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Amendment Of Section 18 Of Companies Act 1967

Volume 979: debated on Tuesday 26 February 1980

The text on this page has been created from Hansard archive content, it may contain typographical errors.

(1) In section 18(1) of the Companies Act 1967 there shall be inserted the following:

  • "(c) the members joining and leaving the company during the year and there shall be separately classified the numbers of school-leavers joining the company, the numbers of those retiring and of those who have been made redundant;
  • (d) the employment and training policies of the company and, in particular, those relating to employees under the age of 19 years;
  • (e) the trade unions recognised by the company for collective bargaining purposes, and a resumé of the collective bargaining arrangements;
  • (f) the employee participation arrangements;
  • (g) the numbers of man-days lost per year as a result of industrial disputes within the company;
  • (h) the pension and sick pay arrangements of the company;
  • (i) the numbers of disabled people employed and of those who have retired or been made redundant;
  • (j) a resumé of how the company's personnel practices cater for disabled employees.".
  • (2) In section 18(2) of the Companies Act 1967 there shall be inserted the following:

    "(c) those matters which are set out in section 18(1)(c) to (j) inclusive."

    (3) This section shall not apply to the directors' report in respect of a financial year ending before this section comes into operation.'.—[ Mr. John Smith.]

    Brought up, and read the First time.

    I beg to move, That the clause be read a Second time.

    With this we may take the following:

    New clause 6— Amendment of section 157(1) of Companies Act 1948:

    'There shall be added to section 157(1) of the Companies Act 1948 the following:

    "A public company shall also distribute to each of its employees the balance sheet and report described above.".'.

    New clause 15— directors' reports and employment of disabled people:

    (1) The Companies Act 1967 shall be amended in accordance with the following provisions of this section.

    (2) In section 16 (additional general matters to be dealt with in directors' reports) in subsection (1) there shall be added after paragraph ( g)—"( h) in the case of companies of such classes as may be prescribed by the Secretary of State, contain such information as may be so prescribed about the arrangements of the company and its subsidiaries in that year for the recruitment and training of disabled people and for the employment, training and advancement of disabled employees."

    (3) In subsection (6) of the said section 16 for the words "paragraph ( g) shall" there shall be substituted the words "paragraphs ( g) and ( h) shall".

    (4) After subsection (5) of the said subsection 16 there shall be added—" Any expression used in the said paragraph ( h) and in the Disabled

    Persons (Employment) Act 1944 shall have the same meaning in that paragraph as it has in that Act.".'.

    New clause 15 stands in the name of the hon. Member for Exeter (Mr. Hannam) and other hon. Members. I shall make a brief reference to it, but I shall leave it to those hon. Members to explain it.

    The purpose of new clause 4 is to require a company to make a wider disclosure of its employment practices. That would apply both to its able-bodied and to its disabled employees. It is in the belief that the general requirements which the law imposes on companies in the United Kingdom are not wide enough that we have put forward the new clause.

    In general, the disclosure requirements that are imposed on United Kingdom companies relate to their financial situation rather than to a requirement to show a general economic or social picture of their activities.

    Increasingly in recent years, in successive pieces of legislation, the minimum information that companies are required to disclose in their annual reports has been increased. There has been an increasing requirement on companies to show more detail of the financial side of their affairs. But the tradition has been to look on the information required as that which would principally be of interest to shareholders and creditors rather than to employees or to members of the general public who are interested in assessing the company's economic wealth as well as the details of its finances.

    In recent years, there has also been a recognition that those legitimately interested in a company's affairs constitute a much wider group than just the shareholders and creditors or those particularly interested in its finances. If we look at recent history, we notice that Governments have been taking a much closer interest in the affairs of companies. There were provisions in the Industry Act 1975 requiring disclosure of company affairs to the Government, and the Government also took power to elicit more information about particular company affairs. That is information sought by Governments in the interest of national economic planning. I do not suppose that that is a line which the present Government will be inclined to follow, since almost perversely it seems that they have decided not to interest themselves in national economic planning or in the fortunes of particular companies, be they in the public or the private sector.

    Another tendency which has been growing in recent years, and which is to be highly commended, is that the work forces of companies feel much more involved when given information about the companies for which they work. After all, their work represents a large part of their lives. They contribute that to the company, and as a result they have a legitimate interest. They have an interest as individuals and also an interest through their trade unions and professional associations.

    Under the Employment Protection Act. we have seen the growth of an obligation upon companies to give information, for example, for the purpose of collective bargaining. The requirements on companies to do that were strengthened in terms of that Act. But in Europe and other parts of the world much more information is disclosed and is required to be disclosed under the laws of other countries than is the case under the law of the United Kingdom, particularly in the case of countries that are members of the European Community. For example, the works council system in the Federal Republic of Germany leads to the disclosure of much more information on the employment side as well as much more general information about companies. I understand that a French decree will come into operation in 1984 under which employees will be able to demand a social balance sheet from a company. There are also developments in Belgium and the Netherlands.

    To a large extent, they build upon the system of statutory works councils that operate in many Community countries and which, whatever their merits or demerits in terms of industrial democracy, are a useful method of disseminating information to the work force. It gives a work force a sense of involvement in the decisions of the company, a wider and deeper perception of both the problems and opportunities of the company and an opportunity to make an intellegent critique of the management of the company. One hopes that that will lead to a better spirit of co-operation between the management and those who give their lives to the company in terms of the work that they perform throughout their working lives.

    New clause 6 suggests that a company should give a balance sheet and report to all its employees. I imagine that the objection to that will be that it is too cumbersome. If that is so, I am sure that my hon. Friends would settle for a reasonable abbreviation. However, I do not think that it would be too burdensome in principle to have an obligation to communicate to the employees who work for a company. One of the main points behind the new clause is the feeling that not enough information is required to be disclosed under United Kingdom law at present and that many other countries do a great deal more.

