The government’s lack of ambition on corporate governance reform is disappointing. The decision to abandon its Corporate Governance and Audit Reform Bill is a missed opportunity, based on the myth that effectively regulating business is bad for growth.
From Carillion to P&O and the water companies, we have seen how poor corporate governance and disregard for workers can have a damaging impact not only on workers, but on consumers and the general public’s faith in the ability of big business to have a positive social impact.
While there is of course a debate to be had on the pros and cons of various forms of regulation, abandoning the bill altogether prevents such a debate from happening in the first place.
This decision follows on from the similarly disappointing decision by the Treasury to scrap the Shareholder Revolt Register. This won’t stop shareholders challenging board decisions, but it will make scrutinising companies harder.
It also sends out a message that demanding better practices from companies is anti-business or anti-growth. A government which is truly pro-business and pro-worker would not be making such decisions.
The High Pay Centre has long called for policies such as the inclusion of worker directors on boards and revising directors’ duties to ensure they prioritise the interests of all stakeholders and not just shareholders. We support such measures because we believe this approach to business will not just benefit workers, the environment, consumers and wider society, but will also help to support better, more sustainable businesses.
While we have warmly welcomed the government’s actions on boosting employment rights, including the passage of the Employment Rights Act, this direction of travel does not bode well for the government’s willingness to stand firm in the face of business opposition when it comes to implementing this legislation in full either.
Since it is early in this government’s term, there is still time for ministers to rethink such decisions and work with ourselves and others to help build a business model which enables a stronger economy and better social outcomes too. The two are not mutually exclusive.