Webb DuncanCOMPANIES (DIRECTORS DUTIES) AMENDMENT BILLFirst ReadingDr DUNCAN WEBB (Labour—Christchurch Central): Kia ora e te Mana Whakawā—a pleasure to take this call. I move That the Companies (Directors Duties) Amendment Bill be now read a first time. I nominate the Economic Development Science and Innovation Committee to consider this bill.Glen Bennett: Good committee.Dr DUNCAN WEBB: Excellent committee well led and I do hope that it will get the opportunity to take this bill and really improve on what is I think a small but very good and important idea. All this bill really does is make it abundantly clear that companies are able to act as responsible corporate citizens. In effect this bill will confirm in law what many companies have been doing for a long time: taking into account the wider impact that they have on society the community and the environment.A company is a separate entity it's got its own legal rights duties and obligations. Importantly those obligations are ring-fenced; directors and shareholders are not responsible for the liabilities of a limited liability company except in extraordinary circumstances. But I think we've always got to remember that a company is a legal construct—it doesn't have a mind or will of its own; it's simply a creation of the law—and a director is an agent and by duty of a company that he or she directs. They have a duty to act in good faith and in what the director believes to be the best interests of the company."—that's what section 131 of the Companies Act says. And it's always the law in relation to companies and indeed fiduciaries generally.But somewhere along the way the interests of the company have been conflated with making profits alone. It's clear that a company must be solvent and mustn't act recklessly risking the creditors' funds. However it's never been the law that there is a legal obligation on a director to seek to maximise profits at the expense of all else. While the law places minimum constraints on the behaviour of companies in respect of the activities of that company I think we can expect more and by in large companies deliver more.So first this bill will enable companies to understand that the interests of a company—even a company which is seeking primarily to provide a return on investment to shareholders—can take into account a wide range of considerations in determining the best interests of the company. This shouldn't be surprising; anyone who's read Larry Fink's 2021 letter to CEOs in which he warned that companies who ignore stakeholders do so at their peril would understand that even a company that seeks to maximise profits has to take into account the wider context in which it does business and it's only going to be sustainable in the long term if it does so. But secondly the bill recognises the really important place of companies which have as a key objective a goal other than profit those entities which have as their mission some social impact environmental or other outcome. It's long been the case that these entities whatever you label them have existed. However often an incorporated company hasn't been seen as an effective and useful vehicle. They've leaned towards other entities like trusts incorporated societies friendly societies industrial and providence societies credit unions and the list goes on.But the need for a more flexible approach is clear and that's something that the Ākina Foundation in its report Structuring for Impact: Evolving Legal Structures for Business in New Zealand really points out. The fact is that the limited liability company is really flexible. It can be a useful vehicle for such projects: it can bring capital and shareholders together; it can bring together the disparate views of shareholders in the form of a board of directors; and it can act as a legal person in entering into legal arrangements. So it's no wonder that many social enterprises impact companies and B Corporations used a limited liability company as a vehicle. This bill will make that easier and better. I'm not sure it's going to be quite the great leap forward that has been suggested by Andrew Davies of B Lab but I do hope that it marks the beginning of a positive change which was suggested by Steven Moe another real champion of impact companies and investment in New Zealand.The bill itself is short even tiny. The operative clause is only a few hundred words at most and it only adds one subsection to section 131 of the Companies Act. That section simply makes it clear that what we can take into account when determining what's in the best interests of the company is much wider than perhaps has previously been put forward. It's interesting that the interest of a company has been departed from in the UK quite significantly. In their Act they say that the directors must act to promote the interests and success of the company but they take a much more modern formulation of that which has much wider measures. I do want to point out that this bill is my own formulation of what the law should look like but I'm absolutely not wedded to it and I really think the select committee has good work to do in examining carefully the proposed formulation and improving adding and perhaps even subtracting from it. So I really look forward to that and—as Jacqui Dean said previously in respect of her bill—I look forward to working with the committee on that. I do invite the committee to consider all of those clauses. For example the bill states in new section 131(5)(a) in clause 4 that the company may recognise the principles of Te Tiriti. I'm sure that the sentiment is clear that companies are able to put Māori interests principles and values to the fore; whether that's the best formulation is another question. It may be that the net needs to be cast wider to take into account different and wider conceptions of Te Ao Māori interests principles and values to the fore; whether that's the best formulation is another question. It may be that the net needs to be cast wider to take into account different and wider conceptions of Te Ao Māori. So I look forward to any expansion on that. New section 131(5)(b) proposes that directors may take into account "reducing adverse environmental impacts". Again the objective I think is clear but I'm not a scholar in that area. I'm sure that those words can be improved to better capture the ability of a company to take into account the impact it may have on sustainability and the environment more generally. New section 131(5)(c) states that the company may seek to uphold high ethical standards. That could come in a number of forms whether it's sourcing goods that are certified as fair trade or not sourced from areas occupied by belligerent forces—which we see in Ukraine and of course the West Bank—and also reassuring that its own products are marketed honestly and fairly. That's not saying meeting the bare minimum legal standards but doing more and better which may not reach the same profit standards but it will be a more sustainable—in every sense of that word—business model which puts perhaps at a higher rating at a higher—Angie Warren-Clark: Value. Dr DUNCAN WEBB: —value—thank you—the interests of the community customers and stakeholders rather than merely shareholders and profit-takers. So I really do hope that there are improvements to be made there. In some ways that's simply an extension of following and of course protecting and promoting the interests of employees as relevant stakeholders. It's a real labour value and one that says that we should look to not just shareholders as part of the stakeholder kind of constellation but also employees as an important part of the health and wealth of any company. So I think it's really important that we look carefully at that and look at how it can be best expressed. But really what this is saying to the corporate world: "Let's rethink what companies are. Let's ask ourselves whether it might not be better to say: what is the purpose of a company?" Now shareholders can through a board of directors say "The purpose of this company is to give me money—to give me a return on investment." but I don't think every shareholder is that venal. I think many shareholders want a much more balanced approach and I want for shareholders to be able to speak to their directors through the company vehicle to say "We put other values higher than mere profit and we want to see our capital used to improve the wellbeing of New Zealanders and the international community in a much different and better way." I think that this bill helps companies achieve that. It's an enabling bill. It's not a mandatory bill. I think it's a real improvement and step forward and I do hope that other parties around the House will support it because what it does is it gives more rights and more freedoms to shareholders and directors to improve the welfare of a company's shareholders and New Zealanders. Kia ora."