted large companies and appropriate medium-sized companies in the Business Reviews, to reshape this proposal back towards the original OFRs.