    There is quite an interesting survey by the Financial Times entitled "The Financial Times Survey of 100 major European Companies' Reports and Accounts", from which it is quite clear that many continental European countries publish much more information about their employees and various employment matters. It also becomes clear that the United Kingdom and other countries such as Australia, Canada and South Africa, publish much less. Indeed, many United Kingdom companies go no further than conforming to the basic requirements of the Companies Act 1967, which makes them disclose the numbers employed and the related wage costs.

    A number of guidelines were published by the OECD in June 1967 which apply principally to multinational companies, or, as they are called in United Nations parlance, transnational corporations.

    The United Nations has an international standard of reporting and accounting for those corporations. By and large, they appear to be ignored by the multinational companies and also by United Kingdom companies. There is much room for improvement. In this new clause we are not suggesting anything very dramatic. The idea of an employment statement was canvassed in the Green Paper entitled "The Future of Company Reports" published by the Labour Government in July 1977. A number of other matters were canvassed on that occasion, but for the purpose of this new clause we are confining ourselves to an employment statement.

    Does the right hon. Gentleman agree that in some countries where greater disclosure of matters relating to employment is required there is not the same detailed employment legislation—apart from company law—that we have in Britain?

    I am not in a position to confirm or deny that, because I do not have detailed knowledge of employment legislation in other countries. It does not matter how the information is obtained, but I am not confident that the Employment Protection Act covers all the information that we are seeking in the new clause. The Employment Protection Act provides for information that is required for collective bargaining purposes. Our ambition should be wider than that. There should be a desire to inform employees and the general public about employment within the narrow confines of the collective bargaining system.

    It is not unduly burdensome to suggest that companies should be required to disclose information about the numbers of employees joining and leaving the company, about their employment and training programmes, about the unions they recognise for collective bargaining purposes, about pension and sick pay arrangements, and so on. That is not an onerous obligation. Most good companies should have that information in any event. It would give a fuller picture to people interested in a company of how it carries out its employment policies and practices.

    We include in our requirements a reference to the disabled. I do not wish to trench on the provinces of other hon. Members who take a deep interest in the problems of the disabled. I simply say that we think that the disabled should also be included in the comprehensive disclosure about employment. They fit neatly into it. Most people would like to see a statement on how many disabled people companies employ and how they are employed. The same principle could apply to able-bodied employees also. Indeed, it might be preferable to include the figures relating to the disabled in a general employment statement rather than have them sticking out like a sore thumb in a separate statement.

    The advantages to be gained from the requirements in the new clause are considerable. We have a long distance to go in Britain to improve industrial relations in many companies. In some companies there are good industrial relations, in some companies there are adequate industrial relations, but in many companies there are not effective communications between the work force and the management and it is extremely difficult for the work force to find out proper and legitimate information from the company. It might also be useful for companies to be subjected to public assessment, not simply in terms of their financial performance—which tends to be the principal concern of the financial press—but in a slightly wider framework. It would be a useful start to have a disclosure of employment.

    7.15 pm

    Many companies may be willing to do that voluntarily. Many companies in other countries are able to do so. The requirements of the law should have the effect of bringing our regulations up to a higher standard. We do not think that enough is being done in this area, and we think that the process could be stiffened by the introduction of a statutory requirement. New clauses 4 and 6 are modest. I shall not trench too much on new clause 15, which has its own advocates, except to say on behalf of the Opposition that we wish the proposers of new clause 15 well. They will recognise that there are some advantages for them, as well as for the public, if the Minister gives a sympathetic reception to new clauses 4 and 6.

    I wish to speak particularly to new clause 15, which is in my name and the names of other members of the all-party disablement group. It is interesting to note how often that group is becoming involved in legislation. I notice and welcome the attendance of the four musketeers of the group, plus, in this instance, my hon. Friend the Member for Kensington (Sir B. Rhys Williams), who so ably moved a similar amendment in Committee.

    We seek to include in the 1967 Act provision for directors' reports on company policies relating to the employment, training and promotion of disabled people. In Committee my hon. Friend the Member for Kensington moved a similar amendment, and his presentation of the case received support from the Opposition and from the Minister, who promised to follow the guidance of the Manpower Services Commission's review of the quota scheme. The Minister gave an assurance to the Committee that he would use clause 48 powers to meet any requirement that the commission might recommend. However, there is a significant difference between the amendment that my hon. Friend tabled in Committee and new clause 15.

    All hon. Members are concerned at the appallingly high level of unemployment amongst disabled people. The figure for January is 137,063. The failure of the present quota system is due partly to non-compliance by employers but also to ignorance on the part of companies as to their responsibilities towards the disabled in our society.

    We do not seek to achieve a requirement to fulfil the quota. We accept the point made by the Minister in Committee that he would wish to wait for the Manpower Services Commission's quota study review before including any provision in the Bill. We have therefore removed that part of the orginal amendment, and we now propose that in its directors' reports a company should provide information on the recruitment and training of disabled people. That is a straightforward suggestion, and it is in line with the basic concept of section 79 of the Health and Safety at Work etc. Act 1974. Under that Act companies had to include information on their employees' health, safety and welfare at work. Many companies have done that, and some have moved even further. In recent years they have begun to give reports on local community actions, anti-pollution activities, and other varied policy matters.

    The greatest support for our amendments lies in the 1977 Green Paper entitled "The Future of Company Reports". In that Green Paper it was suggested that companies should publish information on their policies towards the employment of disabled people. At present, those companies with a good record in this field often have a director or a senior manager with a special knowledge of or a close interest in disability. Many other companies would happily employ disabled people if, each year, they had to concentrate their minds on the problem in a directors' report. The fact that disabled workers provide the most loyal and dedicated service to companies would be more widely known than at present.

    As in many other areas of disablement, we want to achieve a consistent and more uniform treatment for disabled people. A written statement of policy would ensure that every consideration was given to the employment and retention of disabled people. Another important factor is that non-disabled employees would have a much clearer indication of what their company would do in the event of their becoming disabled.

