In the finest tradition of government riven by splits between camps, the UK Companies bill, the biggest change in company law in a decard, has once again been changed at the last minute.
Corporate responsibility-minded readers will recall that not too long ago, the much heralded Operating and Financial Review requirement was scrapped by Gordon Brown at the last minute as overly onerous.
The OFR production requirement on companies was to ask them to disclose relevant social and environmental risk to their business to investors, subject to the judgement of directors.
In light of an EU requirement for a company to begin producing a Business Review for investors, this was apparently justified, notwithstanding that almost everyone agreed the OFR, in principle, was a good idea. For many it was seen as a way of encouraging the the laggards among Britain’s 1300 or so listed companies. Search http://www.ethicalcorp.com for all the background on the OFR.
Now, Margaret Hodge, the sixth or so CSR minister in the same number of years (none of them actually do much, if anything) announced last week that Labour had slipped another requirement into the companies bill, which has not been previously mentioned or consulted upon.
The measure is designed to ask businesses to publish information about their supply chains. However, the business lobby is complaining that the wording is so vague it could force directors to reveal commercially and legally sensitive information.
The bill, which is likely to become law inside a month, will require quoted companies to include in their annual business review “information about persons with whom the company has contractual or other arrangements which are essential to the business of the company”. Companies believe this to be too vague, or at least their lobby groups do.
The CBI and the IOD are threatening to go over Hodge’s head (as much apparently does) to the big Kahuna in waiting, Brown himself, to get all this overturned.
So what’s going on here? The answer is not, and may not become, immediately clear. Is the government back tracking on a backtrack? Or is this the DTI feuding with the Treasury yet again, as it did over the OFR. Perhaps Brown will be too busy to notice, but bearing in mind the voice of the City in government, that seems unlikely.
The FT today quotes DTI officials as saying that the amendment gave directors discretion to disclose relevant information only, adding: “It’s up to their judgement what they put in the business review.”
So is this late change a good way to encourage companies to report on supply chain risk, or at least think about it? Or an overly onerous requirement on business? Post your own comments . Personally I prefer other methods than regulatory to encourage reporting and disclosure, but legislation should eventually be resorted to once all other avenues have been exhausted. Many of these remain unexplored though, which is why this move smacks somewhat of heavy-handedness.
This space, it would appear, warrants watching.
Toby Webb, Editor