Companies (Directors Duties) Amendment Bill

When this debate was last debated, we were just finishing with a National speaker, and so now I call Shanan Halbert.

Kia ora, and thank you for the opportunity to speak this evening, Madam Speaker, on the Companies (Directors Duties) Amendment Bill. This bill seeks to amend the Companies Act 1993 by inserting a new subsection (5) into section 131 of the Companies Act 1993. Section 131 sets out the duty of a director of a company when exercising powers or performing duties to act in good faith and in what the director believes to be the best interests of the company.

I want to acknowledge Dr Duncan Webb, who is the member putting this amendment bill forward. He did a cracker of a speech in the general debate today, and we’re really, really proud of him. But the work that he has done and the simple way that he explained this particular bill to me is that it’s about ensuring that directors are as responsive to the needs of the community and their stakeholders as much as they are about the profit margin of their particular company.

So this new subsection (5) inserts several environmental, social, and governance factors that a director may, when determining the best interests of the company, take into account. Those factors can include: recognition of Te Tiriti o Waitangi, the Treaty of Waitangi; reducing adverse environmental impacts; upholding high standards of ethical behaviour in their organisation—and when we speak of the last bill that was just read, the Employment Relations (Extended Time for Personal Grievance for Sexual Harassment) Amendment Bill, it’s important that organisations are looking into that piece of work within their organisation; that they’re following fair and equitable employment processes; and recognising the interests of their wider community.

I’ve spent a lot of time working with businesses in Tāmaki-makau-rau Auckland, and we’ve seen growth, I guess, of organisations being far more responsive to sustainability. They recognise that as an important part of their future and an important part of their brand. Second to that is the increased responsiveness to corporate social responsibility that many businesses that I’ve worked with have embarked on. But that doesn’t mean that everyone recognises those key things as attributes of their organisations that they do tend to look towards. Profit is the main driver that measures their success. But I do want to acknowledge those organisations that do do a very good job at what this particular bill attempts to do.

In the first speech, where we listened to Dr Duncan Webb, he shared some words in his opening remarks that I wanted to quote this evening. I’ll try my best Dr Duncan Webb voice, this evening, for everyone—along with his little laugh that he does! “The spark for this little bill was an urgent debate in Parliament on the letter of expectations that the Minister sends to Air NZ every year. It set out some climate expectations, good employer expectations, etc. David Seymour thought this an outrage to divert Air NZ from a maximising profit motive. I thought it nonsensical that there was a debate at all—but thought if there is some suggestion that ‘the best interests of the company’ means ‘making as much profit as we can …’, then we need to clear that up.” I thought that was a great synopsis of what this particular bill aims to do—and a good man behind it.

Just quickly, to go through, there are some changes being proposed—amendments to this bill. In clause 1, it outlines the title clause. Clause 2 is the commencement clause and provides for this bill to come into force on the day after it receives the Royal assent. Clause 3 identifies the Companies Act 1993; this is the principal Act, the Act being amended by the bill. Clause 4 amends section 131. And the important one, new subsection (5): “To avoid doubt, a director of a company may, when determining the best interests of the company, take into account recognised environmental, social and governance factors”, such as the Treaty of Waitangi, the environment, upholding high standards of ethical behaviour, fair and equitable employment practices, and recognising the important interests of their wider community.

Without further ado, I would like to commend this bill to the House. Tēnā koe.

Tēnā koe e te Māngai. I rise on behalf of my Green Party colleague Ricardo Menéndez March to support the Companies (Directors Duties) Amendment Bill. We congratulate Labour MP Duncan Webb for having his bill drawn from the ballot and getting the chance to debate it at select committee.

This bill seeks to amend the Companies Act 1993 to make clear that in determining the best interests of a company, directors can take matters into account beyond just financial interests, allowing for the consideration of environmental, social, and governance factors. This bill is particularly relevant to ongoing discussions around corporates putting profits ahead of people. The current broken economic system encourages this. After all, for companies such as banks and our supermarkets, making as much profit as possible is paramount. It ends up having adverse effects on everyday people, who are seeing the cost of living skyrocket.

