Better Business Act. Last week a coalition of businesses and campaigners organised a lobby of Parliament for a Better Business Act. The corporate governance reform campaign is calling for an amendment to Section 172 of the 2006 Companies Act, which enshrines the principle that companies must be run in the interests of their shareholders.
Models of corporate governance. In UK law (unlike other European countries), shareholders are given primacy in the legal duty of company directors. The 2006 Companies Act obliges directors to ‘act in the way he [sic] considers, in good faith, would be most likely to promote the success of the company for the benefit of its members [the shareholders] as a whole’. In a report for the IPPR Commission on Economic Justice, Mat Lawrence explains that shareholders are not the legal owners of firms, and that the shareholder primacy model of corporate governance contributes to the UK’s economic problems, including low and excessively short-termist investment, and inequality.
Purposeful companies. The emphasis in the Better Business Act proposal on the ‘purpose’ of the company emerges from the idea that companies should focus on their core purpose rather than simply on (often short-term) profit making. The British Academy’s Principles for Purposeful Business argues that a stated purpose should be the primary ‘reason for a corporation’s existence and its starting point’, with profit coming second as a ‘product of a corporation’s purpose.’ It offers eight principles for business leaders and policymakers to enable companies to ‘solve the problems of people and planet profitably, while not profiting from causing harm’. The Purposeful Company is a not-for-profit organisation dedicated to promoting business purpose, set up follow a 2017 report on the value of emphasising business purpose by the Big Innovation Centre’s Purposeful Company Task Force.
Worker representation in corporate governance. The TUC has consistently called for workers to be elected to company boards. Its 2016 report All Aboard set out the case, showing that worker representation on boards is common in many European countries (including Germany). It argued that workers generally have a stronger commitment to a business’s success than its shareholders, who may only hold shares for a short period and can always sell. The House of Commons BEIS Select Committee concluded its investigation in 2017 by saying that worker directors should ‘become the norm’ among larger companies The TUC’s Frances O’Grady went head to head on the issue with the Adam Smith Institute’s Sam Bowman in the Guardian.
Lower real incomes harm UK growth prospects. In its latest survey of the global economy the IMF forecasts UK growth to be the slowest in the G7 due to the scarring effects of inflation on household consumption. Read the FT’s commentary by Chris Giles. In the Guardian Larry Elliott reviewed the global economic outlook in the light of the war in Ukraine.
Central banks are making policy mistakes. Economist Duncan Weldon analyses why central banks are raising interest rates even though many western economies are heading for a downturn as a result of high inflation. He concludes that aggressive hikes in interest rates to reduce inflation will lead to ‘a Britain where the employment rate is lower, unemployment is higher, wage growth materially slower and GDP growth barely positive.’ (See Bloomberg’s summary of central bank moves across the globe.)
What are other countries doing in response to higher bills? The TUC’s Nina Reece compares the UK government's support for people and sectors hit by the energy crisis to the German, French, Spanish and Nordic countries. Bruegel has updated its policy tracker comparing national policies to shield consumers from rising energy prices for 26 European countries, from price regulation, windfall taxes, transfers to vulnerable groups and more. The IEA and European Commission has also released a guide on improving household and workplace energy efficiency across the EU.
What if energy companies took the hit instead of consumers? James Meadway outlined the case for keeping the energy price cap at its current level: ‘because pretty much everyone is affected, the potential constituency for demands to regulate prices is very broad…we could choose to protect households instead of company profits’. If some energy suppliers go bust as a result, they could be nationalised, as Bulb Energy was last October.
Conservatives for energy efficiency funding. Chris Skidmore MP, former Conservative energy minister and leader of the Net Zero Support Group, has called for an energy demand strategy in the Times, following the publication of the British Energy Security Strategy. (See analysis of the main policy gaps in our previous Digest.)
Twitter: an alternative to Elon Musk. After Elon Musk’s bid to buy Twitter, Danny Spitzberg and Nathan Schneider explained why ‘The platform’s essential infrastructure should be controlled by a user-owned democracy’ in an article for Wired.
Net zero: the game. The FT and International Energy Agency (IEA) have developed a Climate Game for Earth Day, where players are forced to pick between policies to limit global warming to 1.5C by 2050. The game is based on modeling from the IEA’s Roadmap to Net Zero by 2050.
Earth Day greenwashing exposed. A Twitter account Net Zero Check emerged on Earth Day to assess any company which tweets about Earth Day’s climate commitments, echoing an earlier initiative which called out companies’ gender pay gaps on International Women’s Day. Liza Featherstone writes for New Republic outlines Earth Day’s inspiring history and its gradual co-optation from its radical roots.
Climate delayers will cost the Conservatives votes. New polling from Onward on voters attitudes to net zero finds the Conservatives would lose 1.3m votes at the next election if they listen to the “noisy campaign on the right of British politics, including from Nigel Farage, to overturn the Net Zero pledge”. (Twitter thread summary.) Onward found a majority think that the Ukraine crisis and rising fuel costs means the government should move faster (not slower) on decarbonising the UK’s energy supply, and that “voters want politicians to stick to their promises and are skeptical of big energy companies making big profits”.
Lessons in economic democracy. Politico’s Global Policy Lab explored the history of participatory budgeting in European cities and explained how to overcome the challenge of middle-class residents dominating policy discussions about how public money is spent.