Webb DuncanDr DUNCAN WEBB (Labour—Christchurch Central): Thank you Mr Speaker. I'm not going to spend too much time replying to the neoliberals over there. At least they've got a theory. As for the Opposition Mr Bayly his theory is profit at all costs. Does this bill make an important change to the law? Yes it does. It's a very important bill. It removes any doubt that companies are quite able to pursue wider purposes. It's a signal that stakeholders are relevant to corporate governance and that the best interests of the company can in fact be to promote the interests of others. Companies do not have to have a dominant or sole profit motive. They can be incorporated for any purpose whatsoever and it's about time we woke up and recognised that companies whose purpose might be to promote environmental outcomes or to promote social goods whilst sustaining a profitable bottom line are legitimate companies.Now there's a lot of commentary out there. I must say I'm caught by surprise at the fierceness of it but there are some very sensible commentators. For example Russell McVeagh a respected law firm has made some very interesting comments about whether for example we should follow the UK line and make stakeholder interest a compulsory consideration or whether there is a balance to be struck between stakeholder and shareholder interests or whether this is an unduly constraining approach and in fact further and wider matters ought to be taken into account other than the limited list that's been set out there. All are useful suggestions and I'm sure the Economic Development Science and Innovation Committee will look at them.While some think this isn't a necessary change and it doesn't advance the law I disagree. I disagree strongly. Not only is it clear that clarification is needed it's long overdue. This bill shifts the balance towards stakeholder interests. DLA Piper an international law firm has identified quite nicely the reason for this bill when it said this: As well as providing clarity this Bill would mark the current transition in how we view companies and the role they play in society. In New Zealand according to conventional corporate governance theory companies have traditionally been viewed through a shareholder primacy lens which usually translates to maximising returns. The proposed amendment would endorse a shift away from shareholder primacy to the approach where the interests of wider stakeholders have an increasing importance when exercising directors' duties." Thank you DLA Piper. That is in a nutshell one of the most prestigious international law firms endorsing this view.Now some commentators haven't been so kind. Chapman Tripp doesn't see it as necessary and they refer to the case of Debut Homes but they do so in half-hearted fashion. In fact in that case the court identified the tension between theories of stakeholder interests and shareholder primacy. They didn't resolve that issue in the case because it was clear in that case that directors could take into account the interest of creditors but they recognised that it was the stakeholder theory of governance that allowed wider considerations beyond maximising profits.This bill makes it clear that the foundations of company law is stakeholder interests and a narrow shareholder view is not going to cut it any more. Many commentators make the point that it wouldn't be good for a company's long-term profitability to ignore stakeholder interests but that's not good enough. It's not just about profits. We have a test. They call it the business judgment test—the idea that you can't second guess directors. But that presupposes that it's all about business. What we need is a purpose judgment test: is the purpose of the company properly pursued by the directors when they're exercising their judgment? And that's what taking into account these wider considerations mean.But I do want to put one issue to rest and Mr Bayly seems to have made this issue. The bill is not some carte blanche to ignore the risks to creditors and to trade in an insolvent manner. There's numerous protections for creditors. The Companies Act has reckless trading rules for example in section 135.So look there's a good number of people also saying on the other side of the fence I haven't gone far enough that this should be compulsory that it should be wrong to ignore the wider interests. I haven't gone that far. Look we've recently heard about mega profits from the banks. Have they lost their social licence? What do they take into account? Do they take into account social goals? It's time for companies to wake up. This is a shift. This is a change in the balance of shareholders versus stakeholders. It's a good bill. I'm very proud of it. I look forward to it going to select committee."