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Mr. Sutcliffe: I am grateful to the hon. Gentleman for giving way and I welcome him to the Opposition Front Bench; hopefully, this could be the start of a long career. Given that there have been some notably poor performances by major corporate companies, does he feel able to support the Government's efforts to improve
public confidence in the way that they operate? How should one balance the use of regulation against the performance of certain companies?
Gregory Barker: I do not have enough time to discuss particular companies, and to be honest I am not sufficiently well briefed to give the Minister an expert answer on the performance of individual companies. However, as someone who has worked in the City and in business, my feeling is that, by and large, British companies do a pretty good job and can hold their heads up high in the world. Indeed, they have often been at the forefront in encouraging and nurturing best practice. We should not be ashamed of our businesses; rather, we should be proud of what they achieve daily. I am not here to berate businesses, but I do want to encourage them to be better, and to take that best practice abroad and share it more widely. We must continue to be vigilant in terms of increasing performance.
There is no doubt that socially responsible programmes have the potential to bring benefits to business and to society as a whole; as such, they are to be welcomed and encouraged. However, too much compulsion can hit competitiveness, particularly of smaller firms, give less responsible firms an advantage, and even give the whole agenda of corporate social responsibility a bad name.
Mr. Dismore: The hon. Gentleman talks about small companies, but has he read the Bill? If he had, he would know that we are talking about companies with turnovers of £50 million or balance sheets of £25 million or with more than 500 employees. Those cannot be viewed as small companies.
Gregory Barker: If the hon. Gentleman were familiar with the definition of small to medium-sized companies, he would know that by stock exchange standards that is typically taken to mean companies with a valuation of anything less than £250 million—or, in some cases, less than £500 million. That definition may exclude basic trading companies, but many small companies with a market capitalisation in excess of £100 million—perhaps on the AIM market or approaching a stock market flotation—could find their performance greatly inhibited by burdensome regulation.
My concern is that there are risks in the imposition of legal requirements, so it is vital not to force socially responsible initiatives on to business without proper and due regard to their impact on Britain's ability to compete. If business is faced with rising costs, the ability to win orders and create jobs is affected and all members of a community—rich and poor alike—may be made worse off. Regulation reduces economic freedom and deprives people of opportunities. That is the great risk of introducing a statutory approach to corporate social responsibility. The potential for harm caused by the imposition by the Government of a legal framework, including too many onerous standards and policies, is an important consideration.
As I said, it all comes back to a question of balance. I prefer to encourage business itself to take the lead in dialogue not just with politicians, but with other representatives and stakeholders in the community. A lightly regulated business environment, which promotes a dynamic economy, is the most important force in creating the fairer society to which we all aspire.
In summary, I am broadly sympathetic to the aims of the Bill and I am glad to see it debated here in the House, but I am keen to see that it is neither too bureaucratic nor too prescriptive. Accordingly, my party will encourage the Bill into Committee for further detailed debate. At the same time, we will insist on a proper regulatory impact assessment so that the costs as well as the benefits of the measures in the Bill can be rigorously scrutinised.
2.17 pm
Roger Casale (Wimbledon) (Lab): I congratulate the hon. Member for Bexhill and Battle (Gregory Barker) on his debut at the Dispatch Box. Given the strength and brevity of his contribution, I am sure that we will hear many more fine performances from him in the future. We can all agree that we have heard many fine performances in today's debate.
I am pleased to have this opportunity to make a brief contribution because I represent a constituency with a high percentage not only of shareholders, but of professional and managerial people who are active in international companies and in many Government Departments. It was interesting to hear the expertise and comments of my hon. Friends the Members for Brent, North (Mr. Gardiner) and for Hendon (Mr. Dismore), and I would also like to congratulate my hon. Friend the Member for Rugby and Kenilworth (Andy King) on introducing the Bill.
