HC Deb 19 July 1967 vol 750 cc2270-8

Amendments made: No. 160, in page 8, line 20, after 'subsidiaries)', insert 'and'.

No. 20, in line 23, leave out from 'tax' to 'and' in line 24.

No. 21, in line 26, leave out from 'cash' to end of line 28.—[Mr. Jay.]

Mr. Neave

I beg to move Amendment No. 23, in page 9, line 18, at the end to insert: (6) For the purposes of this section 'in the company's employment' shall be deemed, in the case of group accounts, to include 'in the employment of any subsidiary or subsidiaries.' This is a very important Amendment, and I should be glad if the President of the Board of Trade would listen to me. The reason for moving it is the utterly unclear answer which the right hon. Gentleman gave to my hon. Friend when the point was raised on 16th March, in Committee. The Clause relates to the need to give particulars of all employees earning over £10,000 a year. It is necessary that shareholders of a group of companies with subsidiaries should get the information as required under the Bill about the higher-paid executives employed by their company. It is necessary for the purpose of clarification that the words "in the company's employment" should clearly indicate that it means "in the employment of any subsidiary or subsidiaries".

By what is the person employed in the case of subsidiaries? If a person earns £12,000 a year and is employed partly by the parent company and partly by the subsidiary, his total remuneration brings him within the scope of the Clause, but as my hon. Friend the Member for Scarborough and Whitby (Mr. Michael Shaw) pointed out in Committee, if the parent company is a holding company and the employee in question is employed only by the subsidiary it is not clear whether he comes within the Clause or not. Apparently he does not. He might also be employed by several subsidiaries at different amounts aggregating £10,000 a year and, as we understand it, those sums would not be aggregated.

We are trying to help the Government make sense of the Bill, and I hope that in this case I am performing a constructive function in moving the Amendment.

When asked about this by my hon. Friend the right hon. Gentleman said that it was desirable that shareholders should know these things about subsidiaries and should be able to look at the reports. How are they to be able to look at the reports on a big group of companies with a number of subsidiaries? It was stated that they might have to look at the subsidiaries of the Shell group of companies, of which there are 485.

This demonstrates that there is a gap in the Bill, and there is considerable doubt whether it would be logical to make the disclosure as provided in the Clause. It depends whether the information we are talking about appears in the group accounts. I should like to know whether it does. As my hon. Friend pointed out, a person could be employed only by the subsidiaries of a holding company and could earn £3,500 in each subsidiary, which would bring him over the limit. I suppose that it would be possible for him to be employed by 10 subsidiaries at £1,000 a year each, in which case the whole thing would be quite illogical.

If we are to have the disclosure of information concerning persons employed at over £10,000 by a holding company it must be logical to include all persons employed by subsidiaries.

10.15 p.m.

Mr. Burden

I support my hon. Friend the Member for Abingdon (Mr. Neave). In many instances, accounts of the parent company do not go into great detail about the emoluments of the directors of subsidiaries. If it is desirable for the public to know—[Interruption]—

Mr. Speaker

Order. It is difficult for an hon. Gentleman to address the House against a background of private debate.

Mr. Burden

I was wondering what was going on, Mr. Speaker. The mutterings surprised me.

Proper disclosure is essential, but many particularised accounts of subsidiaries are not shown in those of group companies, particularly the salaries of directors. A director of three or four subsidiaries could be drawing a total of £10,000 a year from them, although he need not be a director of the parent company, and his salary would therefore not have to be disclosed.

Suppose that a company acquired another, which became a subsidiary, and the managing director was under a contract which had to be honoured by the group which acquired the company. The contract might be for a salary of £10,000 a year for five years. As soon as the company was acquired by another, the salary of £10,000 would not be disclosed, but if it remained independent, it would be. The right hon. Gentleman will agree that this is an anomaly which should be put right and I hope that he will therefore accept the Amendment.

Mr. Darling

When we discussed this matter in Committee the hon. Member for Scarborough and Whitby (Mr. Michael Shaw) mentioned a loophole which he said should be blocked in the interests of proper disclosure. I intervene now because I want to quote the hon. Member for Ormskirk (Sir D. Glover) before he speaks. A little while ago, he said that company law should not be absolutely perfect but should be reasonable. He said that 95 per cent. perfection would be acceptable if it were reasonable and practical, and this is what we are doing in this; case. There is an anomaly here, which we accept, but to do what is suggested would mean another 12 Amendments to the Bill. Frankly, we do not think that it is worth it.

