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The danger lies not in the administrative costs that will be borne and in the diversion from running the business that will occur but in the fact that some information could cause harm. The Minister referred to animal rights activists, but I do not think that we
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We congratulate the Minister on Amendment No. 245B, in that it would allow non-disclosure where it would be seriously prejudicial to the interests of the other party to the contractual arrangements. We completely agree with that. But my Amendment No. 245C goes on to deal with two further issues.
First, it would allow non-disclosure if it were seriously prejudicial to the company. The Minister will be aware that the CBI has expressed continuing concerns about this aspect of the Government’s own amendment. He sought to argue that the main problems would always be borne by the company on the other side of the contractual arrangements, but I do not believe that that would always be the case. For example, a quoted company could deal with an unquoted company which the animal rights activists know all about, but they might not know that it is dealing with a quoted company until the disclosure is forced—perhaps because there is one essential contract. The Minister’s amendment would give no comfort to those companies, which would have to reveal the first time that they were dealing with a company, such as Huntingdon Life Sciences, which was itself unquoted.
The Minister has confined himself to trying to deal with the issue of animal rights activists and similar. Commercial considerations must also be protected. If, for example, a company has an essential supply contract with another company, revealing that could well reveal the source of that company’s competitive advantage, which would thereby give commercial information to its competitors and possibly to its foreign competitors. The amendment gives no protection to that kind of company.
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The Minister has pointed out that his amendment also allows non-disclosure only if the second test of public interest is met. I am not sure that it is reasonable to expect directors to weigh public interest in deciding whether to disclose. I can think of no other instance in company reporting that is qualified in this way. It is far from clear what public interest means in this context and perhaps the amendment tabled by the noble Lord, Lord Razzall, becomes more important as regards understanding the words in these amendments. It is not clear whether public interest applies only where potential criminal activity is involved or whether it could also apply where there was some commercial interest and, if so, whether that could be calibrated only at the level of UK plc or whether there is some public interest in the commercial health of other companies. It is very unclear. The Minister has offered some explanation,
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My amendment leaves the public interest wording there. I do not know what it means but it is there as an alternative and not as an essential test. Through my amendment, I do not wish to open the doorway to those who unlawfully wish to disregard the legitimate disclosure requirements that the Government now wish to create. However, we need to weigh in the balance the very real need to protect British companies against possibly harmful effects from disclosure and against the benefits that others certainly see. It is not clear-cut and it is a balance.
Moved, as an amendment to Amendment No. 245B in lieu, Amendment No. 245C.—(Baroness Noakes.)
Lord Razzall: My Lords, I wish to speak to this amendment and to Amendment No. 245D in my name. The two are interrelated, as the noble Baroness has indicated. Noble Lords who have followed the debate through the pages of the financial press over the past two or three weeks will realise that considerable heat has been engendered, not so much on the issue but on the timing of the Government introducing this amendment at a late stage.
These issues are not new. For many months, a number of NGOs have argued for such an amendment. It is easy to complain about process when in reality people are against the substance. I am pleased to hear that, notwithstanding the extravagant remarks of the noble Lord, Lord Hodgson, in opening this debate, it appears that the Conservative Opposition have seen sense and will not oppose the issue that Commons Amendment No. 245 should be disagreed with—whether that is grandstanding for the benefit of his Back-Benchers, many of whom are no longer in their places, I do not know. In the presence of the right reverend Prelate, I am always pleased to see the sinner that hath repented.
What has been lost in this debate in the media is that the often lamented OFR contained similar provisions. When industry was preparing itself for the introduction of the OFR, sadly denied them at the last minute by the instigation of the Chancellor of the Exchequer, I do not remember that there was much agitation about a similar provision. I believe that significant heat has been engendered into the process from people who really are against the substance, which does not include the Liberal Democrats because we support the principle being introduced by the Government.
In the course of the debate, a number of NGOs have felt that it would be appropriate for this element of the business review to be both subject to audit and subject to reporting standards. We on these Benches do not go that far but we accept the arguments that to impose an audit obligation would be potentially extremely expensive for companies and quite difficult to perform. However, we support the NGOs in believing that the Government—not only for the reasons indicated by the noble Baroness, Lady
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Lord Patten: My Lords, I have three points to make in support of my noble friend Lady Noakes. First, I do not believe that it is right to let this moment slip by with the Minister purporting to give the impression to your Lordships that he is very happy to be in the position of bringing forward these amendments to this legislation. The DTI did not want these provisions put on the face of the Bill at all. I believe that the DTI has been bounced into this position—it was not its original intent. The DTI has shown legislative fatigue on this issue—
Lord Sainsbury of Turville: My Lords, as this Motion was proposed in the Commons by my colleague in the DTI, I hardly think it is correct to say that it was not supported by the DTI.
