Companies (Directors Duties) Amendment Bill

I move, That the Companies (Directors Duties) Amendment Bill be now read a second time.

It is a pleasure to stand and speak on the second reading of the Companies (Directors Duties) Amendment Bill. I’ve only recently become the member in charge of the bill, and I appreciate that there are many members in the House tonight who have had a longer history than myself on this particular bill. I particularly want to acknowledge the Hon Duncan Webb, who became a Minister and so was unable to progress this bill through the House, and then passed this bill on to my other colleague who I do want to acknowledge, the Hon Rachel Brooking, who also became a Minister and so was unable to progress this bill through the House. I intend to look after this bill through its passage through the House, but I want to thank both those members for their time and stewardship of this bill, especially Duncan Webb, Minister Webb, who put this bill in the biscuit tin the first time.

The purpose of this bill, as stated in the general policy statement, is that a director, acting as the mind and will of a company, can take actions which take into account wider matters other than the financial bottom line. It’s a simple addition to the Companies Act. I’ve just got a copy of the bill here, and it’s so short that I’ll just go through its primary provisions. It does amend the Companies Act, and clause 4 puts in a section after section 131(4) of the principal Act, which is section 131(5), which just adds in that the company, when determining the best interests, must take into account—and it lists a whole range of matters which we would usually term as environmental or social matters that are not necessarily to do with the profits that a company makes. The ones that Dr Webb has put in his first draft of the bill, which were examined by the Economic Development, Science and Innovation (EDSI) Committee, are: the principles of the Treaty of Waitangi, environmental impacts, ethical behaviour, fair and equitable employment practices, and interests of the wider community. So quite a wide-ranging list of considerations that people may take into account, if this amendment to the Companies Act 1993, which is the principal Act, was to be made into law. So a very simple bill, really.

If you look back to the first reading of this bill, where Minister Webb was discussing his rationale for the bill, it came across because of a very common misconception within our law, which is that the directors of companies must look to the shareholders of the company and must only look to profit in terms of the best interests of the company. And that, as people who have sat on the select committee and looked through this bill, is not quite a correct interpretation of the law as it stands, but it is none the less a widely held view that has, in fact, been reported regularly in this House and, also—I’m under no illusions—throughout boardrooms throughout the country as well. So this is an important matter to clarify.

Since the first reading of the bill, which I referred to—it was referred to the Economic Development, Science and Innovation Committee, and I want to acknowledge the members of the committee for the time and attention that they gave to this bill, no matter their personal view as to whether it should progress or not. I want to assure that select committee that I’ve taken their report seriously and it will be informing the Supplementary Order Paper that I intend to introduce prior to the committee stage of this bill.

I now, briefly, want to turn my attention to the submissions that were made to the select committee. I was not, as I’ve stated, the member in charge of the bill when the EDSI committee was considering it, so I was not there, as is sometimes usual for member’s bills, to sit alongside that committee and to hear the submissions in person. However, I have made sure, now that I have stewardship of this bill, I have read and looked through the written submissions that were made to the committee. There were 51 submissions, 34 in support, which included making improvements to the bill, and also 15 opposed and two that did not express a position. Some, as is the case in many instances, considered that this bill went too far, and some others thought that it was not necessary at all. And so some would say that that means that this bill strikes the right balance. But others may also say that you need to actually examine the bill and its purpose to see if it is achieving it, and so that’s what I have done.

I want to be clear: I do not agree with the submissions that say that there needs to be further compliance mechanisms included with this bill. There were some people that thought that that should be the case, that there should be further duties placed on directors. I don’t see that as consistent with the purpose of this bill, and that is not something that I will be looking into introducing in any Supplementary Order Paper.

The select committee report was very short and it made one recommendation. The overall recommendation—as people aware at the EDSI committee may know, that committee is made up, I think, of an equal number of members from the Government parties and the Opposition parties. And so their report is a little bit different from some select committee reports that we do have. But they did recommend a change, if this bill was to pass—and I just will look at that briefly—which was, essentially, to cross out the majority of the bill and add in a new provision that would say, “To avoid doubt, in considering the best interests of a company or holding company for the purposes of this section, a director may consider matters other than the maximisation of profit”. I just want to let members of the committee know that I am seriously considering the reasoning for that recommendation, the simplicity of their recommendation, and will be looking into that in terms of drafting the changes to this bill, because I do think that it is important to get these things right.

There’s a lot of commentary, which is available and now published on the website, which goes through the official advice on the bill—and I’m sure you’ll hear from other members of the House that it was a position held by many respectable organisations, including the advisers to the bill, that they did not agree that this bill should proceed. In their view—and I summarise—it would not add to the existing law. I disagree. I think the codification of law, as of the common law, which a lot of their advice relies on, often adds clarity and certainty. And, in my view, that is a matter of utmost importance in relation to clarity. The common law is case law, which is made by the courts, and so when we codify that, that does add a certainty to the law and clarity for people who often, probably, won’t be reading the judgments of the Supreme Court and other very important matters that they do consider.

I also have looked at quite a few of the submitters to this bill, and one of the overriding changes that I will be taking forward is the issue of clarity. I think there are some significant improvements which can be made to the bill. The matters that I wanted to note in this speech were: taking the point that it’s important that people know that the list is not exhaustive, if indeed the list is carried through; taking into account the wording change—there was a suggestion of removing that “take into account” to “may regard”, and I know Dr Webb also suggested that that would be a valuable change to the bill; and then also removal of the word “recognised” in “environmental factors”, which has been confusing for some people. So I do take those into account as well.

We do know that a similar provision to this bill has been adopted in the UK—not exactly the same, but a similar provision. We do know that in Australia, they decided not to introduce a bill similar to this, for various reasons. I say New Zealand can make its own decision.

I think that there’s also been a bit of commentary about what a member’s bill should do, and some submitters to this bill said that it’s not appropriate for a member’s bill to look at something so substantive as company law and the duties that affect directors. Some have said that we should go further within the member’s bill. And I think it’s important to this House to recognise that members’ bills do have a purpose. This is a bill that adds one new section of “communicative intent”, which is a phrase used legally, which is referenced in many journals, which is seen as a positive thing in relation to the purpose of the law. It doesn’t substantially change the law. It doesn’t require cost or compliance. It doesn’t require any additional spending. But it does set out the purpose of how we would like directors to do business, which is not to only consider the maximisation of profit but to truly and freely decide what is best for them and their business. I think that Parliament should enable them to do that.

So my intention is to proceed with the bill and to introduce a Supplementary Order Paper, in good time, prior to the committee stage, in order to address the issues raised through the select committee and to allay any concerns around compliance. I commend it to the House.

The question is that the motion be agreed to.

Oh, we were doing so well today. We had the local bill—the New Plymouth District Council (Perpetual Investment Fund) Bill—then we had unanimity on the Employment Relations (Extended Time for Personal Grievance for Sexual Harassment) Amendment Bill, then Mr McKelvie successfully negotiated and passed a conscience issue bill, and there was a real sense of fraternity breaking out across the House. Then we had this: what I have added to the long list of both Government and member’s bills that are coming to this House that are a well-meaning waste of time. And we are going to waste the House’s time doing something that, frankly, is not needed to be done.

I note that the bill as it came out of the select committee is a shadow of its former self. And let’s just say that there wasn’t much of a shadow when it went in. It’s a very smaller shadow coming back out. Mr Webb’s bill—

Simon Court: Dr Webb.

Hon MICHAEL WOODHOUSE: —Dr Webb, I apologise; the Hon Dr Webb, these days—had a list, an avoidance of doubt list, that talks about the principles of the Treaty of Waitangi, reducing adverse environmental impacts, upholding high standards of ethical behaviour, following fair and equitable employment practices, and recognising the interests of the wider community—all of which is either in other law or something that companies routinely do. And we came out of the select committee with a single sentence, again, “To avoid doubt, in considering the best interests of a company or holding company for the purposes of this section, a director may consider matters other than the maximisation of profit.” Well, who knew that those rapacious directors had to be guided by legislation to consider things other than the maximisation of profit? Because, of course, that presumes that that is the goal of every single entity covered by the Companies Act.

Now, I used to be the chief executive of a surgical hospital. A limited liability company was the entity that ran the hospital and was my employer. It was a registered not-for-profit. It did other things. And there are thousands of companies just like that up and down the country who exist to do other things other than profit and will continue to do so if this bill is passed. And even those profit-making companies don’t, most of them, exist to make a profit; they exist to provide a product or a service.