This bill won’t bring down capitalism, and we understand that that’s not the Government’s goal, but it does broaden the scope of what issues directors can consider, and for those directors who sometimes do think about climate change or inequality before going to sleep, they will now consider how best they can channel that energy into the directions they make regarding their companies. Enabling directors to consider that broader range of issues will also enable shareholders in civic society to better advocate for companies to stop being so deeply unethical in some of their activities, since directors can no longer hide around just profit as their primary driver.

The Greens look forward to the contributions from submitters on this bill and will continue campaigning to transform the system to one where essential services are publicly owned, instead of run by companies. We commend this bill to the House. Kia ora.

Thank you for the opportunity to take a call on this excellent piece of legislation, brought to the House by Duncan Webb, who has had a lot of experience in this area, both as an MP and as a lawyer before becoming a member of Parliament.

First of all, I’d like to thank all of those businesses that operate in New Zealand and all of those directors who direct companies; it takes a lot of courage to set up a business, and I admire and take my hat off to people who take that step, that leap of faith. Often they’re in a position where they’ve been working for someone for quite a while and they want to go out on their own, but it always takes quite a step of courage, quite a leap of faith—often taking out a mortgage on their house to actually get started. We’ve seen a number of very successful businesses here in New Zealand.

I believe at the heart of this bill—and the member might share his views on it when he does the right of reply at the end—is the reason why business exists in an economy like ours. We have an open economy, we have a free-market economy based primarily on a capitalist regime—to a point—but why does business exist? I remember standing in a lounge up in Hamilton a few months ago; there were a couple of fairly well-known businesses represented there and a couple of CEOs were just having a conversation and I was just sort of standing there listening in. They were talking about a contract that was available—I think it was in the civil space—to be bid for and they were talking about who’s going to be successful with the bid, and it really stuck with me because one of the CEOs said to the other CEO: “Well, look mate, at the end of the day it doesn’t really matter who gets the contract, because all of the money we earn goes back to the community anyway.” He was alluding to the work that they do in schools, supporting gymnasiums and other sponsorship programmes; the work they do in terms of employing people, in terms of supporting subcontractors, and all of that. The other CEO agreed because, you know, their philosophy was that business exists for the community.

I believe that that’s at the heart of this bill; that connectedness between business and community. You know, business exists for community. Business needs community to exist. Some of you may have heard about the stakeholder theory. Stakeholder theory is a view of capitalism that stresses the interconnected relationships between business and its customers, suppliers, employees, investors, communities, and others who have a stake in the organisation. The theory argues that a firm should create value for all stakeholders, not just for their shareholders, and that if a business only focuses on the shareholders, then it could quite quickly potentially become a sunset business because it loses that connection with the community. First of all, it loses that purpose, the fundamental purpose of serving the community; secondly, it loses that connection. And often it may even lose that access to labour or other resources that it needs.

So the Companies (Directors Duties) Amendment Bill—we’ve heard that it amends the Companies Act, and that there are five key areas. First one is recognising the principles of the Treaty of Waitangi. The second one, in terms of the principles that the directors must take into account, is reducing adverse environmental impacts. Now, the reality is we’ve been dealing with COVID over the past few years. It’s been a huge challenge for the planet. Fortunately, we’re coming out the other side, but the number one issue remains: climate change. I’m pleased that as a Parliament, we have accepted that right across—well, broadly across the House—

💬 Simon Court: Nah, we voted against your climate emergency.

Broadly across the House—broadly.

The aspect about climate change is absolutely important. Basically, we’re seeing a number of businesses really lean into this and seeing what their responsibility is for climate change, and seeing what they can do. And look, it’s encouraging to see that. This bill will be another step on the way in terms of putting climate change in the minds of directors.