Lord Patten: My Lords, I believe that the noble Lord's colleague in the House of Commons was very firmly bounced by NGOs and others into making these provisions. It was not something that the Government had toyed with bringing forward until the lobbying gained pace at a later stage. My point about legislative fatigue is the way in which the Government rolled over to the lobbying and that is why I think the DTI has shown a certain amount of mettle fatigue as well. That is doubtless why the Secretary of State for Trade and Industry, in his appearance in another place before the Select Committee on Trade and Industry on 24 October, stalwartly refused to give any undertaking at all that he thought that the department had a long-term life in front of it.
My second point is in strong support of what my noble friend said about the effect of these provisions on smaller companies with just one, two or three suppliers. I believe that this will be a very onerous burden. She has set the point out very clearly and I shall not attempt to be a little Lord Echo to what she has said so forcefully.
Thirdly, I believe that we should all be aware of legislative creep, of regulatory creep and of compliance creep in this legislation. My noble friend on the Front Bench said that big companies can handle the extra regulatory box-ticking through which they will have to go, but I predict that a whole new industry will emerge and companies will have to be very stalwart in resisting it in order to give gainful employment to professional services, firms and others, coming forward with seminars, breakfast meetings and new undertakings that they feel
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I do not believe that the purposes of industry, business and commerce have been particularly well served in respect of these provisions by the CBI and, in particular, by the Institute of Directors. The words of Mr Templeman, the director-general of the Institute of Directors, which have already been quoted in your Lordships' House, will come back to haunt him in future years after having had a cup of tea with Mrs Hodge, who told him that everything was going to be all right. She does not have that effect on me, my Lords.
Lord Grabiner: My Lords, I agree with what the noble Lord, Lord Razzall, had to say on this subject. We ought to focus on the substance or merits of the amendment rather than complaints made about the behaviour of the Minister in another place or elsewhere over cups of tea. If I may say so, I took the opening remarks of the noble Lord, Lord Hodgson, on this matter as an uncharacteristic expression of irritation.
The amendments tabled by the Government are entirely logical and consistent with the rest of Clause 399. The clause already provides, in a non-controversial sense, for the fact that the business review must contain,
The review is required to provide a balanced and comprehensive analysis of various things and the main trends and factors likely to affect the future development, performance and position of the company’s business.
What is proposed here is entirely consistent with that logical structure; the idea that it would be possible or practical consistently with those provisions not to have the provisions that are being suggested strikes me as absurd. The matters it is now proposed should be incorporated are consistent with the philosophy that one finds elsewhere in that provision.
The proposal for protecting the position of the individual in proposed subsection (11) is again logical and consistent. The proposed paragraph (c) is designed to require the production of the information from the individual. Proposed subsection (11) will protect that individual in the circumstances there described. The point made by the noble Baroness, Lady Noakes, might already be covered by—or at least, in very large part—subsection (10) which is designed, albeit in different language, to protect the interests of the company rather than the individual.
The Lord Bishop of Winchester: My Lords—
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Baroness Northover: My Lords, as the Minister will remember, there was considerable discussion of the role of companies in the developing world when the Bill went through your Lordships' House, and those issues were picked up in the Commons. I give a guarded welcome to the Government’s Amendment No. 245A, which acknowledges that there are issues relating to labour standards and environmental, social and human rights impacts down companies’ supply chains which need to be addressed. However, the amendment is still pretty weak; it does not go as far as the OFR, which the DTI had proposed and the industry had accepted but which the Chancellor then knocked out last year. As the Minister emphasised, under the amendment it will remain the directors’ judgment of what is relevant in the supply chain for them to report on. It will not require companies to list their suppliers. It also affects a limited number of suppliers, so it is a limited amendment.
On Amendment No. 245B, I would like to know more about the circumstances in which directors could withhold information. I would not want this to be a Trojan horse in the middle of the legislation.
I believe that Amendment No. 245C should be opposed. It is significantly weaker than the Government’s amendment and would undermine the provision of information to shareholders about risks down company supply chains. Meanwhile, the amendment of my noble friend Lord Razzall would ensure a much more independent framework for the Government’s proposals. It would mean, for example, that companies could be compared across years or between themselves; less would depend on the judgment of the directors and more on outside standards, which is vital. It should help companies see what they need to do, as the noble Baroness pointed out.
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It strikes me as ironic that this week, with enormous acclaim, the Stern report was launched in the presence of the Prime Minister and the Chancellor. All agree that there has to be a sea change, as it were, in public, government and international thinking about what we are doing to our planet, how the poorest countries in particular will cope and what the consequences will be for all of us. Yet when I look at these very limited proposals, there seems to be a gulf between what is here and what the Government said earlier in the week.
