Employees, Corporate Governance and a Grand Day Out

I have thus never understood the trite simile with legislation.  Indeed, having again been involved in a small way in the law-making process, I shall now enjoy my sausages more than ever. 

I serve on the Legislative and Policy Committee of the Employment Lawyers Association. This is much more fun than it sounds. ELA has 5,000 plus members and it is ‘L&Ps’ job to take part in Government body-led consultations and other similar exercises on behalf of all employment lawyers to help get effective and workable legislation. Crucially, ELA members represent employers and employees: we are drawn from large commercial law firms, companies, trade unions, the voluntary sector and local government. We have no ideological axe to grind. When I chaired L&P, a major part of the role was to ensure scrupulous neutrality.

It is that neutrality, the icing on the expertly and lovingly baked contributions from our selfless membership, which gives ELA an excellent relationship and reputation with law makers. 

L&P works by convening ad hoc sub-committees to respond to particular initiatives.  Each such committee is chaired by a member of L&P, and it fell to me to chair ELAs response to BEIS Strategy Committees inquiry into corporate governance.  A collection of ELA members, whose names I list below, and who are much more expert than me in this field, came together to answer the committee’s questions.  So far, another day’s work for L&P.

Then ELA got a call: the BEIS committee was interested enough in our report to ask us to come and give oral evidence. This, however much I might try to pretend otherwise, is emphatically not the day job.

So, I find myself passing through the metal detectors at the House of Commons, striding across Westminster Hall and through the Central Lobby and up the stairs to the Committee Room corridor.  If, like me, you are a politics junkie but your boredom threshold was always too low to consider it as a career, then this is a moment in heaven.  As I say, I love sausages. 

The Committee Room looked exactly like they all do on the telly: dark wood panelling and fussily patterned wallpaper.  The members are arranged in a horseshoe which takes up half the room, leaving not enough space for a couple of rows of chairs squashed together at the back and crammed in behind the table at which three witnesses sit.  As I squeezed into the chairs to wait for my turn, wishing for shorter legs and a smaller bottom, I saw that the huge portrait directly opposite and which dominated the room was that of my namesake, Neville Chamberlain (no relation)  I hoped this was a good sign, until I remembered what a horrendous mess he had made of everything. 

I had prepared for the session not only by re-reading our own submission but those of the other witnesses whom I knew would be appearing alongside me.  I was acutely conscious in the moment that I was not an expert but had merely chaired a committee of experts.  I was representing people with real knowledge and deep experience who had committed a great deal of their valuable time: it was my job not to let them down: no pressure.   

You can see how I did, if you really want to, by watching the video here. You may be as fascinated by my evidence as was the trainee solicitor from Gowling WLG who accompanied me, who I’m sure can be seen gently nodding off at [11:22] albeit she strenuously denies this

I found the experience stressful but tremendously exciting and I am hugely grateful to ELA for giving me the opportunity.  However, rather more important is the outcome.

Those not interested in the details of corporate governance may skip the next bit but the committee was interested in what we (I) had to say about Section 172 of the Companies Act 2006:

1. A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
   1. the likely consequences of any decision in the long term;
   2. the interests of the company’s employees;
   3. the need to foster the company’s business relationships with suppliers, customers and others;
   4. the impact of the company’s operations on the community and the environment;
   5. the desirability of the company maintaining a reputation for high standards of business conduct; and
   6. the need to act fairly as between members of the company.
2. Where or to the extent that the purposes of the company consist of or include purposes other than the benefit of its members, subsection (1) has effect as if the reference to promoting the success of the company for the benefit of its members were to achieving those purposes.
3. The duty imposed by this section has effect subject to any enactment or rule of law requiring directors, in certain circumstances, to consider or act in the interests of creditors of the company.

ELA‘s view, in line with what the Committee described as the “vast majority of the evidence” they received, was supportive of this formulation.  However, as I said to the committee:

“We are all in agreement that, to put it at its lowest it is very difficult to evaluate the operation of Section 172 in the absence of any real disclosure as to how it is working in practice”.

Gratifyingly for me and, I hope the members of ELA, the Committee’s report quoted me verbatim.  They then went on to adopt one of ELA‘s recommendations, which is that companies should report their compliance with Section 172 in a similar way that they report compliance with their obligations under the Modern Slavery Act Regime: that is to say transparently but not punitively.

I am not sure how far I can stretch the sausage metaphor but let me not put you off your breakfast: we have added to the recipe.  If the Government do not adopt this recommendation then perhaps little difference will have been made but, if they do, it may well be that ELA has made a strong and positive contribution to the corporate wellbeing of the UK.  Forgive me if not only did I have a great deal of fun but that I am extremely proud of that.