Source: New Zealand Parliament – Hansard
TUESDAY, 1 AUGUST 2023
(continued on 2 August 2023)
COMPANIES (DIRECTORS’ DUTIES) AMENDMENT BILL
Third Reading
ASSISTANT SPEAKER (Hon Jenny Salesa): Mōrena, the House is resumed for the extended sitting.
CAMILLA BELICH (Labour): I move, that the Companies (Directors’ Duties) Amendment Bill be now read a third time.
It is a pleasure to take a call on this bill. This bill has had an unusual journey to this, its third reading. It started with a common misconception articulated in this House that directors have a duty at all costs to return a profit. These narrow views about the role of business in our society serve no one. Just like it is often said that no person is an island, it is also true that no company operates entirely on its own, without effect or regard to the environment or the community around them. Many businesses recognise this and act responsibly with consideration not just to the profitability of their company but also to the environmental impact, the true nature of their supply chain, and the people who live and work nearby or who are impacted by the business that they carry out. This is along the same lines of a lot of other work that has been done in this space. For example, the modern slavery announcement that was made by the Minister Carmel Sepuloni last week, looking at the integrity of our supply chains and how as businesses within New Zealand or operating in New Zealand they have the responsibility to do better and to make sure that there is no exploitation in the work that they do. This bill is along similar lines and looks to the future of conducting business responsibly. I commend the businesses who are already undertaking these kinds of assessments and conduct in their work.
What is achieved, then, by this bill, is to provide clarity and security to those directors who were, until the passage of this bill, unsure or unclear about the scope of their duties. It doesn’t require directors to consider environmental, social, and governance matters. It doesn’t increase compliance costs. It doesn’t create new duties, and I want to be clear about that. This simple but important bill clarifies a small but significant point that profit is not the only factor important to responsible businesses. This bill is so straightforward that I can outline again, for the benefit of the House, exactly what it does. It adds a new subsection into clause 131 of the Companies Act. After the passage of this bill, 131(5) will state “To avoid doubt, in considering the best interests of a company or holding company for the purposes of this section, a director may consider matters other than the maximisation of profit (for example, environmental, social, and governance matters).” That is the entirety of the change that this bill introduces. It clarifies the best interests of a company could or may be to consider other matters other than the maximisation of profit.
This bill was further strengthened by the Supplementary Order Paper (SOP) I introduced at the committee stage outlining that environmental, social, and governance—or ESG—matters could be considered. I felt that this clarification was needed in order to provide context for the type of considerations directors may take into account. ESG matters are mentioned in section 129 of the KiwiSaver Act 2006 when dealing with responsible investor statements. So this concept has precedence already in New Zealand law and it is my view that it will continue to be used by the business sector when looking at factors other than the maximisation of profit. Members will also be aware that the United Kingdom has also introduced a similar change to their Companies Act in section 172, all the way back in 2006.
Now, members opposite will no doubt say that this law isn’t needed, that companies can already act responsibly taking wider ESG factors into account. And while companies could do that, the law in this area was not as clear as it could be on this point. This law provides the clarity needed. Members opposite have also accused us of virtue signalling, and I want to unpack that a little bit. “Virtue signalling” is a derogatory phase that implies that the only reason one is undertaking an activity is to be seen to be good. This bill actually clarifies and affirms the right of directors to actually do good. It gives confidence to action, not just signals of good intentions, as alleged. It is good for companies to feel they can consider more than their financial bottom line if they want to. It is necessary to have clear law for it to be accessible and useful to the general population. This bill enables both these things to the benefit of our legislative regime.
On the other hand, some members and submitters to the select committee wish we had gone further and made these considerations mandatory. Although I have sympathy for this view, I think that because of the substantive policy work involved with this type of change it is best suited to a Government bill—if there was will to go ahead with this type of change—rather than a members bill. But I want to recognise those submitters who raised those concerns in the select committee process, and those across the House who engaged in this matter, especially my colleague Ricardo Menéndez March, who put an SOP up on that matter in the committee stage. So I thank them for their interest in the bill and their engagement with it, but I think that this bill, as it is written, strikes the most appropriate balance.
I want to thank Duncan Webb—who first put this bill in the biscuit tin—for this idea, for his support, and for his courage to improve and clarify the law in this area. I also want to thank Rachel Brooking for her leadership of this bill throughout the select committee stage. I also want to thank the Economic Development, Science and Innovation Committee; you may have crossed half this bill out, but I think the bill we have before us today, that is about to become part of our law, is better and stronger for your attention. I also want to thank the chair of the Economic Development, Science and Innovation Committee Naisi Chen.
To the submitters on this bill: you may not have supported this bill—some of you may have wanted it to go further—but I hope you know that we listened to your concerns and considered the feedback, and your submissions had an impact on the final bill that will be passed in the House today. I also want to thank Alana Belin from the Parliamentary Counsel Office for her assistance with the drafting of this bill.
Having good law, especially in relation to the conduct of business, will help New Zealand businesses to grow and will assist individual company directors to have the confidence to have a more holistic view of the impact of their activities in the world around them. I therefore commend this bill to the House.
ASSISTANT SPEAKER (Hon Jenny Salesa): Meitaki maata. The question is that the motion be agreed to.