Did Peter Beck wake up one day and say, “I know what I want to do. I want to make a profit.”? No. He woke up one day and said, “I want to change the world, because I want to change the way we communicate through small, loaf-of-bread-sized satellites that we can launch here in New Zealand.” Did Rod Drury wake up one day and say, “I want to make a profit.”? No. He probably woke up and said, “I want to disrupt the way in which accounting software is deployed globally.”

Simon Court: Did Graeme Hart say he wanted to make a profit?

Hon MICHAEL WOODHOUSE: Exactly. We could go through a long list of companies that are for profit, and we shouldn’t turn profit into a dirty word, because it’s the profit from those companies and the taxes paid on those profits that pay for our health, education, and social services. So the very case for this even being necessary has not been made.

Now I was going to say congratulate—that’s not quite the right word; maybe it was a poisoned chalice that she picked up from her now ministerial colleague. And she has done her very best to put lipstick on this, because I don’t think that it deserves any other epithet. And it wasn’t just me on the select committee who had that kind of derision for the bill. The member talks about the number of people who opposed this bill as if they were part of that rapacious, profit-focused business community. Well, let me go through who actually opposed the bill. Let’s start with the Ministry of Business, Innovation and Employment (MBIE)—the very advisers to the member and the select committee. Their big, bold statement in Part 2 of the departmental report: “We recommend that the bill not proceed.” And they did so not because they were rapacious profit-makers, but they were the sensible arbiters of whether or not this was even necessary. No less than the Legislation Design and Advisory Committee, whom I think every single member and Minister and select committee should listen very carefully to, said in their view that the bill should not proceed on the basis that it is unnecessary legislation with an unclear purpose and uncertain interaction with other legislation. Indeed, the Law Society and MBIE actually worried that this would make things worse, not better.

So why are we putting forward a bill that risks making things more confusing, which was a theme of those submissions, and actually makes things worse? As an accountant for over 25 years, I have been advising small businesses about the way in which they extend their social licence. When I was a student, they used to talk about triple bottom line reporting. We now talk about reporting for outcomes—the actual things that people want to deliver, and it isn’t a profit. Those things exist already. Our obligations to the Treaty of Waitangi, our employment obligations to be a good employer are already set out in other legislation. Directors have their specific obligations in law to be good at these things, and, if they’re not, there are consequences, not the least of which in our social media world, where there is a quite appropriate but very risky cancel culture for an organisation that gets itself offside with the sorts of stakeholders that they have: customers, staff, and so on.

So there are already significant risks on directors and boards that do not act in the manner in which Dr Webb and now Camilla Belich believe we have to put into black letter law. It’s as simple as that. This is a waste of time. I think it’s well-meaning, albeit that this focus on those rapacious profit-makers is perhaps emblematic of this Government. But it is a waste of time. It shouldn’t be here.

Anna Lorck: We love business.

Hon MICHAEL WOODHOUSE: I’m sorry, Ms Lorck?

Anna Lorck: We love business.

Hon MICHAEL WOODHOUSE: I like it when you’re in the House after dinner—always get a very interesting interjection from across that side when the member for Tukituki is participating in these debates. I’ll say no more, except this: this should not go through.

Thank you, Madam Speaker. When the Economic Development, Science and Innovation Committee—that great select committee—was presented with this bill, we had to deal with a couple of issues.

Firstly, we recognised that, in the 21st century, in the year 2023, there are companies that might have other reasons for existing, such as social enterprise. We wanted to make sure that those companies who weren’t there purely to pursue the bottom line had the means through legislation to protect themselves when the decisions that they were making were not only just for profit or when they had a set of decisions to make for their companies that their directors wouldn’t be at risk or jeopardy of being sued because the decision they had made was one of principle.

We were presented, firstly, with legislation from the Hon Dr Duncan Webb that had, what we call, an exhaustive list. As the select committee examined the bill, we were looking at different alternatives to see whether or not we could give the same reassurance to these companies who were not only pursuing profit as their only goal in existing.

But also, at the same time, I recognise the submissions—especially the one that the Law Society had given—that you don’t want to make this bill a back door to acting recklessly for your directors. You don’t want this to be an excuse for why they’re actually harming the company and using it just as an excuse. I can imagine some instances when the directors of a company are not acting in good faith; they could try and find some sort of far-fetched excuse to say that they’ve acted for this reason so as to justify their perverse behaviour. So I also got that point from the submitters as well.

So we were looking at this whole concept of whether or not we wanted an exhaustive list or whether or not we wanted just an open statement or whether or not we wanted a very succinct short statement—and that’s obviously, ultimately, where we have landed, just to make sure that we could use this line as, what I would say, a defence in legal proceedings, and saying that they may consider matters other than the maximisation of profit.

So while we will not give the exhaustive—and the select committee didn’t recommend—list of things, such as Te Tiriti, the environment impacts, high standards of ethical behaviour, fair and equitable employment practices, and recognising the interests of the wider community, while we had chosen to cross that out, we think that giving a non-exhaustive list of just being able to say that they may consider other matters other than maximisation of profit was the best way to respond to the submissions that we had heard.

During the select committee process, I had asked specifically of some of the advice around whether or not there have been cases brought to the courts to see whether or not people could be liable when they’re not acing to maximise profits. So we were given the case—and my computer’s now not playing; well, it shows that a millennial doesn’t always have a way with tech; I shouldn’t have touched that, but OK—of a Supreme Court judgment on section 131 of the Companies Act, which is Debut Homes v Copper. So the judgment, basically, is just saying that the shareholders can consider other issues apart from just the maximisation of profit. I think that goes back to my colleague who is the sponsor of this bill, Camilla Belich, in her opening speech, and making sure that we codify what is already there in common law. I think this is what we seek to do to make sure that those people who sit on boards, who are directors of companies, who might be in a state where they exist for different reasons as well—and it’s not just for profit but also they might want to be a responsible company, they might want to be a good corporate citizen in dealing with some of those things in our world. We know that this world today is very different to that of 20 years ago; we want our corporate citizens to behave better, to have responsibility for looking after our environment, fulfilling their Treaty obligations, and making sure that we are able to look after all of their employees as well. So being able to codify the case law that we already have—I think that’s really good.

But also just noting that it is not uncommon for a case brought against a director to allege a breach of section 131, as well as section 135 as “Reckless trading”, or section 137, the duty of care and skill. So this is the advice that we had given.

So if we turn it around and say that if we don’t pass this bill, there will still be directors who are liable to lawsuits under this, even though the case law has now so far been proven—and this is the Supreme Court; so one of the most authoritative case laws has already been produced, but that is not necessarily known by everyone. So there will still be shareholders out there who don’t think that their board of directors or any of their other directors are acting to maximise profits—they might still actually have that chance to bring a law suit against their directors, and that is, frankly, saying it’s absolutely a waste of our legal resources. It’s a waste of our courts’ time. It’s a waste of lawyers fees. So by being able to amend one small member’s bill, we’re able to actually save a lot of that court time, a lot of that dead weight lost in our economy as well—so making sure that companies no longer have that friction and that understanding between their shareholders and their directors.

So it was really nice to be able to hear from a lot of the NGOs, especially, who came to us and said, “Well, we actually do hope that our companies actually really need to up their game as well.” So during the select committee process, we were able to hear some of the submitters who think that, actually, this bill didn’t go far enough, that this bill needed to actually put that onus on to companies to say, “Well, as a company, not only do you have to consider your own bottom line, your own profitisation, but also you need to be able to consider the environment or have that active consideration of environmental issues but also have that active consideration of, for instance, your employment issues, have that active consideration of other social issues such as Te Tiriti as well.” While the select committee didn’t, in the end, follow that line of reason and we didn’t completely agree with them, I can see where they’re going.

So, I think, for the benefit of the House and to put that as a balanced debate, in the end, the select committee was trying really hard to find a balance somewhere. We weren’t going to go down that you have to actively consider these issues and nor were we saying that—and the status quo right now is that all you can consider and all you have to consider is profit.

