Basic Principles: The Better Business Act
February 10, 2021
Our objective is to see these four principles reflected in an amended Section 172 of the Companies Act. In doing so, the government will establish a new level playing field for all UK businesses.
For many directors, this change in law will not materially affect their behaviours or the actions of their companies, but by becoming law they will ensure that no business can use short-term profit maximising to justify behaviour that’s harmful to society or the environment:
1. Stakeholder Governed
Stakeholder governance must replace shareholder primacy in law as the governing principle of fiduciary duty within Section 172 of the Companies Act.
2. Empowering Directors
This change must empower Directors to exercise their judgement in weighing up and advancing the interests of all stakeholders.
3. Default Change
This change must apply to all businesses by default. It must no longer be optional to benefit wider stakeholders beyond shareholders.
4. Reflected in reporting
Following this change, businesses must report in detail on how they balance people, planet and profit in a strategic report or similar impact report.
An example amendment to Section 172 of the Companies Act, incorporating these principles, can be found here.