    For all those reasons, and with the intention, which I know the House shares, of enhancing employment opportunities for the disabled without imposing new and onerous requirements on a company, I hope that the Government will accept new clause 15. It does not prejudice the outcome of the quota review. If it is decided that the statutory quota system should continue, the Government can use their powers under clause 48. If it is decided not to continue the quota system, the proposal will nevertheless help to provide employment opportunities for disabled people.

    We cannot allow these large numbers of willing and, with training, highly talented workers to remain cut off from normal work opportunities. I hope that the Government will accept the new clause.

    I support the contentions of the hon. Member for Exeter (Mr. Hannam). I almost called him my hon. Friend. As the two chief officers of the all-party group on disablement, we work closely together. I should like the Minister to know that the all-party group feels strongly about new clause 15.

    The aims of the clause are to focus the attention of top management on the problems of disabled people. Far too often those problems are completely disregarded by companies or, alternatively, dealt with by junior staff. If attention is not focused on those problems, they simply go by default. As a consequence, disabled people suffer.

    Disabled people suffer not only in terms of employment but in terms of training. Far too often the legitimate claims of a disabled man or woman to adequate training are overlooked, partly because of -the common prejudice against disabled people—we are all aware of that—and partly because in the minds of some employers is the conviction that disabled people require more training than non-disabled people. That is a complete myth.

    For similar reasons, disabled people are often overlooked when it comes to promotion. The best men or women may be overlooked because they are disabled. That is gross unfairness. If the clause is accepted or viewed sympathetically by the Minister, it will mean that in the annual report of every company attention will be focused on the problems of disabled people.

    New clause 15 is of far greater importance to disabled people than is commonly realised. The employment of disabled people is an absolute disgrace, training is deplorable, and promotion is absolutely disgraceful. Last week I tabled questions about the rate of unemployment of the disabled—a subject about which we have been concerned for many years. The trend has not changed at all. There are proportionately many more disabled people who are unemployed. The problem is that many employers are breaking the law. They are not fulfilling their quota of disabled people and are taking on new people without permission to do so.

    We have deliberately avoided dealing with the quota in the new clause, because we want to meet the Minister as best we can. The quota system is under review. We have therefore deliberately kept the quota out, in order to give the Minister an opportunity to meet us. On Report the Government could insert a provision for reference to the employment, training and promotion of disabled people.

    I hope that the new clause will be accepted by the Minister. It is of profound importance. It is a small clause, which will cost the Government no money but will greatly help disabled people.

    I support the remarks of my hon. Friend the Member for Exeter (Mr. Hannam) and the right hon. Member for Stoke-on-Trent, South (Mr. Ashley). New clause 15 is a modest clause. It is put forward on the premise that we are all concerned about employment and want to see more employment for more people. We are particularly concerned about the disabled.

    The figures are well known and I need not go through them. As the right hon. Gentleman said, there are proportionately more disabled people unemployed than able-bodied people. The reasons are obvious, and I need not go into them.

    We are anxious that disabled people should at least get their fair share of employment opportunities. Indeed, we could argue the case that they should have more than their fair share because of their other disadvantages in life. However, that is not our case. It is only that they should have their fair share.

    The quota system is being reviewed. I have never been happy about it because the nature of employment varies so much. There are undoubtedly firms that could take far more disabled people into their service than any quota system would lay down. Conversely, there are firms, such as contractors and those working on building sites, in which, with the best will in the world, it is difficult to employ many disabled workers.

    We are putting forward the value of publicity. Surely that is what open democracy and government is all about. It is one of the premises of our existence in Parliament. Publicity helps to get things done. We in no way suggest taking executive power to compel firms to employ more disabled people. We advocate the use of publicity.

    If a company had to spell out in its annual report the modest fact that we suggest in the new clause, it would concentrate the minds of management, and hence others in the company, when writing the report. When the chairman or managing director reads the draft of the annual report produced by the company secretary and sees a thin return of what the company has contributed to the employment of disabled people, if he values his reputation he will say that it is not good enough and that the firm must do better next year. It will concentrate the mind, and that is one of the most important points. It is not just the external effect but the internal effect on an organisation of having to publish those statistics.

    We hope that in the long run there will be more incentives rather than penalties for companies to employ a greater number of disabled workers. For a number of years I have been most anxious to see the Queen's Award for Industry extended to include a company's performance in regard to disabled employees. The Manpower Services Commission has gone half-way in proposing a solution of its own. Because of the prestige of the Queen's Award for Industry, I should like to see it awarded for performance in regard to employment and subsequent training of disabled people. New clause 15 would be a good start. If it is incorporated in the Bill, I believe that it follows logically that the Queen's Award for Industry should be given to companies which perform well with regard to the disabled, as well as in export and technological innovation. The three go happily together.

    7.30 pm

    I am the fourth of the four musketeers. If the Minister has listened carefully, he will have decided to accept new clause 15. The more information, the greater the awareness. Directors will then appreciate what can be done. All too often, an attitude of defeatism prevails towards the disabled and their prospects of employment. I may cause some upset by saying that I am not completely convinced that the Manpower Services Commission understands the problems of the disabled. It makes an attempt to employ the disabled, but it has not got the message concerning what can and should be done.

    Perhaps this clause will give the commission another little weapon with which to approach the problems involved in employing the disabled. If the boardroom is aware of the problem, company policy may change. Those of us who are involved in this subject know that from time to time we meet pleasant personnel officers. They may say that we are quite right and that they agree with us. But then they go on to say that it is not company policy, or that there is no one on the board who believes in it. However, if this subject is included in the annual report, there may be a better chance of getting this concept of the disabled accepted. If it is accepted at boardroom level, it can be passed down to the shop floor.

    We tend to tuck the disabled away and to say that in the fullness of time they will die. The congenitally disabled, those who become disabled as a result of illness and those who become disabled as a result of industrial or traffic accidents may have an expectation of a working life of between 40 and 50 years, thanks to medical skill. Why should they be ignored as part of our work force?