The reality is, businesses need a social licence to operate. That’s the society that we have here in New Zealand and it’s the way it should be; that businesses work hard for their communities, but at the same time, like I said, they’re very much connected to their communities and there’s an aspect around social licence that’s important. This area of climate change is one of the key areas. I know there’s another three, but I’ll leave it at that one there, that particular aspect around climate change.

I guess, just to summarise, businesses are not a silo, they don’t operate in a silo, they’re connected to the community, and we’re all connected to each other. Thank you.

The Companies (Directors Duties) Amendment Bill proposes an amendment to section 131 of the Companies Act 1993, for the duty of directors to act in the best interests of the company.

This is a bill that potentially is misguided, potentially harmful, but just not necessary and can open up a Pandora’s box of misery. If we remember that three weeks ago when Shakespeare was attempted by this Government to be buried, he said, “Let every man [and woman] be master of his time.” Well, I say Mr Webb is wasting all of our time with this superfluous bill. If it’s Shakespeare that says, “Pleasure and action make the hours seem short.”, then the bill does the opposite. Shakespeare says, “Some are born great, some achieve greatness, and some have greatness thrown upon them.”, and then some have to write the Companies (Directors Duties) Amendment Bill. Alas, Will Shakespeare, we remember you well.

But if it wasn’t for “Lord Grubby Grant” and our own “Lawrence of Arabia”, who’s heading off to Egypt, the numbers for the merry men and women on the other side would ensure that this bill would just wither away and not be seen by the light of day and not take up any more parliamentary time.

“Lord Webb” and co. have this bill and it’s been viewed as misguided and harmful. There does not seem to be a legislative code in the Companies Act to achieve anything related to this. This is just a nudge by doctrine causing conflict in decision makers’ processes, and totally unproductive. The system is not broken, so why would you try to fix it? That’s the reverse psychology when it comes to business with the Labour Party

When you see what it means, it actually reflects the five-year trend of this Government of socialist stakeholder capitalism. Labour actually hates business, and it’s a war on business enlightenment. Environmental, social, and corporate governance (ESG) advocates a return of New Zealand society to darkness. Mr Webb is playing empire with this bill. He’s overturning the enlightenment to the gall of central planning with his ESG and tokenism of Māori reverence. He is rejecting stakeholder capitalism. Not only does he endanger prosperity; there’s not a company director in this country that’s ever been prosecuted for not abiding by these rules. Remarkably, we have a successful system.

The problem with the Labour Party is it just wants to view the world through Karl Marx’s eyes. The Government is never able to reflect efficiency and innovation of the private sector, entrepreneurs, and monitors. It’s because of freedom and prosperity that this has been allowed to develop. The reason why it is: it’s called a company structure. Company structures were tried by the Pope, judges, and priests, to take away the resources of private individuals.

Look at the first line of this bill: “Companies are a useful legal entity for the conduct of many activities.” What does that mean? “What does that mean?”, I ask myself.

So, rooted in Marxism is this agenda to set for stakeholders who are not shareholders in a company. If stakeholders want to be involved in companies, let them buy a share. That would be a great start to the economy, wouldn’t it? It would really give it a boost. Over the last five years, Labour has killed that dream. We created a class of stakeholders who interfere with companies, who are really cultural Marxists like Mr Webb, and, really, they’re shaking down shareholders and wanting things to be done. They’re just a waste of time and have no accreditation and actually are not in tune with the law of the land.

The Companies Act is very specific. Company directors have currency under New Zealand company law; not stakeholder capitalists. That’s why this bill should be rejected by the House.

Thank you very much, Madam Speaker. Well, I don’t even think Roger Douglas would have written that speech, and he certainly wouldn’t have delivered one like that in this House. This is not a return to Marxism in any way, shape, or form. I know David Bennett would cross the floor if that was the issue, and I certainly know that Mr Bayly does not agree with that in any way, shape, or form.