I absolutely agree with my colleague who has just resumed his seat, saying that, right now, companies are in this environment where they can’t just consider their profits, whether it’s social media, whether it’s the awakening of the biggest groups of consumers, the citizens that they’re trying to serve and the market that they’re trying to play to, we know that consumers are now demanding different things. When we buy products, we know that we want to see sustainability. Obviously, “greenwashing” is a whole different topic we need to talk about, but at least we know that consumers have that expectation.

So this bill is one where we have to make sure that there is that freedom and availability for them to be able to consider that, even though, maybe sometimes, it is not the most, for instance, cost-saving. So the example we hear all the time is if you had two products—and I think elections are about to come up, so members of this House would know that, for instance, if we have an organic printing material versus one that is not, then, obviously, the organic printing material—I think it’s soy ink, if I remember correctly—is going to cost us a lot more than that which isn’t. So being able to choose something that we know is actually better for the environment, even though it might not be the best for our pockets or our campaign accounts, we know we’ve done the right thing for the environment. So using that analogy on to companies, we know that not everything that we choose for the environment is necessarily always the right economic decision, but we know in the grand scheme of things it’s going to better for our lives, it’s going to be greater for the planet, it’s going to contribute to our wellbeing.

So to save the courts from having to deal with cases that are already settled law, in terms of making sure that our corporate citizens play their part in our community, I commend this bill to the House.

I’m extremely enthusiastic—in fact, pumped—today to speak to this bill. Nothing stokes the fire of a former corporate lawyer more than talking about corporate law. It’s like that famous bar room line in Hood Street in Hamilton: “That’s enough about me, what do you think of me?” It’s great to see all the lawyers out there—some of whom are leaving—opining on companies legislation.

The purpose of this bill, which is to make it clear that a company director can consider matters other than profit maximisation—what those matters are we don’t know yet—is one that really provokes me. Actually, I don’t know any credible director worth their position that does not do this already. What those matters are remain the purview of those directors in place at the time, and they need to contend with those. In fact, in some instances there’s more C and E than S and G—there’s more culture and environment than social and governance—at other times there’s more culture and governance and less environment and social, and, of course, there are a few other things like language that can play into the heart of decision making: is it going to be a reo Māori one, a reo Pākehā one, or a reo Wīwī one?

On inquiry and looking more closely into the proposed legislation, I’m profoundly cautious—cautious that I don’t have a slip and fall accidentally on the side here, too; I’ll move this way. Section 131 of the Companies Act states that when directors exercise powers or perform duties, she or he “must act in good faith and in what the director believes to be in the best interests of the company.”, and common law—fiduciary law—also dictates and implores these similar expectations.

Current legislation provides that a director of a company commits an offence if he or she acts in bad faith towards the company while believing his or her conduct is not in the best interests of the company and will cause serious loss. The proposed provisions add nothing but text: “To avoid doubt, in considering the best interests of a company or holding company for the purposes of this section, a director may consider matters other than the maximisation of profit.” So you can consider anything, and that’s about as good as saying you consider nothing. As my former form teacher Fred Jackson, brother of Syd and Moana, would say, “Too vague, boy, too vague.”

The wording in this bill is a mishap, e hoa mā. It’s really unclear what the pātai is that this whakautu is trying to answer.

Directors’ duties—they’re sourced in common law, fiduciary law, and sometimes statute. They’re codified. They include acting in good faith, acting in the best interests of the company, acting for proper purpose, exercising independent judgment, avoiding conflicts of interest—very topical today—maintaining and keeping records, and complying with the Companies Act and related legislation, and these are fundamental to the credible corporate governance of companies.

B corporations are already set up to meet high standards of social and environmental performance, accountability, transparency. In my various roles and responsibilities, I’ve had the great privilege to sit along and to listen to various sages, diverse warriors of corporate governance practice in New Zealand, people like Rob McLeod and Joanna Perry, who have demonstrated a professionalism and diligence in their daily decision-making for Tainui Group Holdings. They had the temerity and the audaciousness to drive Tainui Group Holdings forward with The Base retail centre in Hamilton West—if you haven’t been there—residential developments at Rotokauri and Five Crossroads, various hotel developments like the Pullman Te Arikinui, the Novotel Auckland Airport, and the Novotel Tainui in Hamilton West, and the mother of all logistics developments, known as the Ruakura Superhub.

Those people made decisions monthly to move the economic dials, and they considered financial and non-financial implications during option analysis and, ultimately, resolutions. They did not need a statutory provision to tell them what they needed to do; they just did it.

My life as a board secretary would never be the same after one board meeting with either of those two people and others that I got to know. Backed up then as the first trainee CEO of Ngāi Tai ki Tāmaki, the Ngāi Tai nation, iwi karoro inu tai [the governor from Maraetai], with James Brown, or Hemi Paraone—not the dancer, but the governor from Maraetai—John Robertson, a former colleague of y’all in this House, and Anita Killeen and the indomitable Billy Brown, who instilled a genuine sense of practical intuition into decision making by governors.

Governance ambitions were inevitably disproportionate to their financial capacity, but this did not phase them. It was, in fact, the very fearlessness that drove the decision making through the history and herstory of Ngāi Tai ki Tāmaki to do quite unusual things, like buying Macleans College, worth $120 million, in Bucklands Beach—a great place—

David Seymour: Macleans?

TAMA POTAKA: —great place—when they only had a $25 million asset base. Their notion of cultural and E, S, and G decision-making was hard-wired. They did not need a statute to tell them what to do.

What they and others showed me was that excellent governance practice is not driven out of amorphous statutory provisioning that jumps on the road to nowhere, but, rather, from a credible decision-making framework, an awareness of statutory and common law duties required for company decision-making, and a careful balancing of the various factors that enable a genuine and accurate assessment of risk and reward over time. Masters Woodhouse, McKelvie, Ms Kuriger, and others know this, and, deep down, I’m confident that Ms Belich and my former academic colleague Minister Webb know this too.

The legislation design and advisory committee of the New Zealand Law Society and others have all said that this is unnecessary. It could have unintended consequences, and it could give rise to more judicial activism, and that’s all we need! Imagine all the legal beagles barking around the legislative dishes today as we get a real doozy, a game-changer, for directors to completely adjust their behaviour. The bill continues to reinforce this Government’s modus operandi. It knows everything and knows best—omniscience—it wields power to achieve its own objectives, however wayward—omnipotence—and it will make up solutions and see things that just don’t exist—hallucinatory.

I’ve said this before in the House and elsewhere: the best people to run businesses are business, not govt.nz, whether or not that’s from Tukituki or Northcote, and certainly not one ideologically driven agenda. Our view is that many governors already consider these matters in their decision making—that is, all matters, profit maximisation and others. It’s already in their best interests as organisations to do so, and therefore this bill is not necessary. Our learned colleagues, much more so than others—much more learned than ourselves on these matters—from auspicious organisations such as the Law Society oppose this bill, and so do we. Their guidance has been received and it will take some boldness—some boldness—by the Government to say, “No, we know best. We know what directors should do in making decisions. In fact, we might even make their decisions for them.”, because that’s the next stage of this slippery slope.

A likely theme for this Government that does nothing to fortify corporate governance practices and does everything to make things more squishy, squashy, and foggy: why not use guidance or training materials from the Government to help educate directors, and give some of those 1,400 bureaucrats something to do? The Institute of Directors and others are already training people in this space. The NZX listing rules have given guidance. Most importantly, the best interests of the company are just that—best interests.

Folks, we’re on a slippery slope. Yesterday, I got the ACC reporting function past the opposition goalie; today, it’s an unusual and uninteresting obligation on directors; and tomorrow, ko wai ka hua, ko wai ka tohu [and tomorrow, who can say]? A well-meaning waste of time. It’s like having me, a guy who’s flat on āmine, trying to sing in the whānau band—a nice idea, but not a good one.

Like Linda Ronstadt, I don’t know much, but I know I love law, and as a former corporate lawyer with a trifle of experience, I feel as though this provision creates wide space for judicial activism or misinterpretation. As such, it’s an uncertainty that I’m unwilling to concur with, and tonight, on this dark Wednesday night, I oppose the bill. Kia ora tātou.