    Managers tend to raise problems. They often say that there is a problem of mobility. They ask how the disabled can get to work. However, this is not such a big problem. Vehicles are adapted. Several schemes are run by the Manpower Services Commission in order to help the disabled to get to work. The problem of mobility can therefore be overcome.

    It is also said that there may be a problem of access to the factory. Directors should show some concern about that. If their premises are inaccessible, they should make them accessible. Should the disabled be employed? I am an unpaid director of Possum Controls Limited. From experience I know that if the will exists there is no disability. I shall repeat slowly for the benefit of the Minister. There is no disability that cannot be overcome by advanced technology.

    There are total quadraplegics who are unable to breathe, but they are able to control their environment and to earn a living. The oldest surviving respiratory polio victim in the world caught polio in Malaya. He can export specialised hospital beds all over the world from his bed. He can do that only because someone has thought about the problem and has considered how to exploit his obvious skill. He uses his mouth. Some people use their chins and others use their noses. This is a challenge to directors and to the Manpower Services Commission. Let us inject a little bit of life into directors. We should make them realise their duty. If we accept the clause, we may give the disabled a chance to indulge in industrial, economic and social work.

    No one will disagree with the need to employ the disabled. No one will disagree that new clause 15 will help towards that end. My hon. Friend the Member for Eastleigh (Mr. Price) has put forward constructive proposals. He has suggested that there should be some way of providing special provisions. After the First World War, anyone who employed a disabled soldier or sailor was allowed to put a medallion on his notepaper. Such companies were proud to do so. If the proposal of my hon. Friend the Member for Eastleigh is carried a little further, it will have greater effect than new clause 15.

    New clause 15 has its advantages. Perhaps it should be obligatory on every board meeting to include on the agenda information about its disabled employees. People tend to take too much notice of balance sheets. Once they have been published, they are of little interest to the general public. However, competitors may be interested.

    I am very much against new clause 4. I hope that the Government will resist it. Basically, it is a "Nosey Parker" clause. It would give a tremendous amount of information to competitors. Overseas competitors would be able to find out too much about a company. However, the information would be fairly useless. It might appeal to an employer or to someone who was investigating. Subsection (1) refers to
    "the members joining and leaving the company during the year and there shall be separately classified the numbers of school-leavers joining the company, the numbers of those retiring and of those who have been made redundant".
    However, the number of people travelling or walking to a building site will depend upon whether the site is starting or finishing. A tremendous amount of information will be produced that is of no value to anyone other than a competitor. A competitor may wish to know whether business is growing. What use can this information be as regards employment statistics?

    The new clause refers to
    "The numbers of man-days lost per year as a result of industrial disputes within the company".
    Workers may strike for an hour about a cup of tea. In order to comply with the requirements of the new clause, it will be difficult to work out the number of men on a site and the number of strikes over silly things such as sugar in the tea. I have known a strike to go on for half an hour as a result of a dispute about sugar in tea. That should not happen. However, putting statistics on an annual balance sheet will be a waste of time.

    The problems involved in the other subsections seem obvious. What purpose can be solved by putting this information on a balance sheet? It would be better to have a standard form of employment policy. It should be available to shareholders who wish to see it, but it would not be repeated year after year.

    I join my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) in hoping that the Government will resist new clause 4. I have considerable sympathy with one line of new clause 4. The right hon. Member for Lanarkshire, North (Mr. Smith) proposes that emphasis should be placed on the employment and training policies of the company. During the next 10 years the Government should encourage companies by every means possible to undertake training schemes. Such schemes should be financed by the company. That is preferable to the practice of discharging employees whose skills have become obsolete. Those companies leave such people to the taxpayer to retrain. Companies take them on again when they have acquired the skills necessary for the next decade. The taxpayer cannot bear that burden.

    The Government should recognise the need for training within industry. They should give every possible emphasis to it. Much of the information that is called for in new clause 4 would be superfluous and misleading. Companies have to pay a lot of attention to public relations to the exclusion of their business. They would have to spend time explaining the facts to any hostile elements who looked through the accounts and who felt that they were on to something. Very often there are good reasons why things have gone wrong, and boards should not be harassed too much by being forced to disclose every detail. Therefore, I hope that the Government will resist new clause 4.

    I hope that the Government will also resist new clause 6. Although I am entirely in favour of a great many more consultations with employees, I do not think there is much point in blinding them with science by giving them the balance sheet. It would simply require an enormous amount of paper to be printed which would probably be thrown away unread. Once again, I recognise the intentions of the right hon. Member for Lanarkshire, North (Mr. Smith), but I think that in practice such a proposal would be a blunder.

    New clause 15 resembles the clause that I moved in Standing Committee. I hope that on this matter we shall have a gesture from my hon. Friend the Minister tonight. There have been speeches from both sides of the House that have been absolutely sincere and they have shown a real understanding of the problems of the disabled. The House often comes back to problems of the disabled and debates these matters, always with sympathy but not always effectively. The Government should adopt this proposal because hon. Members know what they are talking about. I hope that the Minister will be forthcoming.

    I declare an interest in that I am deputy chairman of a public company. I support the spirit of both new clause 4 and new clause 6. However, I think that much of what is contained in new clause 4 would be better put in a code of practice. Some of the information that is listed here could create difficulties either for management or trade unions and if a body such as ACAS were to draw up a code of practice this would be the best way of producing some real and useful information which could be used for the benefit of everyone.

    The other point with which I have some sympathy is that the list of information contained in new clause 4 is very much concerned with advancing good human relations in a company. It is right that the chairman of a company should be very much concerned, and if he had to sign a statement which described his recruitment policies, the training that was done within the company and how the different forms of participation were being developed, it would be helpful in terms of ensuring that the most senior person in the company concentrated his mind on seeing that his company was doing all that could be done. Inevitably he would look at his competitors to see what they were doing and at other companies which had established a reputation for good practice in these areas.