It has not featured much in today's debate, but my hon. Friend also includes the actions of Government Departments—the public sector, not just the private sector—in the scope of the Bill. Many examples spring to mind. From the recent Budget we know about job changes in the Department for Work and Pensions—and other Departments—that will affect many of my constituents who live close to, and work in, central London. There is also the action of St. George's trust in disposing of land in my constituency, which will have considerable environmental implications. I would certainly like to see a more rigorous approach towards assessing the environmental and social impact of various Departments.
My constituents, like those of my hon. Friends, will be attracted by the touchy-feely appeal of the notion of corporate social responsibility, but the hon. Member for Bexhill and Battle was right to say that we should be cautious about what that will mean in practice and, in particular, for the bottom line. However noble our social and environmental objectives, we have to let businesses be run as businesses. We must not give them any other objective than being successful as businesses. To be successful, they must aim at maximising shareholder value and making a profit. Some directors and shareholders may go into business because they want to make a wider contribution to society, but the way to do that is to run a successful business and then invest the money made in other social projects—give it to charity or invest it in other ways.
At the same time, however, we must realise that the notion of shareholder value—which companies and directors have to maximise—is changing, in a changing world. My hon. Friend the Member for Brent, North
spoke about best value, but I prefer to refer to the notion of enlightened shareholder value that recognises that if businesses are to be successful in the long term and in a sustainable way, they must be held to account in relation to wider objectives such as those that we have debated today. The Bill is desirable for exactly that reason.The Bill is necessary, but when we review it in Committee we will need to take a cautious approach to how it will work in practice. One of the issues that will enjoy closer scrutiny in Committee is the question of whether the regulation should be mandatory or voluntary. We should not be too inhibited by the prospect of regulation because the Bill does not seek to introduce more red tape. Instead, it would introduce what may become known as green tape—something that will help companies to resist actions that would be damaging to the environment and, therefore, to the relationships that they have with clients and suppliers. Green tape could also prevent companies from damaging their reputations and, therefore, their long-term business interests, as well as assisting long-term sustainability.
Should the legislation be mandatory or voluntary? Well, we are talking about minimum standards. We want to encourage best practice, and Business in the Community has been mentioned as one vehicle among many that does that. However, we should not forget the extent of malpractice that occurs. We have seen several terrible business failures, with consequences on a massive scale, including Enron and Equitable Life. The people most affected are often those with investments—the rich and powerful—but we are considering the impact on local communities from job losses and environmental problems. Just as we seek to be tougher in the regulatory framework on business malpractice in the financial sector, we should introduce proper measures to prevent malpractice in relation to social and environmental concerns, which may affect all of us. I favour a mandatory approach, but we will return to the matter in Committee. The other aspect that we should focus on is the criteria. When the Bill was debated in January, it was made clear that whatever regime is introduced, it must be transparent and fair.
The point about consultation with the business community has not been made strongly enough. The Government have not said, "We know all the answers, we're smarter than everybody else. We know what to do, thank you very much. Here are our laws." They want to work in partnership to solve the problem. The Government will listen carefully to any proposals for legislation to bolster corporate social responsibility and will build on the excellent relationships that they have forged with the Federation of Small Businesses and other bodies representing business. The same thing applies locally. I am in close consultation with the Merton chamber of commerce in my community, which helps us in our work. I am sure that business representation will be clear and helpful and will assist us in framing transparent, specific legislation.
To return to my original point, society has changed. Sustainability is at the heart of our considerations on how best to secure the future of our local communities and on ensuring a fairer global business community. Our market economy must be underpinned by a strong and effective regulatory framework. Citizenship
involves rights matched by responsibilities. The idea that such responsibilities and duties should apply to corporate entities is much stronger than ever before.Much of company law is backward looking. These proposals are forward looking and will help companies to prepare for the future and could have a positive impact on their business success, which has to be the bottom line. I am delighted to add my contribution to a debate in which there has been a high degree of cross-party support for an important measure, and I congratulate my hon. Friend the Member for Rugby and Kenilworth on introducing it.
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