Tonight, Madam Speaker, “I’m going to be”—I’m not sure, actually, but it felt like a sort of a game show that was just going on across the other side of floor there. I feel like it was a bit of a game show where obviously there was a dessert challenge, or something; you’d get so many different names or words or who knows? Anyway, tonight I am going to be Glen Bennett, and I’m going to speak in favour of this simple and small piece of legislation which—the fear seems to be shaking across the other side of the floor as the previous speaker, Tama Potaka, talked about things like the “slippery slope”. I’m not sure where the slippery slope’s going, but it does confuse me. Or the “slushy and foggy”—the “hallucinogenics of this legislation”, which I’m thinking maybe it’s something he had for dinner. But the hallucinogenics across the other side of the floor is something to consider; I won’t be having dessert with him any time soon.

We support this member’s bill. It’s simple, it’s something to not be afraid of because, yes, it’s abundantly clear that companies are to be good corporate citizens. Companies are required to act in the best interests of their shareholders, and many of them do, and I totally agree when we’re looking at this legislation I really agree that companies need to make sure they’re doing right by their shareholders, by their people, by the environment.

I am here because I want to see this nation better than it was when I first arrived in this place. And so I am really grateful to be here speaking on this because this is only words, as I said from across the other side of the room; only words, but words matter—words matter. And so, yes, we need to get things right when it comes to corporate responsibility, and that is why we support this member’s bill. The Hon Dr Duncan Webb, the Hon Rachel Brooking, and—I’m guessing, shortly, because obviously whoever touches this bill turns to an Honourable—the soon to be Hon Camilla Belich, but who knows.

But this year I was on the Economic Development, Science and Innovation Committee and we did explore, and we did, I think, as a committee, we disagreed. I agree that we had disagreements on this, but I think we made changes, we did things that we thought were right in terms of bringing it back to the House in better order than we first found it.

Section 131 sets out the duty of a director or 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. And that’s why, you know, we talked about it and we explored it and the legislation came as it was. Because 20 years ago, 30 years ago, 40 years ago, this was something that often wasn’t thought through. All it was was around the bottom line of making money. We didn’t care what effects or impacts our business had on people, had on the environment.

David Seymour: Looks at the clock: oh, six more minutes.

GLEN BENNETT: I’m not even looking at the clock so I’m looking forward to checking it shortly to see how far I’ve got through.

But it was a different time. And I do remember growing up in the wonderful 1970s and 1980s and the difference that business had in that time. Earlier this evening we discussed alcohol reform and I mentioned around our tobacco industry and the difference it was—

Simon Court: Future Minister.

GLEN BENNETT: I mean, a future Minister, that’s something that, you know, I’d be considering in my third or fourth or fifth term as an MP.

But we change, we move, and we manoeuvre as a society. And words matter, that’s why the previous speaker, he had lots of words—words, words. And some of them made sense, some of them—like, for example, when he spoke about how this legislation “provokes him”. It provoked him to respond and to react in such a way that I’m unsure why, because it’s some simple words that can encourage and remind business, that can remind industry, that can remind board members of what is important. And yes, as I’ve said, there’s bottom lines, but we need to consider the environmental and the social governance—the ESG, should I say.

Now, I look at some of the examples around the world that have been implemented, and I looked at this, and obviously the United Kingdom back in 2006, and then there was the Anderson Lloyd on overseas regimes and what they looked at in terms of this piece of legislation. New Zealand wouldn’t be the first country to endorse the stakeholder approach at law. As I said, the United Kingdom required it for directors to have regard to ESG factors. Back in 2006, they passed that law. And section 172 of that Act proposed a mandatory duty on directors to promote the success of the company—to promote the success of the company—by taking into account similar considerations as those listed in the bill. The consideration—as in the United Kingdom’s case is mandatory—of the weight that directors must give to the factors is subjective. And so that’s where we need to look and to explore what this legislation would mean when it comes to companies and the director’s duties. And that’s why I think it is good for us to have a conversation, as a member’s bill, and to find a way forward where this can be something that is in legislation moving New Zealand forward.

We have things to do, we’ve got work to do on this, and I look forward to the committee of the whole House. I’ve already started writing notes and preparing my contributions for that. I look forward to it. I hope that everyone will be there for that.

But we’re moving as a society and a nation. We’re leaning into things like Te Tiriti like we’ve never leaned in before. We’re leaning into things like looking at our environmental footprint. We’re leaning into things around future generations, which so often, as companies, we didn’t. So often, we looked at the bottom dollar for today and for this year’s shareholder meeting, this year’s, you know, checking our bank account to see how we’ve done. But I’m glad that we’re now looking and saying, “You know, what is it in 2050?” If we look back on the impact that my company had not only on today but in years to come. That’s why I think as a community, as a society, this legislation is simple and important because it moves us forward. You know, very much around—we had stakeholders, we moved from the short-term to the long-term aims. We look at the winning it for me right now whereas we look at the “us” and how do we move forward together. And I know that the other side of the House rolls their eyes when we talk about community, when we talk about connection, when we talk about taking people with us. And I can hear that, obviously, I’m taking the room with me this evening as I can see that people are flipping their votes as I speak!

But I feel confident that we can we can take this and make it into the right form. And as I get shouted at from across the room from the National Party and the ACT Party, shouts of applause and excitement from this side of the House—come on, please, that was a cue—it didn’t work! They make silly comments around how this isn’t going to do anything or make an impact, and then they do make comments around my leadership in New Plymouth. And it’s interesting because in the newspaper yesterday, and today on Seven Sharp, there’s comments around the ACT Party and around the National Party for their illegal use of electioneering, which has to be removed. So that side of the House obviously is discussing things and think that maybe this bill doesn’t actually do much but they need to look at their own backyard first before they make us make a decision.

So it was good to be part of the committee to hear the submissions and to explore what this could look like. Again, I want to thank the Hon Dr Duncan Webb, the Hon Rachel Brooking, and I also want to thank Camilla Belich for bringing this to the House. I look forward to it going into the committee stage.

The Companies (Directors Duties) Amendment is something that we will be supporting, that I personally will be supporting. Words matter and the words that we have created and we will continue to create are important. Therefore, I commend this bill to the House.

Let me begin by putting in a human rights complaint. Whoever is the Labour whip who forced that member to speak for the full 10 minutes after it was obvious he was drowning after the first 30 seconds, with nothing to say whatsoever that would not embarrass him in ways that would be played back again and again and again, if anyone cared, should be subject to a human rights complaint.

While I’m concerned about people’s rights, I also want to give my commiserations and condolences to Camilla Belich, who has taken the ultimate hospital pass. You know, one of the better souls and brighter stars of the Labour Party, who has had a successful legal career—why on earth she is championing this bill can only be put down to the strange machinations of the Labour Party that explain the Mt Albert selection.

Of course, this bill has its genesis in something that I was amused to find in the Parliamentary Library’s debate pack—and we have to thank the Parliamentary Library for putting together these debate packs. It starts with a very haunting paragraph which is headed “The trigger”—ha, ha; Madam Speaker, you’ll have to forgive me. It says, “Christchurch Central MP Duncan Webb, sponsor of the bill”—

Hon Dr Duncan Webb: Great MP—great MP.

DAVID SEYMOUR: —“says the crystallising”—we’ll come to that member—“factor that led him to draft the bill was a view expressed in Parliament about Air New Zealand by ACT Party leader David Seymour.”, and he goes on to describe how I explained in a speech to this House that the duty of directors is to maximise the returns to their shareholders within the framework of laws that are made by this House to govern New Zealand. If the Parliament has made the laws well, and the laws that we have ensure that people can’t take advantage of each other by force or fraud, can’t undermine the commons by environmental pollution, and can’t abuse human rights, which this Parliament has done, then what is left is for those who find themselves as directors to make sure that they act in the best interests of their shareholders within that framework that this Parliament has set apart.

The difficulty for people who support bills like this is that if it is true that Parliament has done its job—and this Government’s been in power for almost six years now—and ensured that the regulatory environment in which firms operate is adequate, then it shouldn’t be necessary for firms to follow other rules and objectives than doing the best for their shareholders. If, on the other hand, it is necessary for directors of firms to fulfil a whole lot of other objectives, then maybe that tells us that, actually, the Parliament has failed in its attempts to get its regulatory settings correct, which would be a strange admission for a party that’s been in power for six years.