    I like the concentration on school leavers, and we should all be concerned about this. In my constituency there is a very real rapport between industry and education. There is a concern to ensure that children are given an early warning of the sort of areas where there are likely to be more jobs and the areas where jobs are likely to be fewer. On training, it might help to establish a better understanding of where the balance should be drawn between in-company training and training through the agencies of the Manpower Services Commission.

    Some chairmen may like to spell out the particular initiatives that have been helpful in their own companies. In my company we made every employee take the IBM aptitude test and as a result we found five people who had skills that no one had suspected. As a result, their career prospects were absolutely transformed.

    On the development of participation, sadly Bullock was the great missed opportunity of the decade. The loaded terms of reference and the insistence on a single channel fouled the water to the point where it is quite difficult to see what useful initiatives could be taken. I think that a code of practice is the only useful way that is politically practical at present.

    If one looks at some of the information that is required by new clause 4, one sees that some company chairmen might not wish to spell out the fact that they have been successful in getting unionists and non-unionists around the table. Or they might not wish to spell out that their employees, particularly members of some unions, were now member of BUPA. Also, they might feel that if all the unions were listed it might encourage multi-unionism. There would be certain unions who would look through company reports to see where they should have negotiating rights but did not have them. Therefore, I believe that there are serious practical difficulties which would be best explored through ACAS.

    7.45 pm

    On the question of circulating annual reports to employees, we already do this in my company. We have an employees' meeting immediately afterwards and we try to expand the information. A lot of the information that is listed in new clause 4 would be helpful for such a meeting. Again I endorse the spirit of the new clause, even though it may be premature and we may have to think rather harder about the sort of companies in which it would be useful. I am sure that when my hon. Friend replies he will take us further in these arguments.

    I open briefly by asking the motive of the obligations placed on directors' reports in the Companies Act 1967 under section 15 and thereafter. There are a range of obligations which include profitability, information about the average number of employees by the week and the amount of wages by the year, and contributions for political or charitable purposes—and there may be other motives in that. I note that section 20 requires that in certain circumstances the directors' report should include particulars of exports. It is not just a question of better disclosure of information; it is also a means of directing the attention of the chairman in a certain way to matters which the Government consider important. That appears to be a relevant consideration in the section relating to exports.

    As regards most of the suggestions made in new clauses 4 and 6, the information is readily available to the company. It is not as if the requirement will impose a vast amount of new paperwork on a company. The imposition of the obligation to include those particulars in the directors' report is a means of giving some official pressure for improvement in practice. This may be particularly relevant in the case of school leavers.

    Perhaps in passing I should mention that the practice stated by the hon. Member for Kidderminster (Mr. Bulmer) which operates in his company of distributing the directors' report is an example of what the best companies are already doing. The purpose of the new clauses is to impose on the laggards the practices of the best companies.

    I shall now consider the clause in relation to the disabled. To impose this obligation on a company in its report is, as it were, an official declaration of the importance which the Government attach to this matter. Very much has been done, as is illustrated in the recent report by the Low Pay Unit. This report shows, for example, the increase in the number of firms which are below their quota in percentage terms. On page 2 of the report there is a table showing the percentage of employers who have failed to fulfil the quota of disabled employees. In 1960 it was 38·2 per cent. of employers. That figure has increased a great deal since then. In 1970 it was 57·3 per cent.; in 1975 it was 60·9 per cent. and in 1978—the latest date for which figures are available—it was 63·2 per cent. Although there are other factors behind it and these figures need clarification, the general trend has been adverse for the disabled.

    This report and the corresponding report from the Royal National Institute for the Blind conclude—precisely in the terms suggested in the new clause—that all employers should be required to publish annually details of their levels of quota compliance. If the Government accept that there needs to be some pressure on employers, particularly at this time of high unemployment, when it is more difficult for the disabled to find jobs, this would he a small symbolic way of showing their determination to improve the situation and to ensure that chairmen of companies at least—since they sign the reports—have brought to their attention from time to time the practice of their own companies concerning the disabled.

    For a number of reasons, partly disclosure and partly the seal of official approval and pressure, let us hope that the Department will have something positive to say about these new clauses.

    Recognising the importance of the fact that so many hon. Members have spoken from both sides of the House on new clause 15, I hope that the right hon. Member for Lanarkshire, North (Mr. Smith) will understand if I reply to that part of the debate before going on to new clauses 4 and 6.

    The Government have considerable sympathy with the intentions of new clause 15, as I am sure that the House does. We are all concerned that the disabled should have better opportunities of obtaining employment. A number of points in this context are not matters of company law, and I ask the House to bear with me if I mention them.

    In 1977 the previous Administration published a Green Paper "The Future of Company Reports", which contained a proposal similar to that of this new clause that companies should, as part of an employment statement, publish details of the numbers of disabled people employed together with a short statement of how company personnel practices catered for the disabled. In responding to that proposal, companies pointed out that they were frequently unable to meet the required quota of disabled employees as laid down in the Disabled Persons Employment Act 1958 because there were not enough registered disabled persons applying for jobs.

    That may, of course, have been due in part to a natural reluctance on the part of the disabled to register as such and thereby to class themselves as a separate category of employee with lower expectations. Quite apart from the views of companies—as I explained in Committee—the Manpower Services Commission is undertaking an important review of the quota scheme for the employment of disabled people. In May last year the commission published a comprehensive discussion document which described trends in the operation of the quota scheme, posed a number of key questions and identified a range of future options for providing protection or assistance for the employment of disabled persons.

    One of those options was that there should be a statutory obligation on employers to publish statements about their policy and record on the employment of the disabled, possibly in their company report. As I made clear in Committee, it is well known that the commission's review, together with its recommendations, is expected to be available by the end of the year.

    I was much affected by the terms in which my hon. Friend the Member for Exeter (Mr. Hannam) put forward his new clause 15, and I recognised as the debate proceeded the strength of the support that came from both sides of the House. I thank the right hon. Member for Stoke-on-Trent, South (Mr. Ashley), my hon. Friend the Member for Eastleigh (Mr. Price) and the hon. Member for Eccles (Mr. Carter-Jones) for their moving speeches. I explained in Committee that under clause 77 of the Bill—I also explained how we were awaiting the report of the Manpower Services Commission—there is a provision whereby we have taken a general power to add to or to alter the statutory requirements of the directors' report by regulation.

