In March 1998 the DTI launched a long-term fundamental review of core company law with the aim of developing a simple, modern, efficient and cost effective framework for carrying out business activity in Britain.
The company law review has involved wide research and consulatation. The final results of the review are expected in Spring of 2001.
The review has included a number of consulation documents, the second strategic consulation paper being released in March of this year.
The Trades Union Congress (TUC) have issued a public statement expressing "grave disappointment" at an apparent "cop-out" by the review group steering committee in dealing with the review from a stakeholder perspective rather than a shareholder perspective. Their concerns stem from the second strategic consultation paper.
They have welcomed proposed requirements to disclose more information, but they say the decision to leave more disclosure about employment issues up to directors is unacceptable.
The TUC response to Modern Company Law for a Competitive Economy - Developing the Framework, makes clear its deep disappointment that the review has rejected the case for a new legal duty on directors to balance the interests of shareholders with other stakeholder groups such as consumers, employees and suppliers.
However, the TUC welcomes the Review's acknowledgement that in order to promote shareholder interests, directors should foster positive relationships with employees and other stakeholders.
TUC General Secretary, John Monks said: "This report is frankly a cop-out. The members of the Review panel clearly want companies to behave better, but they have shied away from any proposals likely to make much impact. Of course we welcome proposals to make companies disclose more information, but it is naïve to think it will change a great deal on its own.
"Top directors have shown that they are more than prepared to suffer a few day's bad publicity in return for mega-salary and bonus packages. Public concern grows ever greater at unaccountable corporate power. This report will do little to satisfy that concern. It seems simply to have given into vested interests."
Summary of TUC main points
It expresses strong disappointment that the Review has rejected the case for requiring directors to balance the interests of shareholders with the interests of other groups with a key relationship with companies, and has decided to follow the 'enlightened shareholder value approach'.
Given this decision, it supports the proposed wording for the new directors' duty, which makes clear that directors should, in order to promote shareholder interests, foster positive relationships with employees and other stakeholders; it also supports the proposal that directors should be required to sign the new statement of duties on becoming a director.
Reporting on employment relationships and other stakeholder relationships should be mandatory and not left to the discretion of directors.
The body that is set up to set standards for the new reporting requirements on intangible assets should include representation from stakeholder groups, including employees.
UK company law should allow an option for companies to adopt a two-tier board structures.
Non-executive directors should be selected from a wider pool than at present. A majority of board members should be non-executive directors and a third of the board should be independent non-executive directors.
Mergers and takeovers should regulated to ensure that they operate in the public interest, and consultation with employees in both the bidding and the target firm about the consequences of the bid should be mandatory.
