LETTER: Company law stifles enterprise

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The Independent Online
Sir: John Monks (Letters, 20 March) makes a point of great importance which is undiminished by the fact that it is not new. In 1973 a CBI report on The responsibilities of the British public company (the Watkinson Report) also underlined the inadequacy of a company law which made shareholders the sole legal beneficiaries and stated as a principle of corporate conduct that "the board has to forge closer relationships with its employees towards a common purpose". The report and its recommendations were promptly shelved.

Last year the Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA) published the result of an imaginative initiative, Tomorrow's Company, which argued that only the "inclusive" company, which effectively balanced the interests of all its stakeholders - employees, customers and community, as well as shareholders - would thrive in an increasingly competitive world. This too is likely to suffer the same fate as Watkinson unless it is pursued with greater vigour and wider business support than at present appears probable.

The problem is the ease of measurement of the present sole legal obligation through a financial "bottom line" which allows companies to be judged - and then bought and sold - simply as properties, rather than being regarded as dynamic entities which exist to provide a product or service profitably through the harnessing of human, financial and technological resources.

Additional measures of performance therefore need to be urgently sought. If companies had to report on the enhancement of their human potential through investment in skills and training and if company takeovers had to honour these obligations, which could be simply enforced in law, then perceptions and actions would begin to change.

Exhortation is not enough. Perhaps with the publication of the two Competitiveness White Papers and their depiction of our inadequate industrial performance, and with the diminishing party politicisation of both CBI and TUC there may now at last be a chance of action.

Sir Geoffrey Chandler

London SE10