    I explained that this power could be used to meet the intention of the new clause and I gave a strong assurance in Committee that upon the arrival of the Manpower Services Commission's study and recommendations I would be prepared to use the power in new clause 15 for the purpose of making that regulation.

    I further explained that I thought it best that I should await the report of the Manpower Services Commission. I also made it clear in Committee that I had every sympathy with the principle and sentiments of new clause 15. Having been affected by the arguments put forward, I would point out that clause 77 of the Bill enables me by regulation to alter or to add to the statutory requirements of the directors' report, and I undertook that that power would be used immediately to implement any recommendation of the Manpower Services Commission based on its report.

    In the light of the debate today, I am pleased to inform the House that I am prepared to go further on this point tonight. I can give an assurance on behalf of the Government that we will use our new powers under clause 77 as soon as the Bill is enacted to make regulations on this matter. I would propose to use the interval between now—it will be a short interval—and the passing of the Bill to consult the organisations concerned—in particular those organisations representing disabled persons—about the exact content of the regulations. These regulations will be subject to an affirmative resolution by the House and, therefore, the House will have an opportunity to debate the precise proposals of the Government.

    I hope that on the basis of this undertaking, which definitely advances the matter and which is the most hopeful proposition that I can bring forward, my hon. Friends and all those hon. Members who supported them will feel pleased that progress has been made and that it will be agreed that this new clause should be withdrawn.

    8 pm

    I now refer to the speech made by the right hon. Member for Lanarkshire, North, I appreciate that he has an interest in putting forward his amendment because it is similar to a proposal that was contained in the Green Paper "The Future of Company Reports" which was published my the previous Government in July 1977. In that report it was suggested that companies should publish in the annual report a statement on employment matters. The idea was that the statement should include information about the work force that was relevant not only to employees but also to the shareholders and other interested parties.

    Nearly all of the many bodies that submitted comments on that proposal were totally opposed to the inclusion of such information in company reports. One of the main arguments that was put forward against the idea was that the need for such information had not been identified or justified. When the present Government came to office, we also considered whether large companies should be required by law to publish such non-financial information. Our conclusions are to be found in another Green Paper, "Company Accounting and Disclosure", which was published in September of last year. Paragraph 2 of chapter III states that
    "no useful purpose would be served by introducing legislation requiring the inclusion of detailed employment and other non-financial information in company accounts."
    The reason for that is that it is already a requirement of employment legislation that companies should disclose to union representatives information that is relevant, particularly, as the right Member for Lanarkshire, North mentioned, to collective bargaining.

    My hon. Friend the Member for Dorset, North (Mr. Baker) made a good point in his speech when he said that the comparisons with other countries which the right hon. Gentleman made are not easy unless we can look at the whole picture of legislative obligation. He included not only company law but other forms of legislation which give rise to such obligation. While we welcome the voluntary moves that have been made by companies to provide employees with information about the financial position of the company and the experiments in the wider social reporting which are being undertaken by a growing number of companies, we do not consider that, for the present at least, legislation has a part to play in these developments.

    Indeed, the comments that we have received on our Green Paper hold us steadfast in that belief. My hon. Friend the Member for Kensington (Sir B. Rhys Williams) emphasised the importance of training in industry. I agree strongly with the emphasis that he placed on the importance of that. I listened with great care to what my hon. Friend the Member for Kidderminster (Mr. Bulmer) said on the subject because I greatly respect his knowledge and experience of industrial matters. However, I am not sure that the Bill and company law provision are necessarily the best way to meet such important points. Certainly, I shall bear the views of my hon. Friends in mind as we move on towards the preparation of the next Companies Bill. However, with regard to this Bill I ask my hon. Friends to accept that, while I recognise the importance of their points, I cannot help them on this occasion. I shall bear in mind all the points that they have made.

    In discussing the proposed clause, I do not wish to go into the finer drafting points. However, I shall make one or two points about what I consider to be important differences between this proposal and that put forward in the previous Government's Green Paper. The right hon. Member for Lanarkshire, North did not explain the differences that have developed. The Green Paper said that its proposals had been considered with large companies in mind. It suggested that only those with over 500 employees or a turnover of £5 million should produce all the information called for. This clause requires all companies with more than 100 employees to provide information, and, therefore, in effect, many smaller companies are required to disclose the full range of information called for in the clause. That goes considerably further than the previous Government's original proposal that only large companies should be required to produce an employment statement. Therefore, it would be yet another burden on the small company.

    I resist the measure strongly because our aim is to lessen the bureaucratic demands on small companies. Equally important, the proposal in "The Future of Company Reports" said:
    "It is not intended at the outset to lay down a full range of detailed requirements for the employment statement. This is a new departure and it is expected that the form that the statement will take will evolve over the next few years, once the broad requirement to publish an employment statement has been introduced."
    In this case, the Opposition seek to lay down a host of specific items for disclosure. In their original proposal they were meant to be examples of the sort of items that might be covered in the employment statement. I do not see how Opposition Members can seriously suggest that all the information should be included when they originally proposed that only some of it should be published, particularly when their original propoosal got minimal support.

    The present Government's view on disclosure generally—I stress this once again because it is relevant to the clause—is that every proposal put forward which would add to the amount of material required by law to be included in company reports should be subject to the closest scrutiny to see, first, whether there is intrinsic justification for it. If so, the question arises as to whether it adds yet another avoidable burden to industry.

    My hon. Friend the Member for Folkestone and Hythe (Mr. Costain) made some powerful points when he instanced an example which would be to the detriment of a company in the situation that he mentioned. The suggestion of art employment statement has been subject to extensive debate and close examination. Despite the arguments put forward from the Opposition Benches, we believe that the case for the statement does not even get past the first hurdle of justification. However, there is one aspect of the proposed clause with which we have some sympathy and to which I have made an exception—the disabled. I am glad to have been able to deal with the subject.

