Martin Bunch, Managing Partner at Bates Wells says Yes
The Companies Act as it stands doesn’t get in the way of good corporate practice, but neither does it actively encourage corporations to embrace their responsibilities to wider society and the planet. The Better Business Act aims to amend the Companies Act and embed commitment to positive impact into the DNA of every UK company.
Traditional business models, where shareholder value can be created at the expense of people and planet, are no longer fit for purpose in today’s world. Pressing issues like the climate emergency demand systemic, society-wide solutions.
A May 2020 poll showed 72 per cent of people believe business should have a legal responsibility to people and the planet, alongside profit. Independent analysis has also shown evidence of improved business outcomes for companies run in line with these principles, including faster growth
Changing the default purpose of companies in the Companies Act is the only secure basis on which we can build back better, reach net zero and safeguard our planet.
Matthew Lesh, Head of Research at the Adam Smith Institute says No
Businesses are a force for human progress. They produce innovative products that enrich customers, provide salaries to their workers, and pay taxes that fund public services. This is all done in the pursuit of profit with direct accountability to shareholders.
There are now demands for businesses to be accountable to “stakeholders,” to ensure they deliver for the public good. But there is never a clear definition of “stakeholders” or the public good. This empowers corporate executives to use business resources for personal pursuits — ultimately delivering worse outcomes for shareholders and stakeholders.
If this is required by legislation there will, as Labour proposed last election, be a regulator to enforce the rules. That is, a regulator which dictates how businesses operate in the state’s definition of the public good: a de facto nationalisation of the entire private sector.
Corporations, accountable to shareholders, have delivered immense growth and prosperity over the last few hundred years. We should not destroy the core of our economic system.