Research has shown that 72% of people think that businesses should have a legal responsibility to the planet and people alongside their responsibility to maximise profits. In the wake of these statistics and recent redundancy scandals, more than 1,000 business leaders have lobbied the government to force company directors to align their business objectives with societal and environmental concerns.
The problem and proposed solution
The recent redundancies at P&O Ferries, in which they made 800 staff redundant without notice (read our article on this here), is just one example of an event that has resulted in a call for company law reform. One of the business leaders calling for tighter company governance rules has expressed concern that the current wording of the Companies Act 2006 allows company directors to “maximise profit for shareholders whatever the cost to others”.
In response to this, approximately 500 business leaders put it to parliament that section 172 of the Companies Act 2006, which sets out the responsibility of company directors to promote the success of the company, needs to be reformed. They argued that this section needs to make it clear that UK company directors are accountable to the planet and people, as well as for the profits of the company.
Key takeaway It has yet to be seen what recommendations the government will take from this coalition of business leaders, but this is a useful reminder to employers that, now more than ever, they are expected to find an appropriate balance between their responsibilities to people, profit and planet.