Mr. Burden

Before the right hon. Gentleman sits down. We have already been through about 12 Amendments to bring a previous Clause into perspective. If it was possible there, why not in this case?

Mr. Corfield

The issue is not merely that these are anomalies. If we tried to achieve 100 per cent. perfection with no loopholes, this legislation would be so complicated that no one would understand it. I doubt whether they will anyway, but we do our best. This type of anomaly is similar to that which arises from the Government's refusal to face the problem of defining a family company. The ceilings of turnover and directors' emoluments are direct incentives to anybody who does not want to disclose to set up bogus parallel companies.

This is something which we should discourage. Our legislation should be so framed that this is not an advantage. Instead, for the sake of saving 12 Amendments—and they would not have been drafted to a very high standard judging by the rest of the Bill—we go on with an anomaly which encourages what we should be discouraging.

Mr. Michael Shaw

I regret that in Committee, speaking almost off the cuff, I gave an interpretation, which, on reflection, I realise was wrong. I gave the impression that if a subsidiary company employed somebody at over £10,000 a year, when it came to grouping the accounts all the £10,000 people in all the subsidiaries would have to be grouped in the group accounts. That was wrong, because all that has to be grouped in the accounts is the requirements of Schedule 8 to the principal Act. [Interruption.]

Mr. Speaker

Order. We cannot have private debates.

Mr. Shaw

I am sorry that the Secretary of State for Scotland was not present earlier, because we had an interesting debate on a matter of Scottish law when we could have done with his advice.

If an employee is not employed by the parent company and is employed only by subsidiaries, then, no matter what his total remuneration may be, it will not be disclosed in the holding company's accounts.

Mr. Stainton

It will be disclosed in the subsidiary's accounts.

Mr. Shaw


Mr. Stainton

That is the point.

Mr. Shaw

It is not the point, with respect.

If we are to have disclosure, it should be meaningful disclosure. This is not a trivial matter. In Committee, I called this a loophole. If it is left, the information provided by various companies could be very much less meaningful than it should be.

Mr. Burden

Would it help if the Minister of State moved an Amendment to make it incumbent on companies to produce in the consolidated account the emoluments of directors in subsidiaries whose income from those companies went beyond a certain point?

Mr. Shaw

The only way to do it is the way which we have suggested.

The whole purpose of group accounts is to treat all the companies contained in the group as though they were one company. All the information should be amalgamated so that, whatever curious set-ups there may be in the group, at the end of the day there is presented to the shareholders a consolidated picture. If the job is done properly, it does not matter whether there are 50 subsidiary companies, one subsidiary company or no subsidiary companies, the disclosure should amount to the same in the end. As the Bill is drafted, this information will not be given. If it is to have any meaning, this alteration should be made.

We have the same problem over the question of directors. Some hon. Members argued that it might be possible to show subsidiary directors in the figures that must be disclosed. That is obviously wrong because they are, from the point of view of the group, just executives of the group. Only the holding, company directors should be shown as directors because, from the point of view of the group, they are in the management position of the group as a whole. In the same way, if we are dealing with group accounts, we should show any information as group information and not as a hotch-potch of partial information that could be misleading, in exactly the way as the Clause, as drafted, is misleading.

Sir D. Glover

I understood the Minister to cite me in support of his argument. I cannot accept that. Under this provision it would seem in order for me so to organise my business activities into a group of companies that I could ask somebody else to be the chairman of the main board while I could

become a director of all the subsidiary companies, and my hefty remuneration need never appear in the balance sheet.

This state of affairs cannot make sense. I would be just a shareholder, but also the controlling activist of the group. Because I have so organised my affairs, having asked someone else to be the chairman of the company, my name does not appear on the board of the main company and I just draw my fat salary from the subsidiaries. This being so, the right hon. Gentleman cannot cite me in support of his case.

Mr. Frederic Harris

Does my hon. Friend realise that he could be given the sack by the board of the parent company?

Mr. Speaker

Order. The hon. Gentleman must resist any further attempt to corrupt his hon. Friend.

Sir D. Glover

Like Robespierre, I am incorruptible.

Mr. Darling

The hon. Member for Ormskirk (Sir D. Glover) is mistaken because if he employed himself in a number of subsidiary companies and if his salary was more than £10,000 a year, the relevant facts would have to be disclosed.

Sir D. Glover

I could still draw £9,000 a year. My salary would depend on the size of the organisation. In any event, I have shown that one can organise one's affairs without necessarily being the chairman of the main board.