    I have pointed out that there are certain major differences in these industrial proposals as between what is now proposed by the Opposition and what they put forward in their Green Paper when they were in Government. The differences would have far-reaching consequences for a number of companies that would have to disclose information to the extent that would be required.

    Our Green Paper "Company Accounting and Disclosure", which envisages legislation and which will give effect to the European Community fourth directive in Session 1980–81, is the context in which discussion on the subject should now be raised. Section 18 of the Companies Act 1967 will have to be recast completely to meet the directive's requirement. Thus, I hope that Opposition Members will not seek to burden the legisation and, more important, to burden companies with what would be a transitory provision only. If they seek to press the new clause, I advise the House to vote against it.

    I will very briefly refer to new clause 6. I recognise that hon. Members have put this clause forward from the best of motives. The right hon Member for Lanarkshire, North considers, as do the Government, that companies should keep their employees properly informed about the affairs of the company for which they work. However, as the Government explained in the Green Paper "Company Accounting and Disclosure" published in September, we do not consider that the statutory annual accounts of a company will necessarily be the most appropriate means of presenting information to employees. This view has been reinforced by the comments we have received on the Green Paper.

    Indeed, there are those who also question whether the increasingly complex annual accounts of companies are the best way of communicating with shareholders. A considerable number of companies are making particular efforts to communicate essential financial and other information to their employees in the form of special employee reports. This is a development that should be welcomed and encouraged. To impose a statutory duty on companies to send the annual accounts to employees as well would cut across these welcome developments. Such a move could add nothing except expense to the process of communication with employees and, indeed, might serve largely to confuse the situation.

    Another suggestion that has been made is that both shareholders and employees might be sent a simplified form of financial statement with the full annual account being available upon request. The accountancy profession has done some research on the content of simplified financial statements and this work may, in due course, be of some assistance to those who are concerned with promoting effective communication with both shareholders and employees. But it would certainly not be right at present to contemplate legislation on the subject of simplified reports for companies generally.

    For the reasons that I have given, the Government are not able to support this clause. Although we strongly support the proposition that companies should provide financial information to employees, we do not believe that rigid statutory requirements would help to improve communications; they could well hinder them. But, as stated in the Green Paper, we would expect larger companies at least—those with, say, 250 employees or more—voluntarily to provide copies of their full company reports and accounts to their employees on request.

    I hope that the House will recognise that the process of research, experimentation and evaluation now being pursued by an increasing number of companies and the accountancy professsion is the best way of making progress in this area. The clause we are now considering would inhibit these welcome developments. If the proposers wish to press the matter, I strongly advise the House to vote against new clause 6.

    I have made clear the Government's opposition to new clause 4 and new clause 6 and I am pleased to give the undertaking to bring forward proposals for the assistance of the disabled which I mentioned in the earlier part of my speech.

    Perhaps I could tell the House a cautionary tale. When I was a new Member of Parliament I was involved with the Companies Bill in 1967. I moved an amendment to that Bill which had precisely the same effect as clause 46 of this Bill. A very persuasive and kind Minister, now my right hon. and noble Friend Lord Darling of Hillsborough, took me to one side and said "Look, John, this would embarrass the Government. But you will find it in the next Companies Bill that we shall see during Session 1967–68."

    I waited in vain until the end of the Labour Government's life, throughout the Tory Party Administration and for the last five years, but it was not until this Bill came before the House that I saw clause 46. The point of my tale is that if one has an opportunity to do something in the House or in Committee today, it is better to do it rather than be seduced by the argument that another Bill is on its way.

    8.15 pm

    New clause 4 and new clause 15 have a common theme, which is that the annual report of a company should not merely reflect the state of its balance sheet, profit and loss account and the contents of its books but should give an indication of the thinking, compassion and social and industrial policies of a company. I do not think that the Minister disagrees with that in terms of the disabled. However, exactly the same argument must apply to matters such as the recruitment of school leavers, policies for training, and so on.

    The Minister responded generously to the amendment. I had clear support throughout the House. Perhaps that is one of the reasons why he responded so generously to it. I do not think that I should detract from the way in which he did respond. My right hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley) said that the approach to the employment of disabled people is disgraceful. It is a conundrum that has defied the imagination of Governments of both parties.

    When I was an Employment Minister in 1974, I received a report on the employment of the disabled. As a junior Minister I read that report avidly because I had little else to do at the time. It was in that short period before Parliament begins to sit. I was fascinated by what I read. Clearly we wanted to do something, but in practice it proved far more difficult than one imagines. My right hon. Friend the Member for Doncaster (Mr. Walker) conscientiously went through a special exercise over the quota scheme, yet it still defied him; and now we have the Manpower Services Commission exercise.

    What is important is to provide information. That is why I am glad that the Minister responded as he did. What amazes me—it is the same when one talks about the employment of women or racial minorities—is that once one gets the information out in the open, one often finds that two firms, almost identical in size and making almost identical products, can have totally different policies about sex equality or disablement. It is quite extraordinary. The answer may well be nothing to do with malice; it may simply be because of a lack of forethought and being open to persuasion. But the moment such matters appear in the company report, and the thinking, compassion and approach of a company are revealed, perhaps a change of policy can be brought about.

    As my right hon. Friend says, perhaps the drafting of new clause 4 has not got it exactly right. It might be too detailed. It is possible that it would be difficult for some companies to produce information in exactly the way that the clause requires, but I do not believe that there should be a difference in principle about this information being required, because it is so important to the future of our country. For example, it is important that every company should address itself to the problem of the recruitment of school leavers and training. Everyone who has worked in the Department of Employment knows that, paradoxically, no matter how high the rate of unemployment, there are areas—even those with a high rate of unemployment—where there is a lack of skilled labour.