What we are talking about here is the role of the firm in the 21st century, and this legislation, as it stands at the moment, is not fit for purpose. All that Dr Duncan Webb has done is to seek to bring companies law to meet not only the expectations but actually what is going on in companies in this day and age. Damien Smith, I’m sorry, mate: “environmental, social, and governance” (ESG) is now how a number of the world’s largest firms assess whether or not they are going to invest in organisations. This is not some sort of Marxist philosophy that has crept into New Zealand company law in any way, shape, or form. The largest venture capital companies in the world use ESG measures to determine how they are going to invest, and the reason they do that is because their stakeholders demand environmental, social, and governance expertise.

No longer is it good enough to take the Milton Friedman quote and say “The role of the company is to maximise profit for shareholders.” Very, very few people out of the Milton Friedman school of thought actually believe that any more. In fact, Michael Porter, arguably one of the greatest economists, certainly one of the most influential economists of the late 20th century and the 21st century, is now talking about the role of the company and saying that the role of the company is in fact to work for the community. And it all starts at the top—it all starts at the top. We’ve got to get our governance right if the companies are going to serve our communities. We do not get our governance right if we say that the role of our directors is to maximise profit for their shareholders. The role of our directors is to ensure that the firm meets the expectations of stakeholders, and I would argue until the cows come home that the stakeholders of the vast majority of companies that operate across the world, let alone in our piece of paradise, are actually our communities.

The interesting thing is that I actually did the week-long Institute of Directors course, and they spoke about Dr Webb’s bill. What they actually said is that this is going to change the way that directors are required to look at the role of the company. It’s going to change the way that directors are expected to put in place the expectations of communities—their stakeholders. So to hear the ACT Party actually say that this is not necessary because it’s Marxist philosophy is completely out of step with every single modern economist across the world—across the world.

💬 Hon David Bennett: Porter’s not a modern economist. He’s a communist from Harvard.

Oh, so Michael Porter is a communist from Harvard? Well, there’s one for the books! And, David, I know you don’t believe that, mate. I would also argue that one of the most influential economists these days is a woman called Mariana Mazzucato. She is talking about the role of Government. She’s talked about the role of firms, and she’s talked about the role of ESG and also about the role of corporate social responsibility. I would challenge anyone in this House to find an organisation today that doesn’t live the ESG values. I would challenge anyone in this House to find a listed company where the directors haven’t got, on their board minutes, every single meeting, “How is this company meeting its ESG requirements? How is this company interacting with its communities in a way that actually makes a difference?”

So we have heard a speech from the ACT Party that we have not heard since Roger Douglas left. That’s possibly a reason why they are sitting at around 8 percent. It’s possibly a reason why they will get to around 5 percent. But one thing that I know is that party certainly does not represent business. It certainly does not represent our organisations, and it certainly does not represent key stakeholders, key investors, and our communities. This is a very good piece of legislation, but all it actually does is bring company law into the 21st century.

This bill goes to the heart of trade. This is about being good corporate citizens. That member over there, Damien Smith, is stuck in old historic history. This is about being in the future. When we look to the future, this is what businesses want, this is what consumers want, and this is what businesses expect from each other.

To think that the old-fashioned values have somehow been dismissed. Absolutely we need to drive profit, but beside profit goes good ethical standards. Great businesses do better when we look to the future.

When it comes to members’ bills, I know that Dr Duncan Webb sits down and he listens and his mind’s going, “What can I do next? What can I do next?” And he came up with a fantastic bill, pulled from the biscuit tin, all because of the ACT Party. That’s right, you’re the very reason that—sorry, Madam Speaker. The ACT Party is the very reason that Duncan Webb has come up with this bill. Because he heard—

💬 Damien Smith: It’s not compulsory.

Yes it is. Because when we listen to his first reading, he refers to the comments by the leader of the ACT Party. That’s right, that’s what they did. And he listened to what the leader of the ACT Party was saying.

When it came to that, he was—listen, the spark of this little bill, said Dr Duncan Webb, in his first speech, was the urgent debate in Parliament, which would have been as feisty as this one. It would have gone something like this and it set out the clock, and when they were talking about Air New Zealand, and when they were looking at what Air New Zealand should do, and it set out some climate expectations; good employer expectations.