Question put, That those words be there inserted in the Bill:—

The House divided: Ayes 100. Noes 173.

Division No. 482.] AYES [10.30 p.m.
Alison, Michael (Barkston Ash) Crosthwaite-Eyre, Sir Oliver Hall-Davis, A. G. F.
Astor, John Currie, G. B. H. Harris, Frederic (Croydon, N.W.)
Atkins, Humphrey (M't'n & M'd'n) Dalkeith, Earl of Harrison, Col. Sir Harwood (Eye)
Baker, W. H. K. Dance, James Hawkins, Paul
Bennett, Dr. Reginald (Gos. & Fhm) Davidson , James (Aberdeenshire, W.) Hill, J. E. B.
Bessell, Peter Dean, Paid (Somerset, N.) Holland, Philip
Brinton, Sir Tatton Deedes, Rt. Hn. W. F. (Ashford) Hunt, John
Brown, Sir Edward (Bath) Dodds-Parker, Douglas Irvine, Bryant Godman (Rye)
Bruce-Gardyne, J. Emery, Peter Kaberry, Sir Donald
Bryan, Paul Errington, Sir Eric King, Evelyn (Dorset, S.)
Buchanan-Smith, Alick(Angus,N&M) Fortescue, Tim Kirk, Peter
Buck, Antony (Colchester) Foster, Sir John Kitson, Timothy
Bullus, Sir Eric Gibson-Watt, David Knight, Mrs. Jill
Burden, F. A. Gilmour, Sir John (Fife, E.) Langford-Holt, Sir John
Cooke, Robert Glover, Sir Douglas Legge-Bourke, Sir Harry
Cooper-Key, Sir Neill Gower, Raymond Lewis, Kenneth (Rutland)
Cordle, John Grant-Ferris, R. Maclean, Sir Fitzroy
Corfield, F. V. Greeham Cooke, R. Maginnis, John E.
Costain, A. P. Griffiths, Eldon (Bury St. Edmunds) Maxwell-Hyslop, R. J.
Maydon, Lt.-Cmdr. S. L. C. Pym, Francis van Straubenzee, W. R.
Mills, Peter (Torrington) Ramsden, Rt. Hn. James Walker, Peter (Worcester)
Montgomery, Fergus Renton, Rt. Hn. Sir David Ward, Dame Irene
More, Jasper Ridley, Hn. Nicholas Weatherill, Bernard
Munro-Lucas-Tooth, Sir Hugh Rodgers, Sir John (Sevenoaks) Webster, David
Nabarro, Sir Gerald Rossi, Hugh (Hornsey) Whitelaw, Rt. Hn. William
Neave, Airey Royle, Anthony Wills, Sir Gerald (Bridgwater)
Nicholls, Sir Harmar Russell, Sir Ronald Wilson, Geoffrey (Truro)
Noble, Rt. Hn. Michael Shaw, Michael (Sc'b'gh & Whitby) Worsley, Marcus
Nott, John Smith, John Wright, Esmond
Onslow, Cranley Stainton, Keith Younger, Hn. George
Osborne, Sir Cyril (Louth) Steel, David (Roxburgh)
Page, Graham (Crosby) Taylor, Sir Charles (Eastbourne) TELLERS FOR THE AYES:
Page, John (Harrow, W.) Taylor, Frank (Moss Side) Mr. Anthony Grant and
Peel, John Temple, John M. Mr. R. W. Elliott.
Powell, Rt. Hn. J. Enoch Turton, Rt. Hn. R. H.
Abse, Leo Galpern, Sir Myer Newens, Stan
Allaun, Frank (Salford, E.) Garrett, W. E. Noel-Baker, Rt. Hn. Philip(Derby, S.)
Alldritt, Walter Gray, Dr. Hugh (Yarmouth) Norwood, Christopher
Allen, Scholefield Gregory, Arnold Ogden, Eric
Anderson, Donald Grey, Charles (Durham) Orbach, Maurice
Archer, Peter Griffiths, Will (Exchange) Orme, Stanley
Armstrong, Ernest Hamling, William Oswald, Thomas
Atkins, Ronald (Preston, N.) Harper, Joseph Owen, Dr. David (Plymouth, S'tn)
Atkinson, Norman (Tottenham) Harrison, Walter (Wakefield) Owen, Will (Morpeth)
Barnett, Joel Haseldine, Norman Padley, Walter
Baxter, William Heffer, Eric S. Page, Derek (King's Lynn)
Beaney, Alan Herbison, Rt. Hn. Margaret Park, Trevor
