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158 | Environmental and social transparency under the Companies Act 2006Notes | 159Notes1As relating to quoted companies.2PricewaterhouseCoopers, ‘Surveys Find Many Consumers Hold Companies Responsiblefor Their Actions’ (30 September 1999), quoted in D Neef, Managing Corporate Reputationand Risk: A Strategic Approach Using Knowledge Management (2003), p. 37.3The Financial Services Authority (FSA) also sets rules that govern UK-based companies onthe London Stock Exchange. These now cover transparency and reporting requirements.However, they will not play a role in the main body of the review, because their environmentaland social reporting requirements have application to a smaller class of companiesthan the Companies Act 2006 (all of which are covered by the Companies Act), and are notas stringent. This issue is examined in further detail in Annex 1.4For examples of such studies, see: R Moody, Rocks & Hard Places: The Globalization ofMining (2007) for an extremely thorough account of global social and environmental injusticeslinked to the mining industry; the Norwegian Council on Ethics’ ‘Recommendation of15 May 2007’ on the operations of Vedanta Resources (a recommendation which resulted inthe Norwegian Government Pension Fund divesting from Vedanta), or ‘Recommendationof 15 February 2008’ on the Rio Tinto Group (which also resulted in divestment); War onWant, ‘Anglo-American: The Alternative Report’ (August 2007).Proposals5“The Secretary of State may make provision by regulations as to other matters that must bedisclosed in a directors’ report”.6“The summary financial statement must be in such form, and contain such information, asthe Secretary of State may specify by regulations. The regulations may require the statementto include information derived from the directors’ report”.7“(1) The Secretary of State may make provision by regulations about— (a) the accounts andreports that companies are required to prepare; (b) the categories of companies required toprepare accounts and reports of any description; (c) the form and content of the accounts andreports that companies are required to prepare; (2) The regulations may amend this Part byadding, altering or repealing provisions”.8As required by section 473 Companies Act 2006. Note that negative resolution procedureapplies to provisions made regarding summary financial statements under section 428Companies Act 2006.9“Where regulations or orders under this Act are subject to “affirmative resolution procedure”the regulations or order must not be made unless a draft of the statutory instrument containingthem has been laid before Parliament and approved by a resolution of each House ofParliament”.* * *10Discussed in Chapter 1.1.1, Annex 1.1.2.ii, and note 43.11s 417(6)(b) Companies Act 2006 requires companies to use KPIs in relation to environ-
160 | Environmental and social transparency under the Companies Act 2006Notes | 161mental and social matters ‘where appropriate’, to the extent necessary for an understandingof the development, performance or position of the company’s business.12At the time of his appointment, it was reflected in the accounting press that he “shouldprovide some topical experience in today’s political climate” (Dan Martin, ‘Seven heavyweightssign up for the FRRP’ AccountingWEB.co.uk (13 March 2007)).13FRRP website, ‘Panel Members’ (accessed Nov 2009) .14KPMG website, ‘What We Do: Market Sectors: Mining’ (accessed Nov 2009) .15OIAC website, ‘About Us’ (accessed Nov 2009) .16FRRP website, ‘FAQs’ (accessed Nov 2009) .17Financial Reporting Review Panel, ‘Review Findings and Recommendations 2008’ (2008),p. 4.18Ibid., p. 15.19Ibid., p. 16.20“(1) The Secretary of State may make provision by regulations about— (d) the obligations ofcompanies and others as regards— (iii) the laying of accounts and reports before the companyin general meeting, (2) The regulations may amend this Part by adding, altering or repealingprovisions”.21s 473 Companies Act 2006.22“Where regulations or orders under this Act are subject to “affirmative resolution procedure”the regulations or order must not be made unless a draft of the statutory instrumentcontaining them has been laid before Parliament and approved by a resolution of each Houseof Parliament”.23s 437 Companies Act 2006.24s 310 Companies Act 2006.25While there is no statutory provision that shareholders must have the right to attend theAGM, in practice it is highly unlikely that any company would seek to disenfranchise theirshareholders or a class of them in such a way. For further discussion see Annex 6.3.1 andnote 349.26s 324 Companies Act 2006. Proxies also have some rights in relation to resolutions atgeneral meetings. See Annex 6 for further details.27This view is supported by a range of key stakeholders, including ethical institutionalinvestors (Interview Perry Rudd and Matt Crossman, Research Team, Rathbone Greenbank(Telephone, 15 October 2008)).28s 417(2) Companies Act 2006.29s 172 Companies Act 2006.30s 172 Companies Act 2006 requires that directors must have regard to considerations suchas ‘the impact of the company’s operations on the community and the environment’, and‘the desirability of the company maintaining a reputation for high standards of businessconduct’ when deciding how best to ‘promote the success of the company’.31s 333 Companies Act 2006; s 298 Companies Act 2006.32See Annex 6 for further discussion.33D Zetzsche, ‘Virtual Shareholder Meetings and the European Shareholder Rights Directive- Challenges and Opportunities’ CBC-RPS No. 0029 (26 June 2007).34Access could be vetted by the same body established to govern the access of persons whohave been negatively affected by company activities.35See section 430 Companies Act 2006.ChaptersChapter 136However, it is important to note that annual accounts and reports have long been recognizedas also being for the use of current or potential creditors (Company Law Review SteeringGroup, ‘Modern Company Law for a Competitive Economy: The Strategic Framework’(February 1999) p. 115), and that the ‘directors’ report’, prior to the Companies Act 2006,was viewed in the legislative reform process as containing requirements for ‘public interest’reporting (Company Law Review Steering Group, ‘Modern company law for a competitiveeconomy: Developing the Framework’ (March 2000) p. 158).37Directors’ must also prepare a directors’ remuneration report, under s 420 CompaniesAct 2006, to provide transparency as to the setting of directors’ pay. However, this is notdirectly relevant to this review and so will be omitted from discussion.38s 396 Companies Act 2006.39s 415 Companies Act 2006.40s 417(2) Companies Act 2006. Section 172 Companies Act 2006 provides that a director ofa company must act in the way he considers, in good faith, would be most likely to promotethe success of the company for the benefit of its members as a whole, and in doing so haveregard (amongst other matters) to — (a) the likely consequences of any decision in the longterm; (b) the interests of the company’s employees; (c) the need to foster the company’s businessrelationships with suppliers, customers and others; (d) the impact of the company’soperations on the community and the environment; (e) the desirability of the companymaintaining a reputation for high standards of business conduct; and (f) the need to actfairly as between members of the company.
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