Tag Archives: corporate governance

ESG investing and section 172 of the Companies Act 2006: Desperate times call for soft law measures

By Dr Georgina Tsagas, Lecturer in Corporate Law (University of Bristol Law School).

In this blog entry, Dr Tsagas provides an overview of her proposal for the reform of the UK’s Corporate Governance Code. Her full arguments will soon be published in G Tsagas, “Section 172 of the Companies Act 2006: Desperate times call for soft law measures”, in N Boeger and C Villiers (eds.), Shaping the Corporate Landscape: towards corporate reform and enterprise diversity, Oxford: Hart Publishing, forthcoming.

Section 172 CA 2006: Not worth the paper it is written on?

Section 172 of the Companies Act 2006 has been afforded much attention during Parliamentary discussions on the codification of directors’ duties and has since the enactment of the Companies Act 2006 occupied much space in discussions among scholars who share an academic interest in the shareholder/stakeholder debate, in policy documents on law reforms following a series of corporate failures, as well as in company law lecture notes provided by Law Schools across the UK.

The previous duty to act bona fide in the interests of the company has been substituted by section 172 CA 2006, which imposes on a director the duty to ‘act in a way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole’ and in doing so must have regard to a series of factors listed in the section. The factors are: (a) the likely consequences of any decision in the long term, (b) the interests of the company’s employees, (c) the need to foster the company’s business relationships with suppliers, customers and others, (d) the impact of the company’s operations on the community and the environment, (e) the desirability of the company maintaining a reputation for high standards of business conduct, and (f) the need to act fairly as between members of the company.

With the UK leaving the EU, it is a critical time to discuss enlightened decision-making on boards, considering that, arguably, one of the key benefits of joining the EU with regard to UK company law, was that the UK was prompted to consider incorporating provisions affording a certain level of protection to the interests of other constituencies across a wide range of company and securities law Acts and regulations. What often escapes the attention of participants in discussions surrounding s. 172 CA 2006, is the section’s limitations not so much in terms of it prioritising the interests of shareholders over the interests of other constituencies, but with regard to its enforcement and utility overall. Continue reading

Never Mind the Bake Off, here’s the Great Business Bake In?

By David Hunter, Knowledge Exchange Fellow (University of Bristol Law School).

It seems much of the UK will be focused this year on The Great British Bake Off and whether it will be quite the same, or as successful, as it was in its previous incarnation. Away from popular culture, but with an even more pervasive impact on the lives of the nation, it could be a baking in, rather than a bake off, that is significant in 2017. The ingredient is mission, or purpose, being baked into the constitutions and cultures of business. Continue reading

What is the point of Business?

By David Hunter, Consultant, Charity & Social Enterprise Department (Bates Wells Braithwaite LLP) and Knowledge Exchange Fellow (University of Bristol Law School)[1] and Ms Nina Boeger, Senior Lecturer in Law and Director of the Centre for Law and Enterprise (University of Bristol Law School).

img-20161127-wa0001Businesses are, in some respects, like cement. They are an integral part of the society we inhabit, and yet for the most part invisible to us as tangible entities. We give them little thought, but our lives would be very different were we to wake up to a world without either.

In April 2016, the UK government did invite us to think about the nature of business though as part of what it called a Mission-led Business Review. It set up an Advisory Panel and ran a public consultation and, seven months on, the Panel has reported back to the government with its recommendations[2]. The timing is interesting, with the review commencing when David Cameron was still Prime Minister, before the UK’s Referendum on EU membership and the US election, but the publication of the Panel’s findings coming when those events have demonstrated a clear sense of public discontent with the status quo.

What was the Review about, what is a ‘mission-led business’ and what are the likely responses to and impact of the Panel’s findings? Continue reading

We need a new corporate landscape

By Prof Charlotte Villers, Professor of Company Law, and Ms Nina Boeger, Senior Lecturer in Law (University of Bristol Law School–Centre for Law and Enterprise).

© Childs & Sulzmann. Artist’s impression of Boxworks at the Engine Shed

© Childs & Sulzmann. Artist’s impression of Boxworks at the Engine Shed (Bristol)

Our corporate landscape has relevance for our post-Brexit future. Yet deep public distrust exists not just with regard to our politicians but also with regard to business. Recent debacles involving the now defunct British Home Stores and Sports Direct are just the tip of the iceberg in what is widely seen as a broken economic and political system that has given precedence to the leading market actors.

Corporate governance is the key means by which global wealth is distributed but that wealth is not distributed fairly. Two stakeholder constituents are prioritised: boardroom directors who frequently enjoy eye-watering pay and perks, and shareholders, at least in theory, through the profit maximisation imperative. Both groups have focused on making a quick buck rather than the long term interests of their companies. Workers, at the bottom of the corporate hierarchies, have little chance of improving their means of living and face greater levels of insecurity in their working and home lives. Workers further down the supply chain risk their lives trying to scratch a living in countries only too glad to gain trade from the powerful multinationals.  Consumers lose out as product quality and services are whittled down and the environment, as a natural resource constituency, barely gets a look in. Continue reading