Counting Change

Panthera recently became part of the group ‘Counting Change’. Formed by accountants, the group focuses on discussing and taking action with regards to the real changes that businesses can make towards achieving a better planet and acting more sustainably.

Recently the discussion focused on the law upon which company decisions are made and how the Better Business Act is looking to challenge this. To find out more, read on ...

How do company directors make decisions?

When most of us form a limited company, we use what’s known as the model “articles of association”. Essentially this document is the rule book that guides how the directors of the company should act. It’s set out in company law, under the Companies Act.

And the default setting has been that directors must act in the best interests of the shareholders.

So what?

In short, companies using the model articles are required to maximise shareholder wealth, to make profits for the company owners.

And it’s easy to imagine a situation where there is conflict between what’s good for the owners, compared to what’s good for other stakeholders.

For example, paying staff less than minimum wage (or outsourcing work to other parts of the world where there is no minimum wage) means lower costs, and therefore higher profits.

But that decision to send jobs overseas means there are fewer jobs for the local community. And if there are less stringent health and safety rules governing employee welfare, the newly-created overseas jobs might be damaging to those communities too.

And this is just part of one example around jobs.

It’s why we don’t outsource any work overseas. All our jobs are for people in the UK so that we can benefit local communities.

Every decision?

Now, imagine all the decisions a business makes, where stakeholders could be impacted; recruitment and employment, environmental impact, social good, product quality, service delivery…and so on.

If the primary aim is to “maximise shareholder wealth”, that could lead to company directors choosing to sacrifice quality, to pollute the environment, to outsource jobs, to cut corners, all in order to save money, to make more profit, and to deliver more returns to shareholders.

(Why not take a little look at water companies in the UK just now - higher bills than ever, more pollution in rivers, poorly maintained infrastructure, and MORE dividends to shareholders).

So, what can we do about it?

Great question! To inspire you, here’s what we did;

First, we changed our articles of association at Companies House, to include a legal requirement that all business decisions must be assessed for the impact on ALL stakeholders, including people and planet, as well as the shareholders.

Second, we’re now supporting the Better Business Act, which asks the government to change section 172 of the Companies Act, to change the default setting from shareholder benefit to stakeholder impact assessment. A small change in the law, which will make a big change in the world, helping to create a fairer, greener future for everyone.

And third, we’re talking to all our clients, and anyone who will listen, about this change, the reasons behind it, and we are strongly recommending they do the same.

Fancy a chat? Why not book a call with Panthera Accounting and see what you could do.