Corporate Governance — House of Commons, 2016-11-29
Topic: Domestic Commerce
Gregory David Clark (Conservative, Centre-right): With permission, Mr Speaker, I shall make a statement about the Government’s corporate governance Green Paper, which we are publishing today Successful businesses are the backbone of our society and our economy. They are the reason why ours is the fifth largest economy in the world. They create employment opportunities, and they contribute significantly to the funding of our country’s public services. There are many reasons why Britain is a reliable place in which to do business: for instance, our legal system and framework of company law have long been admired around the world. The Government are proud of our thriving industries, and we want to build on those strengths and enhance our competitiveness even further One of our biggest strengths is our record on corporate governance. It is already highly regarded around the world, especially for its combination of flexibility and high standards. Despite that record, however, our strong reputation can only be maintained if the Government and business regularly review and upgrade those standards. We want to guarantee not only that Britain is an excellent place in which to do business, but that it is where business is done best I am privileged, in my position as Secretary of State, to meet regularly not just those who run successful businesses, but their employees and customers. I have discussed with company heads the way in which their corporate governance is an integral part of their success. It inspires confidence among investors, loyalty among employees and trust among customers. Ordinary working people who work hard for their living deserve to feel confident that businesses act responsibly and fairly. When an individual business or businesses lose the confidence of the public, faith in business generally diminishes, to the detriment of us all There is no conflict between good corporate governance and profitability; indeed, poor corporate governance is a prelude to financial disaster. This Government are unequivocally and unashamedly pro-business, but we also hold business to a high standard. It is right to ask business to play its part in building an economy that works for everyone. Over the last few years, there have been a number of proposals, from both the Government and those representing business, to update our corporate governance framework. In some cases these have been made in response to concerns about the actions of a very small number of businesses which have undermined the reputation of British business generally, whose standards are among the highest in the world. Today, we are launching a discussion paper on how corporate governance could be reformed. I will, as is usual, be placing a copy of the Green Paper in the Library The paper considers three aspects. First, it asks for opinions on shareholder influence on executive pay. Members of the House will be aware that executive pay has grown much faster over the last two decades than pay generally and at times is not in line with corporate performance. The document seeks views on this issue, and in particular on strengthening shareholder voting rights with a view to making them binding, encouraging shareholder engagement with executive pay, and promoting greater transparency over pay Secondly, the document asks whether there are measures that could increase the connection between boards of directors of companies and their employees and customers. It asks whether the establishment of advisory panels and the appointment of designated non-executive directors to take formal responsibility for articulating employee, customer and other perspectives is the right way to proceed. We are not prescribing how this should be done; it would be whatever is most appropriate for the business Thirdly, our discussion paper asks for views on whether some of the features of corporate governance that have served us well in our listed companies should be extended to the largest privately held companies These are issues about competitiveness, and creating the right conditions for investment, as much as they are, importantly, also about fairness. This Green Paper is designed to frame that discussion, so that we can move quickly to consider which changes are appropriate at this time. We want to hear from as many people as possible about how best we can increase confidence in big business and achieve better outcomes for our economy. This does not mean the imposition of regulation when other avenues are open. One of the strengths of our system of corporate governance has been the use of non-legislative standards adopted by business itself We are determined to make Britain one of the best places in the world to work and carry out business. This review will help us achieve that aim and the views of businesses, investors, employees, consumers and others with an interest in successful business are warmly welcomed. I commend the statement to the House.