Now, of course, the hospital pass received by Camilla Belich was passed on by none other than Dr Duncan Webb, and Duncan goes on to protest too much. He goes on to talk about, in his submission, his experience as a lawyer—his experience. All I can say is lots of people have experiences, but I don’t think Duncan Webb’s have been very good, and anyone who spends a bit of time in Christchurch will say that when he left his law firm there was quite a lot of tidying up to be done by the other—

ASSISTANT SPEAKER (Hon Jenny Salesa): Order! [Interruption] Order! The member will come back to this bill.

DAVID SEYMOUR: —partners. Thank you, Madam Speaker. In fact, that can be seen in this particular bill—

Hon Dr Duncan Webb: Point of order.

DAVID SEYMOUR: —because the select committee—oh, here we go.

Hon Dr Duncan Webb: That was a slur, and I would request that Mr Seymour apologise.

ASSISTANT SPEAKER (Hon Jenny Salesa): The member will withdraw and apologise.

DAVID SEYMOUR: I withdraw and apologise, but they don’t like it up ’em, and it can be seen—the sloppiness that led to those problems can also be found in the drafting of this bill, because the bill, you know, is not a very lengthy one. It’s not a very lengthy one at all. It’s a total of five sections. It is, in total, if you count the white space at the top, less than one page, and yet the substantive part of the bill, when it went to a select committee, all of the substance had to be crossed out and replaced with a new section that was one paragraph. So this guy makes himself out to be some sort of legal genius, and his drafting, inspired by my speech, was, as it turns out, completely hopeless and had to be entirely replaced by the select committee. Some people thought the previous speech from Labour was embarrassing, but what is truly embarrassing is the lawyer, or so-called lawyer, who was responsible for the drafting of this bill and what has subsequently happened to it.

But there are more important and substantial reasons to oppose this legislation than the frankly embarrassing presentations by the members tonight and the member originally responsible for it. You see, they have misunderstood the developments of human rights in a free society that has grown up over hundreds of years. Let me spell it out. There was a time when a person, in order to exercise their rights and duties as a member of society, had to fit a very narrow window. Usually, it would be helpful to have a certain religious view, to be a man, to be a landowner, to be born a certain way, to have a certain sexuality. If you weren’t the right type of person, the rights you had were very limited, and they were limited in large part because there were prejudices about who could perform what role in society.

The limited liability company, the idea that a person has a right to transact, that they are only valued based on whether they follow the law that applies equally to everyone and whether their investors and their customers and their employees agree to transact with them, was a miracle of enlightenment. It was a central plank of the Enlightenment that each person could act and be judged upon the value they provided rather than the prejudices which had excluded people from participating in society for so long. The limited liability company was a revolution in human rights. It allowed people to come along to the table and share their ideas and trade value for value regardless of who they were. It made possible the idea that adults would come together voluntarily to provide through cooperation what could not be provided alone. Entrepreneurs with ideas, investors with savings as capital, workers with time to give, and customers with needs could all come together voluntarily and trade value for value regardless of who they were.

What we see today is a reversal of that breakthrough in human rights and advancement of human welfare and prosperity in what is known as stakeholder capitalism: the idea that you only have a right to participate in commerce if the new-age priests tick you off as having met the right precepts. Perhaps you have to be the right identity to fill a quota. Perhaps you have to have the right views on certain issues. Perhaps you have to have the right commitment to the Treaty of Waitangi. Perhaps you have to be the person that is approved by the prevailing views of the time. It’s no longer the value that you offer to those three other types of people, whether you be entrepreneur, customer, investor, or worker. It comes down to other people’s judgment of you, and that is why this bill is most retrograde—to use some Shakespeare, there’s been a lot tonight—to the desire of New Zealanders to be a free people who trade value for value and get stronger together without bigotry or prejudice.

That’s why this bill is not just a little bit wrong; it is based on a fundamental misunderstanding of what has made New Zealand and countries like it successful, a misunderstanding of free markets and capitalism, and a misunderstanding of human rights by a failed lawyer who doesn’t like it up him, but failed he has. That’s why we oppose this bill. Thank you, Madam Speaker.

Always great to get a human rights lecture from people who want to disestablish the Human Rights Commission.

I’m not a company lawyer; I was put off company law by precisely the sort of discussion that we’ve had tonight. I was put off because I grew up in the 80s, when it was “Greed is Good” and Gordon Gekko was king. As a result, I ended up in the highly profitable business of the Family Court.

But what we are talking about tonight—for those of us who aren’t corporate lawyers, like me—is a bit of a recap. We’re talking about putting a section into the Companies Act that would include in the directors duties that directors have to take into account when they’re making decisions about their company, a provision that says, essentially, “It’s not just about the obvious short-term interests of maximising profit for your shareholders; directors have the right and it is appropriate for them to consider longer-term interests.”

The original form of this bill—as it was presented first by the excellent and very learned Dr Duncan Webb, and then taken up, I believe, by the also excellent and very learned Rachel Brooking, and now by my friend, colleague, and also very learned lawyer Camilla Belich—specified what those additional interests might be. So it talks about society, about economy, about the environment.

The version that’s come back from the Economic Development, Science and Innovation Committee is a bit more limited. It just says, very simply, “a director may consider matters other than the maximisation of profit.” What this is setting out, though—despite Mr Seymour’s rather limited view of history—is part of quite a longstanding argument about how companies best do business and what their function is.

It is a conflict that goes between the profiteer shareholder model that talks about the maximisation of profit, and another model that is gaining traction that is sometimes referred to as the enlightened shareholder or stakeholder model. In the one, you’re looking for sheer profit maximisation; in the other, you’re looking for a company that might want to take into consideration longer-term issues.

It might see, as part of its company’s value, things that, while they do not immediately create profit, do—in the longer term—safeguard the company. That’s what this is fundamentally about. It’s about whether there is a way, and is it appropriate for, Government to try to incentivise and encourage the enlightened shareholder stakeholder model over the “Greed is good” Gordon Gekko profiteering alone motive. Had I known, when I was a young law student, about this, I might have been more encouraged to take corporate law. Because the fact is we have some fantastic companies who already follow the enlightened shareholder model.

For example, Patagonia recently made waves—they are one of the world’s largest outdoor apparel brands and they make a heck of a lot of money. But they reflected—and I think one of the slogans that turns up in Patagonia’s stores is “There are no profits to be made on a dead planet.” This company, which is family-owned, divested themselves—the family divested itself of all but 2 percent of the shares—and it put 98 percent of the shares into not-for-profit environmental organisations.

Now, on the face of it, that is not maximising profit for shareholders. On the enlightened stakeholder model that holds that companies have an interest in wider relationships with the rest of society—and, looking around, says a dead planet ain’t good for profits, particularly when you’re an outdoor apparel company—this is a longer-term view which does make sense in terms of their profit.

But what interests me is this isn’t a modern thing. We’ve had this conflict since the beginning. So it was the famous Milton Friedman who said, “The social responsibility of a business is to increase its profits.” But who’s the greatest capitalist? We all know the beginning of the model. What about Henry Ford, if you look to that sheer, big company model that we now know? In 1915, Henry Ford was sued by his own shareholders. What he had tried to do was to take fewer shareholder profits and put some of those profits into increasing the pay and the living conditions of his workers, and reducing the price of the cars he was producing for the consumer.

He was sued by his own shareholders, and the Massachusetts Supreme Judicial Court declared for those shareholders. They said it was not part of a director’s responsibility to consider the wider stakeholders in society; their duty was simply—as Milton Friedman put it—to increase its profit. But other courts, over the years, have taken a different view and this is where we see the sort of thing that we’re talking about with this bill.

In 1989, Time magazine was considering two competing bids: one was from Warner, one was from Paramount. Paramount was offering more money, but Time felt that Warner would actually protect its key value, which was journalistic integrity. They went with Warner; they were sued by their shareholders, who said, “You should have taken the deal that gave us more immediate profit.” The court said, “No, it was entirely appropriate for the directors to consider the wider stakeholders.”

It is possible for both views to coexist. But while there are these great companies, the problem is they’re not all doing the things that we would want them to do; they are not all being good corporate citizens. So we have Bhopal—the world’s worst industrial disaster—where a chemical spill on a badly maintained plant resulted in 3,787 immediate deaths and around 574,000 longer-term deaths. We have the British and American tobacco companies who buried evidence of cancer as a result of smoking. We have the oil and gas industry, who, it appears, have known about global warming and their part in it since the 60s, but buried the information so they could go on making profit.