David Seymour, leader of the ACT Party, is the very reason that sparked this interest from Dr Duncan Webb. David Seymour said, that it was an outrage—an outrage—to divert Air New Zealand from a maximising profit motive.

Now, Dr Duncan Webb said that that was nonsensical—and I’d have to agree with him, nonsensical, because that is what this debate has come to the heart of—but thought that there must be a suggestion that the best interests in a company means making as much profit as we can. Then, as Dr Duncan Webb said, “Let’s clear that up.”

That’s why we have a party over there that is not supporting this bill, because they just do not understand the future of business. And the future of business is about producing goods in an ethical way, and it’s about making sure that we do what consumers want. And when consumers go to the market, they are going to look at companies that absolutely do the right thing.

I know that this piece of legislation, when we look back in history, we’re going to think to ourselves, “Gee, this has just become part of business dealings,” because that’s how we will continue to grow an economy that thrives and does well.

Now, going back to the very basics of this bill, it means that we will be able to look at the principles and the guidelines that will make better directors—governance and better directors.

💬 Simon Court: Treaty of Waitangi? What’s that got to do with business?

And I can tell you—perhaps you might need to go and have a bit of a coaching on governance and directorship to see the type of things that are coming through and growing great businesses in New Zealand.

It’s about being competitive on the world stage. It’s about making sure we do the right thing and growing and setting New Zealand ahead in world-class competitive markets. Because we are a world-class country delivering world-class products to the world in an ethical way where companies can put those interests right forefront, where they need to be. That’s why I commend this bill to the House. Thank you, Madam Speaker.

Well, what a pleasure to be talking on this bill, the Companies (Directors Duties) Amendment Bill, and what an exciting night. I’ve heard it all, I think, tonight. There’s been some interesting contributions. Look, the first thing I want to just talk about—by the way, we are opposing this, just to be absolutely clear.

I love the opening statement on this bill: “Companies are a useful legal entity for the conduct of many activities.”—I assume that’s business activities. Well, isn’t that an understatement? Isn’t that an understatement? Aren’t they the powerhouse of economic activity in New Zealand? Certainly the Government is not going to be the powerhouse; it’s businesses. What I love is “Companies are a useful legal [tool]”. Well, the big, interesting thing—just listening to the debate, you know, it was interesting. I was just looking at the members on the other side there and wondering how many of them have actually run a small business and actually been a director and actually just gone through all that problem of—imagine if they had been running it through COVID times over the last 2½ years; I wonder if they would be so pious and upstanding today, because this is fine, this piece of legislation, when it applies to big corporates who’ve got lots of people doing environmental, social, and governance (ESG) planning and all that sort of stuff, but when 97 percent of our businesses employ 20 or fewer people, that is a different consideration.

So I think one of the big issues in this is that the Companies Act already states that the director of a company must act in good faith and in what the director believes are the best interests of the company. And by that very definition, that doesn’t mean that they can’t have regard to all the issues that we’ve heard today—environmental, social, and governance reporting that Mr Stuart Nash referred to. That is a crucial part of the Companies Act as it currently stands, and, of course, ESG is very common, as members have said, and it’s very desirable. I would say that in most cases, small businesses and, by most accounts, the large businesses—particularly those ones on the list of the stock market who are trying to attract capital—will be trying to demonstrate that they do act as responsible corporate citizens and that they’re doing the best for the employees, because, otherwise, people simply don’t put their money or capital into those businesses.

But the issue with this is that when you are operating a company and you have their choice, what is the primacy of your objective? And if we move away from the prime objective of businesses—to make money, to make profits—then that is an issue, because, otherwise, we’re just going to have a whole lot of companies fail, right? So we must have a primacy around the objective of businesses—and I see Dr Webb scoffing at that—because I think if you do not allow companies to be successful and profitable, then they will not long exist, and that is the simple equation. But the issue with this is that I don’t think for a moment that if I was running a small company again, I’d want Dr Duncan Webb trying to tell me, in a piece of legislation, that it’s important that I have to uphold or have regard for the principles of the Treaty of Waitangi, that I have to reduce my environmental impacts, and that I have to uphold high ethical behaviour, employ appropriate employment practices, and recognise the interests of the wider community.