This is an opportunity, and it surely should not be missed. Responsible British companies are rightly proud of what they contribute in developing countries. Why should we not now ensure that others, too, meet those standards and that their presence in developing countries, as represented down their supply chain, has the beneficial effects we all wish to see rather than negative effects?
I disagree strongly with the noble Baroness, Lady Noakes, that we should not rush into things in the dying days of the Bill. These issues have been debated throughout our proceedings. This is a rare opportunity; this massive Bill has been a very long time in coming, and we should do what we can now. I
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The Lord Bishop of Winchester: My Lords, I too support the Government’s amendment. I am glad that I let the noble Baroness, Lady Northover, speak before me because I affirm everything she said and everything she denied. I share her anxiety and hope that we shall have more debate on Amendment No. 245B to ensure that it is not a Trojan horse and does not weaken the main amendment. I share the noble Baroness’s considerable anxieties about the amendment of the noble Baroness, Lady Noakes.
In the comments of the noble Lord, Lord Patten, there was a sense that lobbying by NGOs was a less proper or worthy activity than lobbying by anybody else. That seems extraordinary. I am glad to be in part briefed by a range of NGOs, among them Traidcraft, which offers its views to the public, and has done for months, if not years, from its experience as a medium-sized company.
Lord Patten: My Lords, either the right reverend Prelate misunderstood what I said or I did not express myself clearly. Of course NGOs have every right to lobby. The whole nature of what goes on in the Palace of Westminster is about lobbying—it is one great lobbying fair in many ways. I was regretting that some of those who should be representing the sensible voices of industry and commerce, such as the CBI and the Institute of Directors, have not been as effective as some of the NGOs in carrying out their lobbying. I regret the corporatist approach of the organisations to which I have referred, but lobbying is what we all do.
The Lord Bishop of Winchester: My Lords, I regret that I clearly misunderstood the noble Lord, although I said what I thought I had heard him say.
What we have here is essential. It is of great importance that business management and company decision-makers not only gather information to understand and improve the impacts of their operation in all the fields in which they work but that their thinking and decision-making, and the evidence on which they make their judgments, should be available to those whose proper responsibility it is to scrutinise those decisions in company reports and similar places.
The effect of the amendment should be—and this is my concern about Amendment No. 245B and still more about Amendment No. 245C—that shareholders and others will have access to the important information about impacts and risks down the supply chains of the companies they invest in. It is most important that this kind of reporting is not an option—not something that directors should have regard to but which is required of them.
Since supply chain management is essentially about relationships, it is important that the reporting in a business review demonstrates that companies hear and respond to their suppliers’ perspectives. It is
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It is of enormous importance that UK companies should be transparent and give their shareholders and others an opportunity to understand the character of their operations in such countries. That is especially important when—not just in my judgment but in the judgment of the All-Party Parliamentary Group on the Great Lakes Region and Genocide Prevention, of which I am a member, and of other organisations such as RAID—the Government are slow on the vital question of strengthening the activities of the UK contact point under the OECD guidelines. It is of great importance that the public interest, for instance, includes that kind of a public interest. That is why I am glad those words are in Amendment No. 245B. But I do not want them to be whittled away. So, as regards Amendment No. 245, it is most important that this provision should be in the Bill.
I am concerned, as was the noble Baroness, about the implications of Amendment No. 245B and some of the first line of Amendment No. 245A. I want to be assured that that is not—as the noble Baroness asked—a Trojan horse. I do not want that to be a weakening of the provision—and it is important that it should not be. I share the noble Baroness's concerns about Amendment No. 245C, which I also wish to oppose. I welcome Amendment No. 245D because it would give the opportunity to set out a proper framework within which this reporting should take place. I am grateful to the noble Lord, Lord Razzall, for tabling it.
In conclusion, it seemed to me that perhaps I or one of my colleagues ought to have a conversation with the noble Lord in order to add to his bank of biblical quotations because we have heard the same one twice today.
The Earl of Sandwich: My Lords, I am favour of Amendment No. 245. I was another of those who was astonished at the outburst from the Conservative Front Bench at the beginning of the debate, which seemed to me to be quite out of proportion. I know that strong feelings have been aroused on both sides of the issue. My sympathies are with those NGOs in the Trade Justice Movement which deal directly with fair-trade sources in developing countries. They have done a lot of work on supply chain reporting. As much as anyone else, they know that it is quite reasonable for the Government to table this amendment now and for companies to make the minimal effort required to report on their contractual arrangements. I say “minimal” because this is, as the noble Baroness, Lady Northover, said, a far cry from the original version of the OFR regulations, which
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