Right down to things like the companies like Gap or Primark or Next and H&M, who were discovered to be using garment factories in Bangladesh and Pakistan over the last 10 or so years where there had been appalling factory fires with factory owners who were maximising profit. They were producing the clothes cheaply, and Primark and Gap and these other companies chose profit over this enlightened stakeholder model.

How do we grapple with this? As we look around us and we see climate change overtaking us and we are starting to see people suing those oil and gas companies—particularly in the EU—suing those companies for failures in corporate citizenship, do we leave this situation to play out? Other countries have chosen to encourage companies to take that wider perspective. In the UK in 2006—has been said. Strangely, the UK economy does remain and I haven’t heard anyone suggest that their companies are less than free. Even Singapore—it’s being discussed.

If we bring in this law—and if it makes it morally easier for one director in one company faced with one decision that will either create profit or maximise the wider interests of stakeholders around the community, protect our awa, protect our moana, protect the health of our children and the future of this planet, then I say this law is worth doing.

Sometimes, Parliament’s job is not to put in regulatory systems; sometimes, our job is to lead by encouragement. When we live in a world where we have all grown up under the “greed is good” mantra, when directors are going to be told and they are told, “Your duty to your stakeholders is profit; you cannot take that wider perspective as to the way in which a company should operate.”, when we live in that world and we need it to shift—we need it to shift—that is where a bill like this can really offer us hope. It can offer us example, and I personally commend it to the House.

Thank you, Madam Speaker. I want to acknowledge the talent that many people have in filling those 10 minutes with a speech, but I do want to commend the previous speaker, Dr Emily Henderson, who I think has been the one that has managed to fill the whole slot with actually speaking to the values of the bill.

Hearing, though, Mr Seymour, I wanted to reflect on some of his comments because it feels to me that one of the ACT Party’s arguments for opposing this bill is that we have now got a world where anyone—queer or no matter your gender or your ethnic background—can become a company director and therefore capitalism is working just as intended. Therefore, we do not need to make legislation to actually ensure—or, actually, this bill is not even ensuring—the possibility that directors may consider, for the avoidance of doubt, other things other than maximising profit. I mean, we support this bill but I do not think this is some radical idea, and by no means by reforming capitalism we are going to get out of a climate crisis, but it just goes to show where each party’s priorities lie in that some people just seem to be OK with this status quo and kind of almost pink-washing capitalism by suggesting that because previously people of specific sexualities could not have become company directors and now they can, that everything is fine, and this is not needed.

As the select committee process went through for this bill—and I acknowledge that we don’t have a Green member in this select committee, but I looked at the submissions—I was none the less disappointed to see that in the select committee report there was a recommendation to take out some of the suggestions, actually, of the things that should be considered because they were great suggestions, and I do think—to echo what the previous Labour member was speaking about in terms of leading the way, the encouragement—actually by having a list of items that could have been considered, including environmental wellbeing, you are actually encouraging it in the right direction.

Several submitters, actually, including The Environmental Law Initiative, NZEI Te Riu Roa, Lawyers for Climate Action New Zealand, the New Zealand Public Service Association, Unite Union spoke at length of the need to perhaps not just say that they “may” want to consider other things other than maximising profit, but that perhaps company directors “must” consider other things beyond maximising profit. I want to sort of echo those, because unless we start genuinely forcing companies to look at other things other than maximising profits, those other things may just be “good to haves”. Looking after our environment, looking after workers, looking after our communities, and honouring Te Tiriti o Waitangi are not just “nice to haves”. They are things that should be happening and therefore company directors should be doing, and so we support the submitters who were calling for a strengthening of this bill rather than a removal of these considerations.

While we, of course, support the intent of the bill, which is to add clarity that company directors may be able to consider these other things, we could have gone way further in not just encouraging capitalism, but to actually twist capitalism’s arm into doing things that are good for the planet and the people to, I guess, expose those tensions that exist—inherent tensions that exist in our economic system—that actually may finally bring to light the fact that—

Simon Court: Is this what you meant, Dr Webb—twisting capitalism’s arm?

RICARDO MENÉNDEZ MARCH: —a sustainable planet and the wellbeing of our workers is just simply not compatible with the current economic system that we have. And yes, actually twisting capitalism’s arm because we’ve got to. To imagine—

Simon Court: Each Minister will be turning up with a little green book, waving it in your face.

RICARDO MENÉNDEZ MARCH: I kind of love the red-baiting from the right hand side of the House, because they always make our political party sound way cooler than sometimes we are. Like, you know, I kind of love it when they call Labour members “socialists”, and I sometimes go “Damn, like, I really wish they were actually were socialists.” But by all means, by all means.

Simon Court: Turns out they’re teenage capitalists, Riccardo, and we’re proud of them.

RICARDO MENÉNDEZ MARCH: By all means, continue making us look cool—

Simon Court: And shareholders in capitalist companies; that’s what we’ve learnt this week.

RICARDO MENÉNDEZ MARCH: Yeah, and indeed, I do think recent events may want to help us all consider where our interests lie and whether it is to simply—thank you for giving me all these talking points, too—just encourage company directors to do the right things or to force them to do the right things. I heard the concerns around, you know, this bill potentially encouraging more court actions, and that creating more barriers and problems. But actually, if it means that civil society can hold corporates to account for not doing the right thing, I don’t think that’s inherently a bad thing because we should be testing these things out in court. I don’t resonate with those concerns because we do need to start forcing the people who hold the power to make the right choices and to expose what is driving them to be in those places in the first place.

So the Green Party will be supporting the bill. We don’t support the what I would consider watering down of the bill in the select committee stage, and would encourage Labour to hear those submissions out, to strengthen it, to actually not just say “may” but “must” consider other things beyond maximising profits.

Thank you, honourable Madam Speaker. Can I just say, first of all, I had no idea that Ricardo Menéndez March was a comic genius, but there you go. You learn something every day. And also thank you to my colleagues Rachel Brooking and Camilla Belich, who have been shepherding this bill through the process after I introduced it.

It comes as quite a surprise to see the amount of agitation on the other side of the House in respect of this gentle little bill, this small nudge towards social responsibility that the bill requests—doesn’t even request, just, perhaps, asks, just gently suggests of corporations. And in fact, the fascinating thing is that what this bill asks, what this bill says is permitted, or would be permitted, by corporate entities, is what every self-respecting, decent, forward looking and modern corporate entity is doing already.

The vitriol that came from the leader of the ACT Party seemed to miss entirely one word in this piece of legislation. He derided it for being short, but missed three letters in the bill: m-a-y—may—that a company “may take into account”. This is not even a compulsory piece of legislation, but, simply, a clarification that it is open to company directors, when looking at what is in the best interests of the company, to take into account wider matters, whether it be Te Tiriti or whether it be environmental matters, whether it be social or employee relations. And here we have the full power of the ACT Party, railing against social responsibility, calling it—Damien Smith, in the first reading—Marxism. Well, not only does he need a lesson in history and economics but he also needs to read the bill. Because all this does is to say that company directors, when looking to what is in the interests of the company, may look not just at dividends, not just at what happens today, but to take a long-term view.

And we know today—well, only recently, we’ve issued standards for the External Reporting Board to say that we need to take into account climate matters—how climate adaptation is going on, what are the climate risks of a company? Any company that does not take that into account is not doing right by its shareholders.

So what is wrong? Why are they so fearful—why are they so fearful—of recognising that a company doesn’t sit in some economic vacuum but sits within a community, that what it does impacts—impacts—its shareholders, its employees, its creditors, and the community in which it sits. And so when directors turn their mind to the question of “What should we do next?”, what’s so very wrong with asking the question, “How will this affect others?” The days of radical individualism are gone; the days of connectedness and community are ahead of us. And so that is the corporate governance we expect.

Whilst there are some who are stuck in the past—I can’t deny it, I saw them at the Economic Development, Science and Innovation Committee, I read their submissions and listened to them, the legalistic type who think that only what is in black and white and letters on a page counts; certainly, they were there. But people that I spoke to who recognised that companies have impact and purpose, that directors have impact and purpose, saw that this bill was a small step, and many of them said not a large enough step in the direction of recognising that companies have responsibilities and are corporate citizens and citizens as well. And as citizens, we can rightly expect them to act properly—with ethics.

