John Lewis, Iceland, innocent and the IoD call for rewrite of UK company law
On Wednesday 14th April, a cross-section of British businesses including the likes of John Lewis, Iceland, Brewdog and Bulb, will present proposals for parliament to update UK company law in a way that will help the UK to build back better from the COVID pandemic and accelerate progress to net zero.
The Better Business Act – which is backed by a growing coalition of over 400 UK companies as well as influential business representative body the Institute of Directors – will amend section 172 of the Companies Act to ensure that company directors are responsible for advancing the interests of shareholders alongside those of wider society and the environment.
The legislation – which is expected to be backed by a cross-party group of parliamentarians speaking at the event – will seek to put four principles of better business on a statutory footing:
- Aligned Interests: The interests of shareholders are now advanced alongside those of wider society and the environment. This establishes a new principle of fiduciary duty within Section 172 of the Companies Act.
- Empowering directors: This change must empower directors to exercise their judgement in weighing up and advancing the interests of all stakeholders.
- Default change: This change must apply to all businesses by default. It must no longer be optional to benefit wider stakeholders beyond shareholders.
- Reflected in reporting: Following this change, businesses must report on how they balance people, planet and profit in a strategic report or impact report, where one is currently required.
A May 2020 poll showed strong public support for the campaign proposals with 72% of the UK public believing business should have a legal responsibility to people and the planet, alongside maximising profit, while 76% of the UK public think business should have a legal responsibility to protect the natural environment.
Additionally, independent analysis has also shown evidence of improved business outcomes for companies run in line with these principles, including faster growth in turnover, employee headcount and anticipated future growth.
Speaking ahead of the parliamentary launch, Douglas Lamont, CEO of innocent drinks and co-chair of the Better Business Act, said: “The Better Business Act campaign is an important movement for change, where leaders of businesses of all types and sizes are coming together united by a clear purpose – to set a higher standard for ourselves and create a clear and consistent regulatory framework that puts aligning the needs of all stakeholders: our shareholders, our people and our planet as its central principle. With this in place we are confident we can accelerate the much-needed journey towards a fairer and more sustainable future for all.”
Jon Geldart, Director General of the Institute of Directors, said: “Directors have a crucial part to play in creating and running better and more sustainable businesses. As we emerge from the pandemic, the IoD is pleased to back the Better Business Act, which will empower directors to advance the purpose of their businesses in a way that benefits all stakeholders.”
Chris Turner, Executive Director of B Lab UK and Campaign Director of the Better Business Act, said: “The world needs business at its best – creating good jobs, helping fix big problems and adding value to society. The best way to do this is to change the law that governs how businesses act. The Better Business Act is a unique opportunity to demonstrate UK leadership on the global stage – creating a competitive advantage, driving innovation, accelerating progress to net zero, and aligning with the government’s ambition to build back better.”