Governance in the UK needs a radical overhaul with company law, accounting systems, the investment industry, shareholder structure, and executive remuneration all in need of significant change.
The recommendations come in a report from The Purposeful Company Task Force, a project set up by think-tank the Big Innovation Centre, and includes 22 changes which the report claims are necessary for the UK to lift investment, living standards and innovation.
It urges companies to state precisely “their role in the world from which profit results” in their article of association, and recommends that directors should publicly report on how they “fulfil” their role to all stakeholders. Asset managers should also declare their “purpose” and have certified how they promote the long-term interests of the companies they invest in.
The task force, which is supported by many prominent business people and companies, also seeks a change to company reporting to ensure a “proper” valuation of long-term value.
Paul Polman. Photo: UN, Flickr.
A press release for the report includes an endorsement from Paul Polman, chief executive of Unilever, which has built a reputation for its approach to sustainability and recently saw off a takeover bid from US food giant Kraft.
Polman said: “This timely report is a welcome contribution to the growing debate about the importance of business purpose and how to deliver it.”
Clare Chapman, co-chairman of The Purposeful Company Task Force, a non-executive director and remuneration committee chair, said: “When we kicked off this Purposeful Company project in 2015 none of us could have predicted just how relevant or timely the recommendations would be.
“Companies acting with purpose, for the long term, must be at the heart of transforming our economy and living standards. An extraordinary alliance has come together from right across the investment chain to rethink the very fundamentals of what it means to be a modern company and point the way forward for the good of all.”
Chapman’s fellow co-chair, political economist and author Will Hutton, said: “The evidence is clear, companies with a declared purpose, adhered to by their leaders and understood by their employees, perform far better over time than their less purposeful peers.”