Now, we are not asking them to live up to some super rocketry standard, something more than we expect of an ordinary citizen. All we are saying is, “Turn your mind to this.” Ask yourself this question: if you embark on this course of action, will it degrade our environment? Will it degrade our society? Will it undermine our families? Will it make us poorer?

Hon Peeni Henare: And what is the cost?

Hon Dr DUNCAN WEBB: What are the costs, Minister Henare? That’s exactly right. Because a company is in a symbiotic relationship with our community and society. A strong society leads to a strong economy, and a strong economy leads to strong businesses and companies. But we seem to have forgotten, on the other side of the House, that we are connected. We are not radically individualistic. We are not islands unto ourselves. We rely on each other—we are a community. And I embrace those companies who recognise that. I embrace those businesses that recognise that we rely on them as they rely on us. That is all that this legislation does.

So I find I struggle—I struggle—with the argument that, in some way, this is a radical departure. In fact, there was a moment in time in the 1970s and early 1980s when neo-liberalism was in the ascendant, when we thought that all that mattered was the rights of the individual and the maximisation of profits, and some people in this House, some parties in this House, are stuck in a time warp. They are stuck in the past and we have moved on. The 1990s have arrived, Brooke van Velden. The 1990s have arrived and we’ve woken up from our slumber. And so all we are saying is that, in this situation, in the modern era, a good company director doesn’t simply look at the balance sheet, doesn’t simply look at the numbers; they look at all of the other bottom lines: the environmental bottom line, the social bottom line, and the community bottom line. We run our Budget in this way. We look at the wellbeing of the whole of New Zealand. And any company should look at the wellbeing not just of what’s going on in the office and on the balance sheet but in the community that serves them and that they serve.

So I was surprised, I must admit I was—and I do thank the select committee for their deliberations. I appeared in front of the select committee, but I was very surprised that—and I’m not sure if it’s unprecedented, but very unusual—the committee gave no report of substance. It was unable to agree. So even though the committee turned its mind to listen to a number of submission and took considerable advice, they didn’t actually come back to the House with any substantive recommendations. I’m a little disappointed that that was the case. And it has fallen to my friend and colleague Camilla Belich to pick this up. And I know that she will be looking very carefully at what the select committee said, but also what a number of submitters said about how the bill should proceed.

Can I just say that I’m very pleased that I brought this to the House, but, equally, I’m very happy to hand it over to the custodianship of Camilla Belich, who will have her own views and her own improvements of this bill. I’m very happy to do that because this is an important step forward. It may not go as far as the UK has in its own reforms—and other jurisdictions—but I’m surprised that on the other side of the House, who say that they’re the friends of business, they are laggards in equipping businesses in moving into the modern world. So I look forward to seeing this bill progress. I know that there’ll be improvements as it meets the committee of the whole House. I look forward to being in that debate. But for my friends from the ACT Party: I’m simply perplexed that stuck they are in 1982.

The next call is a split call. I call on Sam Uffindell for five minutes.

Thank you, Madam Speaker. It’s an honour to rise and speak on this little gem, the Companies (Directors Duties) Amendment Bill at the second reading. I’m sure it will do a lot better under the stewardship of Camilla Belich.

I’ve listened to the debates, I’ve been in this House since the dinner break finished, I was summoned by whip to be here, and I’m very thankful that I endured the last hour and a half of debate.

What I’ve been able to ascertain so far from this is that we have a Government that doesn’t actually trust companies to do the right thing. We have heard these examples about how companies have done bad things out there, and of course there are companies out there who have lost their social licence, but the reality is that in the 21st century, we live in an age where, if you do that—guess what? Investors, clients, customers, super funds, everyone else walks away from you and they don’t invest in you and they pull their money and they don’t buy your products or your goods or your services and—guess what? You generally start going out the back door. And shareholders and all of the social media culture that we have at the moment will pinpoint these companies.

I’m very sad to see Anna Lorck leaving, she’s always one of my favourite crowd moments, but there she goes. Thank you, Anna—farewell. And Duncan’s back, so I guess it’s a balance.

As I was saying, you don’t need legislation to tell companies what to do, because companies will act in their own interests and their own interests are in making sure that customers keep coming back to them so that they can maintain their profit margins. If they lose their social licence, the money and the customers walk away, and that’s how this thing works.

I think this is a fairly well-intentioned bill, to give a bit of credit to it, but I think it misguided and I think it is a solution looking for a problem, in a lot of ways. The Ministry of Business, Innovation and Employment did note that there were other ways that this could be dealt with and it didn’t need legislation to achieve that. The Legislative Design and Advisory Committee also recommended that the bill was not necessary.

As I’ve sat here, I’ve thought about a few companies that have been some of the most profitable companies in my lifetime. I go to Apple. Steve Jobs’ vision for Apple wasn’t to be the most profitable company in the world; it was to put a dent in the universe. He went out there and build products that changed people’s lives and he built them in a manner that improved people’s lives. And guess what? As a result of that, Apple thrived.

As you will see in a lot of companies these days, people expect their directors, shareholders expect their directors, customers expect their directors to take into consideration the wellbeing of people, the wellbeing of the environment, the wellbeing of society, and the wellbeing of communities.

I think that is largely already happening. Yes, there will always be outliers, but I don’t think this legislation is going to achieve its intention. I think there are already natural measures in place to ensure that we get to where we need to get to.

My main concern with this bill is that it is risky for directors, because they are now in a situation where they may be taken to court because someone may have determined that they may not have acted accordingly—[Interruption] They can do that, but they already take into account fiduciary duties, Arena Williams. They already do, and I’m glad I got you in Hansard, as well. It’s my little goal for the day.

I don’t think this is necessary in that regard, and I think the drafting of this bill creates more questions that solutions. It doesn’t incentivise companies to be more socially responsible, but it creates uncertainty around what the directors can do and what they’ve committed to and whether they’ve committed an offence.

As a result of this bill, you are going to have situations where directors wind up in court, and it will be for the courts to determine whether the directors have acted accordingly. That is a dangerous situation for directors. I’m not sure that we are in the right space. I appreciate the intent behind it, but I fundamentally don’t think it’s the right way to go about it, and, as I mentioned already, companies are already taking steps to ensure that they are looking after the environment, looking after their communities, looking after society because, guess what? If they don’t, the money walks away.

Thank you, Madam Speaker. It’s been interesting to sit in the House since the end of dinner and listen to the robust debate on this particular bill, the Companies (Directors Duties) Amendment Bill.

I had the privilege to travel to Christchurch this morning with other members in the House to the Building Nations conference—one of Aotearoa New Zealand’s largest infrastructure conferences that takes place. And I met a number of people, consultants, of course, people that are working on infrastructure projects, and many of them would be company directors as well. They will have governance roles, they have leadership roles, many of them CEOs. One of the things I was quite proud of in the discussion point there was around the fact that it came out that $70 billion has been invested in infrastructure under this Government in projects under way—$70 billion—whether that be in hospitals, whether that be in education and schools, whether that be in community facilities. But my part was around transport infrastructure. But I come back to the people that I spoke to today at the conference. They are good people. They are passionate about the things that matter in Aotearoa New Zealand. They’re passionate about our environment. They’re passionate about the social wellbeing of our communities. They’re passionate about our economy.

I guess as I reflect on this particular bill this evening—and I do want to acknowledge a good Northcote Point resident in Camilla Belich for the work that she has done on this, bringing this to the House, and those people before her: Rachel Brooking, and we heard from Duncan Webb. The work that has been done on this particular bill makes it clear that a company director acting as a mind and will of the company can take actions that take into account wider matters other than the financial bottom line. These are the things that I do believe and agree with many from across the House that people may be doing it already, that they may be interested and passionate about certain areas. I guess where some of the Opposition is coming forward on this bill this evening is that they may see it as a slippery slope or they may see it as a negative thing, where, actually, it’s about recognising the progress that different companies have made in these areas. That we’re not just focused on the profit margin that our organisation or business makes, that we’re actually passionate about the environmental advantages that the work we do brings to our country and to our climate, or to our local wellbeing and communities and the wellbeing—most of all the wellbeing of our communities.