Bence, Cyril Hooley, Frank Parkyn, Brian (Bedford)
Bennett, James (G'gow, Bridgeton) Horner, John Pearson, Arthur (Pontypridd)
Blackburn, F. Howarth, Harry (Wellingborough) Peart, Rt. Hn. Fred
Boardman, H. Howie, W. Pentland, Norman
Booth, Albert Hoy, James Perry, Ernest G. (Battersea, S.)
Boyden, James Huckfield, L. Perry, George H. (Nottingham, S.)
Braddock. Mrs. E. M. Hughes, Emrys (Ayrshire, S.) Price, Christopher (Perry Barr)
Bradley, Tom Hughes, Roy (Newport) Price, Thomas (Westhoughton)
Brooks, Edwin Hynd, John Price, William (Rugby)
Broughton, Dr A. D. D. Irvine, A. J. (Edge Hill) Probert, Arthur
Brown, R. W. (Shoreditch & F'bury) Jackson, Peter M. (High Peak) Robertson, John (Paisley)
Buchan, Norman Jay, Rt. Hn. Douglas Rose, Paul
Buchanan, Richard (G'gow, Sp'burn) Jones, Dan (Burnley) Ross, Rt. Hn. William
Cant, R, B. Jones, T. Alec (Rhondda, West) Rowlands, E. (Cardiff, N.)
Carmichael, Neil Kelley, Richard Sheldon, Robert
Coleman, Donald Kerr, Mrs. Anne (R'ter & Chatham) Short, Rt. Hn. Edward(N'c'tle-u-Tyne)
Conlan, Bernard Short, Mrs. Renée(W'hampton,N.E.)
Corbet, Mrs. Freda Kerr, Dr. David (W'worth, Central) Silkin, Rt. Hn. John (Deptford)
Craddock, George (Bradford, S.) Kerr, Russell (Fettham) Silverman, Julius (Aston)
Crosland, Rt. Hn. Anthony Lawson, George Slater, Joseph
Cullen, Mrs. Alice Lestor, Miss Joan Small, William
Darling, Rt. Hn. George Lever, L. M. (Ardwick) Spriggs, Leslie
Davidson, Arthur (Accrington) Lewis, Ron (Carlisle) Steele, Thomas (Dunbartonshire, W.)
Davies, Dr. Ernest (Stretford) Lomas, Kenneth Swingler, Stephen
Davies, Harold (Leek) Loughlin, Charles Thomas, George (Cardiff, W.)
Davies, S. O. (Merthyr) Lyon, Alexander W. (York) Tinn, James
Dell, Edmund McBride, Neil Tomney, Frank
Dempsey, James McCann, John Urwin, T. W.
Doig, Peter MacColl, James Wainwright, Edwin (Dearne Valley)
Dunnett, Jack Mackie, John Walden, Brian (All Saints)
Dunwoody, Dr, John (F'th & C'b'e) Mackintosh, John P. Walker, Harold (Doncaster)
Edwards, Rt. Hn. Ness (Caerphilly) MacMillan, Malcolm (Western Isles) Wallace, George
Edwards, Robert (Bilston) McMillan, Tom (Glasgow, C.) Watkins, Tudor (Brecon A Radnor)
Edwards, William (Merioneth) McNamara, J. Kevin Wellbeloved, James
Ellis, John MacPherson, Malcolm White, Mrs. Elrene
English, Michael Mahon, Peter (Preston, S.) Whittock, William
Ennals, David Mallalleu,J.P.W.(Huddersfield,E.) Williams, Alan (Swansea, W.)
Manuel, Archie
Ensor, David Mapp, Charles Williams, Clifford (Abertillery)
Evans, Albert (Islington, S.W.) Marquand, David Willis, George (Edinburgh, E.)
Maxwell, Robert
Faulds, Andrew Mendelson, J. J. Winterbottom, R. E.
Fernyhough, E. Millan, Bruce Woodburn, Rt. Hn. A.
Finch, Harold Miller, Dr. M. S. Woof, Robert
Fletcher, Raymond (Ilkeston) Mitchell, R. C. (S'th'pton, Test)
Foley, Maurice Molloy, William TELLERS FOR THE NOES:
Ford, Ben Morris, Alfred (Wythenshawe) Mt Charles R. Morris and
Forrester, John Moyle, Roland Mr. Ioan L. Evans.
Fraser, John (Norwood) Murray, Albert