What on earth do you mean by that? First of all, what are the principles of the Treaty that a small business has now got to interpret and go away and make sure that they understand and are fully cognisant of when they come to make decisions at the board meeting every month? And what does it mean when you’re talking about the wider community? What is the definition of that? That is the prime reason why we don’t want Dr Webb telling small businesses how to run their companies, because they need to operate, they need to look after their employees, they need to look after their customers, they do have to have regard to their communities, and if they do all that appropriately, they will be successful. And, by the way, they’ll give the money to the Government so we can invest in schools and hospitals—all the good stuff that we need to.

It’s a pleasure to take a call in this rather exciting debate, where we really are unravelling the difference between our parties tonight, because what I read is quite different from what Mr Bayly reads. Mr Bayly seems to think that there is some sort of conscription in this. In fact, what this actually does is it says that a director may, when they’re taking the best interests of their company into account—their company—they can look at things—

💬 Andrew Bayly: They can do that now.

—like good employment, they can look at the interests of their communities, and—yes, Mr Bayly, you are quite right—they can do that now. But, as you would have heard from the ACT Party, there are some people who believe that they can’t, and I want to tell you a real story about this.

I want to take a moment of solemnity, because when Pike River happened, what I actually got told by a relative—and, let’s face it, we’ve all got relatives like this—was that it was OK that that happened because it had maximised the profits for that company and that company was working in the best interests of its shareholders. Now, that is the classic mistake that’s made, which is that they had disregarded the safety of those workers for the profit motive. In fact, none of us—none of us—in this House believe that that is right, because, actually, a company has many obligations, and these obligations are not inconsistent with best interests.

What Dr Duncan Webb is doing is making it very clear that people have a right to run their business in a modern way, and that modern governance theory has been around for a while, but we have some people in this House who seem to be stuck back in perhaps the 1970s rather than even the 1980s. Actually, it is time to grow up, because the consequences of that kind of thinking were so terrible in this society. We had people employing people at really low wages, which was unsustainable. Now we have the living wage, and that’s the difference between our parties.

For those who are listening, we had employers employing people at the bare bones and destroying communities. We had things like Pike River happen because people weren’t inspecting the mines. People disregarded the rules to maximise profits. That sort of thing is totally unacceptable in my book, and it is not “Brand New Zealand”. It is not going to make our economy better and stronger in the future. This bill will.

This bill will make something really simple happen: we will all actually realise that these companies are a device we use to limit liability. But the people who use them are actually still very much human beings with many, many needs and interests, and they will produce businesses that meet the needs of their communities, that address the principles of the Treaty of Waitangi, that are actually concerned with employing on a fair and equitable basis, and none of us will be worse off for it.

I have left the best for last: they will need to address environmental concerns. That is our absolute premium need, particularly this week, when we have COP27 going on in Egypt, and we are behind in our needs in this area. So it is extremely important that every business in New Zealand knows that if it wants to prioritise—and I wish it would—the environment at the top of its list, over and above profit, in fact, if necessary, then it can do so.

This bill reinforces a culture that has grown and has been a damned good culture in New Zealand, a growing culture I am proud of, and that is absolutely wedded to the values of the Labour Party, because that’s what we stand for. We stand for modern, good businesses that do a good job for everybody in this society, not just a few who will cream the profit off the top.

That is why I thank Dr Duncan Webb for his wonderful bill, and I can see the point of reinforcing that when there is such a grey area in so many people’s minds about it. We now are crystal clear that this is the modern way. We’re going to do this better. Companies and directors will be able to actually address the best interests as they see them, and, Dr Webb, you encourage them to do that in this bill. I commend this bill to the House.

