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. 

  • The proposed reform. The proposed Better Business Act (full text here) would reform the ‘fiduciary duty’ of company directors so that they were obliged to ‘promote the purpose of the company’, and to ‘operate the company in a manner that benefits the members, wider society, and the environment.’ Shareholders would become one among several beneficiaries of the company, alongside employees, suppliers and customers, and directors would have to consider ‘the likely consequences of any decision in the long term’.
  • Widespread backing. The Better Business Act campaign was set up by B Lab UK, which coordinates ‘B Corps’ businesses (see below). It is now backed by over 1000 companies, including well-known names such as Iceland, Anglian Water and Innocent, and its spokespeople include government retail adviser Mary Portas. It has the support of the Institute of Directors, which argues that the ‘change in law will not materially affect [directors’] behaviours or the actions of their companies’, but that it will ‘ensure that no business can use short-term profit maximising to justify behaviour that’s harmful to society or the environment.’ Labour MP Margaret Hodge and Conservative MP Jonathan Djanogly have jointly written in The Times in support of the proposal, arguing that the position of ‘shareholder primacy’ in the 2006 Companies Act ‘was a fudge that needs urgent re-examination’


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. 

  • Stakeholder capitalism. The Better Business Act proposal emerges out of the wider movement for ‘stakeholder capitalism’. This argues that companies should serve all their ‘stakeholders’, including employees, customers, the environment and the communities in which they are based. Most European corporate governance systems embody some version of this principle, in which shareholders are regarded as just one of the beneficiaries of the firm. The World Economic Forum has developed many of the ideas around stakeholder capitalism
  • Democratising the firm. Common Wealth has proposed an agenda for reforming corporate governance which goes beyond the Better Business Act and the stakeholder model. Its Commoning the Company report proposes that 45% of company boards should be elected by the workforce, 45% by the shareholder body, and 10% representing social and environmental interests. There should be mandatory profit-sharing for workers and a new duty to require company directors to align business activity with a ‘1.5 degree pathway’. 


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.

  • B Corporations. ‘B Corporations’ (or B Corps) are businesses that meet certified standards of social and environmental performance, public transparency, and legal accountability to balance profit and purpose. Companies awarded the B Corp standard seek to use profits and growth as a means to achieve positive impact for their employees, communities, and the environment. Since launching in 2006, only 4,500 businesses have been awarded B Corp status out of over 150,000 who have applied, due to the scheme’s strict requirements. B Corps are certified and promoted by the B Lab, based in the US. UB Lab UK is the UK offshoot, committed to ‘lead[ing] economic systems change to support our collective vision of an inclusive, equitable and regenerative economy.’ To mark last week’s Earth Day, the Independent provided an A-Z guide of B Corps in a range of sectors
  • Measuring better business. Supported by the CBI and TUC, the Good Business Charter is an accreditation system which measures corporate behaviour in ten areas, including a real living wage, fairer hours and contracts, employee representation, diversity and inclusion, environmental responsibility, paying fair tax, and ethical sourcing. 
  • Profits vs. purpose. The Financial Times’s ‘Profit and Purpose’ series examines the ‘difficult trade offs; businesses must make to balance shareholder interests with social responsibility. The series includes business case studies from Levi Strauss to Hitachi, and even a trade-off game where players have to choose between profit and purpose. 
  • Is purpose enough? Anna Fielding of Cohere Partners argues that making ‘purpose’ explicit is not enough to make businesses sustainable; firms need to adopt an ‘impact strategy’ to define how they can contribute to positive change in the world.


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. 

Weekly Updates

Inflation and monetary policy

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.)

  • The case against monetary tightening. The FT’s Martin Sandbu outlines the case against monetary tightening as central bankers across the world continue to increase interest rates, despite inflation being primarily driven by supply-side shocks: ‘Today a pandemic, a war and a climate crisis all necessitate huge structural shifts — which may themselves maximise potential productivity and minimise long-term inflationary pressures. In such a situation, how could it be right for central banks to delay investment and jobs growth, and with them the needed reallocations?’


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.) 

  • Against the ‘Treasury brain’. Skidmore criticised the ‘short-sighted’ decision by the Treasury to hold up additional spending for insulation  and praised the 10 year scheme in Germany, which offers 1% interest loans to households for energy efficiency upgrades as a model. IPPR’s George Dibb explains ‘why we need to chop off the “dead hand” of the Treasury’ and create an economics ministry separate from managing fiscal policy, public sector debt and departmental spending. 


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.

Climate change

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.

  • Countering greenwashing. The Treasury has launched a new Transition Plan Taskforce to develop a gold standard for net zero transition plans for UK companies. The taskforce brings together finance experts, ‘leading companies’, public sector and civil society groups and is supported by a team hosted by UKCGFI and E3G.

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”.

Local economies

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.