    It is true that companies as a whole have done too little about training and that very often the example has been set by local and public authorities. The principle of disclosure of this information, opening a company to persuasion, debate and, if need be, criticism, is the right principle to follow.

    Lastly, I think that the Minister gave the least sympathetic response to the simple proposition that is contained in new clause 6. That proposition is that a copy of the company's balance sheet, trading account and annual report should be seen by every employee. He said that perhaps it should be sent to the employees in a simplified form. If he thinks that, he should have tabled his own amendment to say that he would take power to require companies to send the annual report to employees in a simplified form. In the absence of that, we urge upon the House the simple proposition that each company should give an order to its printers to provide an extra number of reports, which could be sent to each employee. The success and sometimes the failure of a company depend on the performance of its employees.

    It seems only right that the employee should be informed. He should not be required to extract the information, which he is able to do under the employment protection legislation. The information should not have to be extracted for collective bargaining purposes. The company should provide the information as a voluntary and generous act. It should do so without being asked.

    There are two Opposition new clauses before the House. I understand that we have the opportunity to divide the House on only one of them. In the light of the debate that has taken place, it will be more appropriate to divide the House on new clause 6 than on new clause 4.

    The House is discussing new clause 4. Does the hon. Gentleman wish to ask leave to withdraw the clause?

    Division No. 196]


    [8.20 pm

    Alton, DavidEwing, HarryMaclennan, Robert
    Anderson, DonaldField, FrankMcMahon, Andrew
    Bagier, Gordon A. T.Fletcher, L. R. (Ilkeston)McNamara, Kevin
    Beith, A. J.Fletcher, Ted (Darlington)Marshall, David (Gl'sgow, Shettles'n)
    Benn, Rt Hon Anthony WedgwoodFord, BenMarshall, Jim (Leicester South)
    Bennett, Andrew (Stockport N)Foster, DerekMason, Rt Hon Roy
    Booth, Rt Hon AlbertFoulkes, GeorgeMaxton, John
    Brown, Hugh D. (Provan)Fraser, John (Lambeth, Norwood)Maynard, Miss Joan
    Brown, Ron (Edinburgh, Leith)Freeson, Rt Hon ReginaldMikardo, Ian
    Buchan, NormanFreud, ClementMillan, Rt Hon Bruce
    Callaghan, Jim (Middleton & P)Gilbert, Rt Hon Dr JohnMiller, Dr M. S. (East Kilbride)
    Campbell-Savours, DaleGinsburg, DavidMitchell, R. C. (Soton, Itchen)
    Canavan, DennisGourlay, HarryMorris, Rt Hon Charles (Openshaw)
    Carmichael, NeilGraham, TedMorton, George
    Carter-Jones, LewisGrimond, Rt Hon J.Moyle, Rt Hon Roland
    Clark, Dr David (South Shields)Harrison, Rt Hon WalterOakes, Rt Hon Gordon
    Cocks, Rt Hon Michael (Bristol S)Haynes, FrankO'Neill, Martin
    Cohen, StanleyHealey, Rt Hon DenisOrme, Rt Hon Stanley
    Coleman, DonaldHeffer, Eric S.Palmer, Arthur
    Conlan, BernardHolland, Stuart (L'beth, Vauxhall)Parker, John
    Cowans, HarryHome Robertson, JohnPavitt, Laurie
    Craigen, J. M. (Glasgow, Maryhill)Homewood, WilliamPenhaligon, David
    Cryer, BobHooley, FrankPowell, Raymond (Ogmore)
    Cunliffe, LawrenceHoram, JohnRace, Reg
    Cunningham, George (Islington S)Howells, GeraintRees, Rt Hon Merlyn (Leeds South)
    Dalyell, TamHudson Davies, Gwilym EdnyfedRichardson, Jo
    Davies, Ifor (Gower)Hughes, Robert (Aberdeen North)Roberts, Ernest (Hackney North)
    Davis, Clinton (Hackney Central)Hughes, Roy (Newport)Robertson, George
    Davis, Terry (B'rm'ham, Stechford)Janner, Hon GrevilleRooker, J. W.
    Dean, Joseph (Leeds West)Jones, Rt Hon Alec (Rhondda)Ross, Ernest (Dundee West)
    Dempsey, JamesJones, Barry (East Flint)Ross, Stephen (Isle of Wight)
    Dewar, DonaldKilroy-Silk, RobertSever, John
    Dixon, DonaldLambie, DavidSheldon, Rt Hon Robert (A'ton-u
    Dobson, FrankLamborn, HarrySilkin, Rt Hon John (Deptford)
    Dormand, JackLamond, JamesSilverman, Julius
    Douglas, DickLeadbitter, TedSmith, Cyril (Rochdale)
    Duffy, A. E. P.Leighton, RonaldSmith, Rt Hon J. (North Lanarkshire)
    Dunn, James A. (Liverpool, Kirkdale)Lewis, Ron (Carlisle)Spearing, Nigel
    Dunnett, JackLofthouse, GeoffreySpriggs, Leslie
    Dunwoody, Mrs GwynethLyons, Edward (Bradford West)Stallard, A. W.
    Eadie, AlexMabon, Rt Hon Dr J. DicksonSteel, Rt Hon David
    Eastham, KenMcCartney, HughStewart, Rt Hon Donald (W Isles)
    Edwards, Robert (Wolv SE)McDonald, Dr OonaghStoddart, David
    Ellis, Raymond (NE Derbyshire)McGuire, Michael (Ince)Thomas, Dafydd (Merioneth)
    Ellis, Tom (Wrexham)McKay, Allen (Penistone)Thomas, Jeffrey (Abertillery)
    Evans, Ioan (Aberdare)McKelvey, WilliamThomas, Dr Roger (Carmarthen)
    Evans, John (Newton)MacKenzie, Rt Hon GregorWainwright, Edwin (Dearne Valley)

    In the circumstances, Mr. Deputy Speaker, I beg to ask leave to withdraw the motion.

    Motion and clause, by leave, withdrawn.