The government will not support an effort in the House of Commons to reform directors’ duties so they include explicit reference to the environment and workers, according to a minister.

Justin Madders, under-secretary of state for business and trade, was speaking in the House of Commons in response to a private member’s bill brought last week to reshape the duties of directors as detailed in section 172 of the Companies Act.

Madders said: “It is not a bill that the government will be about to support…”. But he added he did want to have “further conversations” with the MP backing the proposed legislation, Lib Dem Martin Wrigley.

“I want to be clear,” Madders said, “section 172, as it stands, already places a legal duty on directors to have regard in their decision-making to the interests of employees and the impact of the company’s operations on the community and the environment.

“It also requires directors to consider a range of other factors, including the impact of any decision on the long-term success of the company.”

Debate on the bill—the Company Directors (Duties) Bill—was adjourned for lack of time and will be reconvened in September after the summer recess.

Shareholders vs stakeholders?

The bill proposes changing the wording of section 172 to read: “A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of—(a) its members as a whole, (b) the environment, and (c) the company’s employees.”

Introducing the bill in the Commons, Wrigley said the current legal framework was “outdated” and had “created a culture of short-term financial performance”.

“The bill,” he said, “gives directors the legal clarity and freedom to make better long-term decisions, moving away from the short-term drive of a quarter’s profits.

“Businesses focused on their stakeholders, not solely on shareholder returns, consistently outperform their counterparts.”

Wrigley added: “It is clear that embracing stakeholder primacy improves financial performance. The law should encourage this, not obstruct it.”

Wrigley’s proposal is championed by the Better Business Act campaign which has been working since 2021 to change section 172 and along the way has won the support of organisations such as the Institute of Directors, John Lewis and Innocent Drinks.

The duties of directors are closely tied to the ongoing debate about whether companies should be driven by “shareholder” or “stakeholder” interests.

In the US, the issue has become bound up in the highly politicised clash between those who advocate for sustainability, on one side, and opponents, who argue such concerns are part of “the woke mind disease”.

The UK is shifting ground in this area. As part of its industrial strategy, the government also launched consultation on new sustainability reporting standards.

However, the government has also shown itself reluctant to increase regulation amid concerns about the UK economy’s competitiveness.

A debate on section 172 will return to the Commons in September. Advocates will have to win enough support to see it become law.