I wanted just to acknowledge one of the readings that I was doing from Selwyn Gordon Coles from the University of Oxford. And some of his conclusions in this particular argument—and it references Dr Webb, of course. And he talks about this bill as “It packs a surprisingly large punch for a little bill.” And I think that’s the point this evening, everyone: it’s that this is a little bill on a significant, big members’ day. And I think it’s important that we don’t overrate, I guess, some of the incremental change that members’ bills can achieve. But he says, “I have argued, however, that the bill exhibits a communicative intent. And while changing nothing about what the law allows for directors, it communicates a deeper message about how directors really ought to act. The message I suggested is to some extent symbolic, and that symbolism carries obvious political advantages in tapping into powerful cultural currents around the proper role of business and society.”

I do believe in supporting business. I do believe that they have a significant role to play in our day-to-day economy, but I also genuinely believe that businesses make a severe and positive impact on the wellbeing of people and the communities that they live in. I commend this bill to the House.

Thank you very much, Mr Speaker. As the last speaker from this side of the House, I’d like to signal that I concur with my colleagues in opposing this bill. I’d like to commend the speeches that were actually made—particularly my colleague the Hon Michael Woodhouse, who did almost a dissertation on this bill and the reasons why he has actually come to the conclusion of why we don’t submit this. I don’t intend to actually repeat some of the words that he said.

I’d like to also congratulate Government members opposite who have actually dutifully done their full calls. I think it takes a lot of effort for a very tiny member’s bill that literally says, “To avoid doubt, in considering the best interests of a company or holding company for the purposes of this section, a director may consider matters other than the maximisation of profit.” That’s literally it. I think the rule for members’ bills, often, is that it has to be a small bill, that it doesn’t actually have—particularly for Government members—fiscal impact to the Government coffers, and I think that’s often the rule, and we understand how members can be really passionate about this.

But I just wanted to bring attention to what the Hon Duncan Webb, who was the original sponsor of this bill, said—that in this day and age, forward-looking companies are already doing this; meaning that what he is actually wanting this bill to do is already doing this and what the bill asks for.

One of the things that I just want to actually quote is from a stakeholder, Chapman Tripp. It says, “But we hope that the select committee will recommend Dr Webb’s bill not proceed, as it will achieve nothing useful.” That was one of the comments. I can also quote other submissions, but literally what they’re all saying—not all, but what they actually say is that the bill adds nothing to the existing law of directors’ duties, and is a virtue signal to the stakeholder theory of corporate governance.

Even the Supreme Court has confirmed in a judgment that acting in the best-interest test is a subjective one, that the director must act in what the director believes to be in the best interest of the company. Therefore, there is no doubt that a director can, under the current section, take into account factors such as those in the bill that they believe is also in the best interest of the company.

One of the things that Dr Duncan Webb has actually talked about was the bottom line; that people should think about the bottom line in context of things like social responsibility. I guess some of the things that he actually wanted to put in his bill were struck out by the select committee and, actually, we ended up with that last sentence that I quoted from the bill.

But I wish this Government would think about the bottom line for this country when they are doing this, because Labour has wasted so much money, I wish they could—

Ingrid Leary: Stick to the bill.

MELISSA LEE: —actually think about the bottom line. Yes, I am sticking to the bill, because I’m quoting what Dr Duncan Webb has actually talked about: bottom lines. Apparently, businesses only think about bottom lines; I wish the Government would think about the bottom line too, that we create a country that is wealthier, better, kinder—think about our wellbeing, for example, is one of the things that he was talking about.

One of the things that I am really concerned about is the fact that this bill is a pretty inoffensive bill, it’s a tiny bill, and a lot of people have already said that it’s a waste of Parliament’s time. So I wish not to waste Parliament’s time, and I do not support this bill.

It’s a pleasure to take a call and the last call on this bill. I’d like to congratulate my friends Dr Duncan Webb and Camilla Belich for continuing to bring this bill, because for me, this bill is going to bust the myth that you have to maximise the profit of a company. That’s a myth that has been around my entire life. In 1970, there was a paper published in The Times, and that was the paper which was called A Friedman Doctrine: The Social Responsibility of Business is to Increase Its Profits. What it said was it said that there was no social responsibility that a company had other than to maximise its profits. That must be done; that’s what its sole purpose must be. That myth shaped the economy. That myth shaped the way that businesses worked.

I looked up the fallacy of maximising a profit, and when I did, I saw that Thomson Reuters had a very good statement of why this fallacy continues, and yes, it does continue today. It continues to shape our businesses and the responses of our directors. What it said was that there are several reasons for this. The first is that there is pressure from heavyweight shareholders for short-term bonuses and profit. That’s what this does. This myth encourages those shareholders to push directors into producing profit at all cost—that’s what it does.

It said that another reason was bonuses and rewards. That is one of the reasons why this fallacy persists. It says that it is an easy metric and it is a simple metric, and it says that a fear of competitors actually making more profit in the short term keeps this alive. It does us damage, because it erodes our environment and it erodes our social responsibility, and it puts directors in a really hard position quite often, because they’ve got to justify to their shareholders why they are not going for the shortest and maximised profit. This is the environment that we have lived in.

Now, I read a book that maybe some of you have read. It’s a book by Yuval Noah Harari called Sapiens, and it was an interesting read. It talked about the development of limited liability companies. What it said was that these were actually part of the evolution of our economy, and they did good for quite some time, because they separated us from our responsibilities, from our moral and social responsibilities—we were separate from them. And they separated the risk in those businesses, because the risk was separated by the limited liability nature. But what he says in the end of that book is that the time has come for us to re-examine that, because it got out of hand. We actually got to the point where we no longer had it in balance any more.

My example for that, and it is a dramatic one, was Pike River, because I remember when Pike River happened and I was an employment lawyer, and I had several friends and relations, in fact, who actually put up—they put up—the argument that it was OK what happened at Pike River, because what actually those company people were doing was they were looking after the shareholders’ interests. That was actually put up as an argument. That was the fallacy in action. That’s where it can lead us, people. That is not where we want to be in modern New Zealand.

The reason why we had the ACT Party slur Dr Duncan Webb, the reason why we had Mr Woodhouse talk about profit and how important that was in terms of its social contribution, was because that fallacy is still around and alive and well, and we have to fight it by nudging. We have to actually make sure that people feel secure when they are directors of companies, and they can actually stand up and say, “These are clearly things that matter. These are things that matter. The environment matters. Social responsibility, the way we treat our staff matters.” These are all things that are legitimate to care about in a company structure, and that’s a very, very good thing.

That is something that is happening in our society, and we should be there as a legislature. And we’re not there with an iron fist; we’re there with a nudge. We are there to support businesses to do that. This particular little change does that. So why is Mr Seymour so frightened of it that he has to slur, that he has to suggest terrible things about people who have happened to be brave enough and creative enough to come and actually reinforce the capacity of our companies to do something that they desperately need to do, as we face an environmental crisis, as we face a need for social growth, because we actually do need those things? It shows to me that I am in the right party, because I am not in a party that is stuck in the 1970s, where several other parties in this House do seem to be stuck. I urge those people to read a little more, to get a little less religious about these beliefs, think through a little more what, in fact, they are saying, because it is very, very important. We stand by our companies when they are innovative and they are brave and they want to do something real and good that isn’t just about maximising short-term profit, because maximising short-term profit is going to actually rip our children off. It’s going to hurt us, it’s going to hurt our environment, and it’s going to make this place a darker place to live, and that is not what we are about.

Now, I wanted just to finish by talking for a minute about other nudges that we’ve had which have worked, because this is a “nudge” piece of legislation. I come from the background of an employment lawyer, and in the employment space, this is what happened with good faith. I’m pretty sure that when good faith was introduced as a principle, there would have been people from the other side of the House saying, “But employers always act with good faith.” Yes, lots of employers do. But isn’t it nice that we introduced a concept like that into legislation and it became the foundation of good employment relations in New Zealand? So I hope that this law, by introducing this concept in this very simple way gives people a foundation in company law to actually do the right thing and to grow and evolve. So I don’t agree with the idea that this does nothing. I think that this does a lot. It is simple. It is elegant. It is supportive of our businesses. That is a very, very important thing at this time.

I hope that we have a law here that will actually stand the test of time, and that in a few years there will be no more fallacy of maximising profit. There will be no more religious adherence to that, even from the right, because the status quo will be, of course, all businesses—all businesses—are perfectly entitled to care about the environment or feeding their children or looking after their workers. That’s the New Zealand I want to live in. And the only way we’re going to live in that New Zealand is if we move on from the 1970s. Thank you. I commend this bill to the House.