Ethical Performance
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August 1999

Test is mounting on the UK government’s steering group on company law to recommend legislation that would require businesses to disclose information on their ethical performance.

A significant number of responses to the group’s consultation paper on company law have come out in favour of new legislation requiring directors to publish details of their social and environmental record.

In a joint submission, a consortium of 14 organizations – including The Amnesty International Business Group, the World Development Movement and the consultancy SustainAbility – says there should be a legal duty imposed on companies ‘to disclose comprehensive information on their social and environmental performance alongside their financial results.’

It claims the company law review could be ‘a defining moment in the relationship between business and society’.

Other organizations have also backed the idea of legally-enforced reporting. In its submission, the UK Social Investment Forum says it is ‘essential that UK companies should disclose their social, environmental and economic performance’. It also argues that ‘shareholder value’ should be redefined to encompass not just financial return but ‘the social return to civil society and the environment’.

The Institute of Social and Ethical Accountability also backs the idea of giving directors a legal duty to take account of ethical matters when they make company policy, saying they should be required ‘to have regard to non-member stakeholder’s interests and be permitted to give precedence to those interests over and above the interests of members’.

The most significant objector to such a move is the National Association of Pension Funds, whose submission claims it could ‘dilute shareholders interests, endanger the supply of capital and weaken the UK as a location for enterprising businesses’. It says directors could be reminded of their ethical duties ‘with a simple booklet rather than the straitjacket of narrow regulation’.

The steering group, which was commissioned by the Department of Trade and Industry to review company law last year, is now digesting the responses with a view to producing concrete proposals for further consultation at the end of this year.




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