Thank you, Mr Speaker. I’m not going to spend too much time replying to the neoliberals over there. At least they’ve got a theory. As for the Opposition, Mr Bayly, his theory is profit at all costs.

Does this bill make an important change to the law? Yes, it does. It’s a very important bill. It removes any doubt that companies are quite able to pursue wider purposes. It’s a signal that stakeholders are relevant to corporate governance and that the best interests of the company can, in fact, be to promote the interests of others. Companies do not have to have a dominant or sole profit motive. They can be incorporated for any purpose whatsoever, and it’s about time we woke up and recognised that companies whose purpose might be to promote environmental outcomes or to promote social goods, whilst sustaining a profitable bottom line, are legitimate companies.

Now, there’s a lot of commentary out there. I must say I’m caught by surprise at the fierceness of it, but there are some very sensible commentators. For example, Russell McVeagh, a respected law firm, has made some very interesting comments about whether, for example, we should follow the UK line and make stakeholder interest a compulsory consideration or whether there is a balance to be struck between stakeholder and shareholder interests or whether this is an unduly constraining approach and, in fact, further and wider matters ought to be taken into account other than the limited list that’s been set out there. All are useful suggestions and I’m sure the Economic Development, Science and Innovation Committee will look at them.

While some think this isn’t a necessary change and it doesn’t advance the law, I disagree. I disagree strongly. Not only is it clear that clarification is needed, it’s long overdue. This bill shifts the balance towards stakeholder interests. DLA Piper, an international law firm, has identified quite nicely the reason for this bill when it said this: “As well as providing clarity, this Bill would mark the current transition in how we view companies and the role they play in society. In New Zealand, according to conventional corporate governance theory, companies have traditionally been viewed through a shareholder primacy lens, which usually translates to maximising returns. The proposed amendment would endorse a shift away from shareholder primacy to the approach where the interests of wider stakeholders have an increasing importance when exercising directors’ duties.” Thank you, DLA Piper. That is, in a nutshell, one of the most prestigious international law firms endorsing this view.

Now, some commentators haven’t been so kind. Chapman Tripp doesn’t see it as necessary and they refer to the case of Debut Homes, but they do so in half-hearted fashion. In fact, in that case the court identified the tension between theories of stakeholder interests and shareholder primacy. They didn’t resolve that issue in the case, because it was clear in that case that directors could take into account the interest of creditors, but they recognised that it was the stakeholder theory of governance that allowed wider considerations beyond maximising profits.

This bill makes it clear that the foundations of company law is stakeholder interests and a narrow shareholder view is not going to cut it any more. Many commentators make the point that it wouldn’t be good for a company’s long-term profitability to ignore stakeholder interests, but that’s not good enough. It’s not just about profits.

We have a test. They call it the business judgment test—the idea that you can’t second guess directors. But that presupposes that it’s all about business. What we need is a purpose judgment test: is the purpose of the company properly pursued by the directors when they’re exercising their judgment? And that’s what taking into account these wider considerations mean.

But I do want to put one issue to rest, and Mr Bayly seems to have made this issue. The bill is not some carte blanche to ignore the risks to creditors and to trade in an insolvent manner. There’s numerous protections for creditors. The Companies Act has reckless trading rules, for example, in section 135.

So look, there’s a good number of people also saying, on the other side of the fence, I haven’t gone far enough, that this should be compulsory, that it should be wrong to ignore the wider interests. I haven’t gone that far. Look, we’ve recently heard about mega profits from the banks. Have they lost their social licence? What do they take into account? Do they take into account social goals? It’s time for companies to wake up. This is a shift. This is a change in the balance of shareholders versus stakeholders. It’s a good bill. I’m very proud of it. I look forward to it going to select committee.

The question is, That the Companies (Directors Duties) Amendment Bill be considered by the Economic Development, Science and Innovation Committee.

Motion agreed to.

Bill referred to the Economic Development, Science and Innovation Committee.