Balancing company success, people, and the environment

Recently, the Company Directors (Duties) Bill had its second reading. The Bill proposed that section 172 of the Companies Act is amended to change the duty of directors to balance the needs of shareholders with those of a company's employees and the environment. 

Section 172 already provides that a director must act in the interests of a company's members whilst having regard for the company's employees, and the impact of its operations on the environment. The Member of Parliament may have intended for company directors to have greater regard for a company's employees and the environment at the expense of an overriding duty to promote success. They also point out the recent success of B-corps which, on their calculations, saw a rise in turnover and headcount above the national average.

The Parliamentary Under-secretary of State for Business and Trade said that the Government would not be able to support the Bill. However, they did say that they would be discussing the provisions in due course. The debate was adjourned until Friday 12 September. 

Whether the Government eventually support the Bill is yet to be determined. However, there is a question over whether the Government will amend the Companies Act 2006 in future to account for changing attitudes towards employee rights and environmental matters. Directors should keep an eye out for further changes, as changes to the legislation may mean changes in how day-to-day operations are ran. 

A record of the second reading can be found here: Company Directors (Duties) Bill - Hansard - UK Parliament

For more information contact our corporate team.