Company Law Reform Bill [HL]

My Lords, I say to the noble Lord, Lord Sharman, that this is not the beginning of a negotiation; this is consideration of this amendment. We are grateful to the noble Lord for tabling the amendment. I said in Grand Committee that we agreed in principle that a five-year period is too long and that the period could sensibly be shortened. I also said that we wished to do some more consultation to confirm that the proposed reduction in the period would not cause difficulties for smaller companies. That consultation has confirmed that there is widespread support for a reduction in the period. Some business groups supported a reduction to three years rather than two years, on the ground that this would give companies the appropriate degree of flexibility in their negotiations with executive directors in a range of circumstances. We, however, share the view of the Opposition, of some major investor groups and of the TUC that a reduction to a two-year period would be more appropriate, as we wish to give a strong signal that contract periods of more than two years should be regarded as exceptional and, as such, require prior shareholder consent. We are therefore very happy to accept this amendment.