Company Law Reform Bill [HL]

My Lords, at the moment, I am tempted to support this amendment because I find the provisions difficult to understand, whether as in the Bill or as in the amendment. I do not say this because the Bill uses modern words, for example,"““would be most likely to promote the success of the company for the benefit of its members as a whole””," whereas the amendment uses,"““in what he considers to be in the interests of the company””," which is the time-honoured phrase, because I do not believe that there is a great deal of difference between the two and I do not know why we have to be trendy and change it. However, I do not think that that is the important point. What I find confusing, and I think most directors will find it even more confusing, is the effect of the various things to which the director is to have regard. Let us consider, at random, the fact that he is to have regard to the impact of the company’s operations on the community and the environment. Obviously, any director will have to ask what the impact of a decision on the community and the environment will be and, if it will be adverse, whether that will damage the company’s reputation, its business, its custom or so on. But the Bill is equally open to the interpretation that what he has to do is to ask himself whether something will have an adverse impact on the community or the environment, although it is of benefit to the company and the damage to the company by any adverse impact will be slight. Has he got to balance what is in the interests of the company with what is in the interests of the community and the environment? Is he to say that although the company will do well out of something and the damage to its reputation will be very slight, it will not be very nice for the community and therefore the company must not do it? I do not think that is what is intended, but the Bill is very open to being interpreted as saying that. If that is what is intended, how on earth is a director to decide how to balance the interests or success of the company—which are what he thought he was there to protect—against outside consequences that are to be dealt with by planners, environmental authorities or so on? If he is meant to be a general policeman of the public good, against the interests of the company, then his job becomes impossible and he is open to complaints from everyone. If it is made plain that all he has to do is what he is doing at the moment, that is, ask, ““Will this damage our relations with our employees and therefore bring business to a halt? Will it mean they work less well? Will it mean that we are very unpopular in the community and therefore no one buys our products?””, that is alright, because that is what he does at the moment. But if he is to be expected to balance those considerations as an absolute or a relative other factor, his life is made impossible. The Bill is wholly unclear on that, and it will certainly give rise to an enormous number of directors saying, ““I do not know what I am meant to be doing. I can quite clearly see what is best for the company, but what about the fact that some of the community will not want our new factory?””. It seems to me that this is creating enormous uncertainty and runs the risk of being thought to widen the director’s responsibilities enormously.