Archived press release

Company law reform fails people and the environment

3 November 2005

Friends of the Earth today (Thursday 3^rd November) accused the Government of putting the interests of big business before those of individuals or the wider environment, with the publication of the draft Company Law Reform Bill.

Tabled yesterday in the House of Lords, the Bill represents the biggest shake-up of company law in 150 years. Amongst its provisions, the Bill includes the first ever statutory statement of the legal obligations placed on company directors (referred to as directors' duties).

Friends of the Earth, in coalition with trade unions and other environment, human rights and development organisations, has been calling for company directors to be given a legal "Duty of Care" to communities and the environment, as well as for victims of corporate wrongdoing to be given legal rights of redress [1].

This would meet with commitments the Government has already made through international agreements on sustainable development. These call for economic, social and environmental interests to be integrated, rather than one interest placed above another. It would also match with Labour's promise on coming to power in 1997, to deliver "joined up thinking across Government" by integrating environmental policy with policy on business and economic development.

But the Government's Company Law Reform Bill will require directors to put profits first and only require them to "have regard to" communities and the environment. This requirement is made even weaker by the Bill specifying that it can only be enforced by shareholders; workers, communities, and other stakeholders will not be able to bring actions even when they are the victims.

Friends of the Earth's Corporate Accountability Campaigner Sarah Clifton said:

"This Government promised us joined up thinking on the environment, but it looks like there far more interested in putting the interests of big business first. Why does the Government only want directors to think about their social and environmental impacts, rather than do something about them? How can it offer justice to shareholders but deny it to the people whose lives are most directly affected by corporate irresponsibility?"

"This Company Law Reform Bill represents a unique opportunity to make UKplc fit for the 21^stCentury. But the current draft fails to do this, and ignores the economic damage caused to communities who suffer the impacts of corporate negligence and malpractice."

Friends of the Earth has repeatedly found corporate malpractice by UK companies who are responsible for environmental damage and human rights abuses in the UK and overseas. UK supermarkets, like Tesco, have failed to take action to clean up their palm oil supply chain, even though current supplies are putting the survival of the orang-utan at risk. Oil companies, such as Shell, are failing to minimise their environmental impacts overseas - and Shell continues to flare gas in Nigeria despite this being illegal under local law.

Notes

[1] Friends of the Earth is part of the Corporate Responsibility (CORE) Coalition of over 130 UK civil society organisations (www.corporate-responsibility.org ) which is calling on the Government to introduce:

1. A Duty of Care to Communities and the Environment

To deliver real improvements in company performance, directors must be required to take reasonable steps to minimise any negative social and environmental impacts caused by a company's activities in the UK or overseas.

2. Rights of Redress for Affected Stakeholders

Citizens and communities abroad should also have the right to pursue litigation in UK courts and seek compensation for human rights or environmental abuses committed by UK companies or their foreign subsidiaries or associates.

If you're a journalist looking for press information please contact the Friends of the Earth media team on 020 7566 1649.

Published by Friends of the Earth Trust