F28: Encouraging Companies to be Responsible Corporate Citizens

Submitted by Federal Policy Committee

Mover: Mike Tuffrey | Summator: Baroness Bowles

Application: Federal

Summary:

Like it or not, large companies are major parts of our society and have a big impact on all our daily lives. This is usually positive, but some examples of bad corporate behaviour have damaged public trust in corporations. This motion sets out some reforms to the way companies work which should mean they work better in the public interest, as well as to help repair public trust in them.

It is already Lib Dem policy to encourage staff involvement in management of companies, to encourage mutuals, co-operatives and other types of ownership, and to increase transparency in corporate ownership. This motion expands on that and sets out a range of future measures.

Full text of the motion:

Conference believes better corporate governance is the intangible infrastructure that business needs to grow.

Conference further believes it is important to:

1. Promote the success of major enterprises, encourage sustainability and enhance the prosperity of the nation as whole by encouraging a long-term approach to investment, innovation, training and productivity.
2. Give more people a real stake in the economy at a time when many feel left behind or at the mercy of forces beyond their control.
3. Restore public trust in the behaviour of large corporations and their senior management, following recent corporate scandals, and provide justice when there has been egregious failure in corporate behaviour.

Conference affirms that reforming the UK's corporate governance framework can help achieve these outcomes, based on the three principles of Transparency, Accountability and Diversity.

Conference notes existing Liberal Democrat policy to:

1. Encourage a greater diversity of types of business, including mutuals, co-operatives, social enterprises, community-interest companies and more employee ownership.
2. Increase transparency over major shareholdings in the biggest companies by lowering the declaration threshold to 1%.
3. Require public and binding votes of board members on executive pay policies and specific awards and require the publication of data on people paid less than the real Living Wage and the ratio between top and median pay.

Conference resolves to:

1. Encourage greater diversity on boards among all under-represented groups, notably including BAME communities and people with disabilities, building on the success in increasing the number of women by Liberal Democrats when in government, and extend reporting of diversity ratios in management and of pay gaps in large corporations.
2. Require all UK listed companies and all private companies with more than 200 employees to have at least 1 employee representative on their Boards with the same legal duties and responsibilities as other directors.
3. Require large corporations to establish stakeholder advisory panels, covering the interests of employees, customers, communities and the natural environment, with designated non-executive directors overseeing their input to the boardÕs deliberations under its "inclusive" duties (Section 172 of the Companies Act) and with enhanced reporting of actions taken.
4. Rebalance the Companies Act 2006 to a genuine obligation on directors to consider the long-term interests of the company and of its employees, suppliers, customers, the community and the environment; broaden the scope to include the company's extended value chain where it exercises control or significant influence; and include a duty of care for the common good.
5. Promote greater development of a new "inclusive" model of company purpose, similar to benefit corporations in other countries, which permits placing the interests of wider stakeholders on a par with the interests of shareholders.
6. Allow shareholders to designate some or all or their holdings as a "stewardship stake", with enhanced voting power and the right to be consulted, in return for a minimum lock-in before the shares can be sold.
7. Encourage institutional and large shareholders to exercise their stewardship functions more broadly by voting at company AGMs, including on executive pay, with mandatory disclosure of voting records and rationale.
8. Support moves to give more control to individual savers over their pension fund investments whether in Self-Invested Personal Pensions or managed funds, with the right to vote retained by the beneficial owner not the nominee, and by encouraging asset owner initiatives such as the Association of Member Nominated TrusteesÕ Red Line Voting on environmental, social and corporate governance issues.
9. Consult on extending corporate governance provisions from publicly listed companies to other large companies held privately or by overseas parent companies, based on adherence to the underlying principles of good governance rather than a prescriptive set of requirements and disclosures.
10. Establish an explicit "public interest" test when considering approvals for takeovers of large or strategically significant companies by overseas-based owners.
11. Require verification of public declarations of the beneficial owners of companies registered in the United Kingdom, its overseas territories and crown dependencies, to ensure this defence against money laundering and tax abuse is robust, and enhance disclosure of the beneficial ownership of real estate including by overseas companies owning property in the UK.
12. Strengthen the law on criminal responsibility for harm arising from a blameworthy corporate failure, so companies pay an effective penalty, and the need to establish intent or the guilt of a senior executive is abolished.
13. Conference calls on FPC to further develop these ideas in its planned policy paper on the 21st century economy.