HL Deb 30 October 1975 vol 365 cc647-60

[Nos 56 to 58]

Clause 24, page 22, line 23, after the words last inserted insert ("and to the members of the company or companies")

Clause 25, page 24, line 42, at end insert ("and to the members of the company or companies concerned")

The Commons disagreed to these Amendments for the following Reasons:

Because it is unnecessary to provide for the furnishing of information to members of companies.

4.49 p.m.


My Lords, I beg to move that the House doth not insist upon their Amendments Nos. 56 and 57 to which the Commons have disagreed for their Reason numbered 58.

Here, again, is a matter which we dealt with at some length. I gave my reasons at the time. I cannot add to what I said then, but if noble Lords feel there are some points which need to be clarified I shall be glad to try to do so. I beg to move.

Moved, That this House doth not insist on their Amendments Nos. 56 and 57 to which the Commons have disagreed for the Reason numbered 58.—(Lord Beswick.)


I accept entirely what the noble Lord, Lord Beswick, said just now. In accepting his suggestion that Amendments Nos. 17 to 55 should be taken together I realised that I would be able to speak only once. That is why, considering the importance of the subject, I tried to condense all that I had to say into one fairly short speech. I recognise that it is not helpful to the House if we keep asking for leave to speak a second time. In the course of dealing with these Amendments I shall probably be able to give my view on the point that was raised just now by the noble Lord, Lord Douglass of Cleveland.

An important side effect of the Bill, if it is passed in the form in which it came to this House, is that price-sensitive information, in the Stock Exchange sense of that word, might be passed to a small group of persons. Price-sensitive information is share sensitive information; information about a company which, if it became public, would cause the value of the shares to go up sharply, or else to go down. Therefore, the Amendment which your Lordships' House suggested to another place was not political and was not disturbing the purposes of the Bill. It dealt with a technical point which the Government seemed to have overlooked. The Amendment would not in any way restrict or reduce the disclosure of information. I must make that clear because I believe that one or two noble Lords think that it would mean less disclosure. Its effect is slightly to increase the dissemination of information, not to restrict or to reduce it.

So that there is no misunderstanding of the intention of the Amendment, may I briefly remind your Lordships that it would ensure that the market for a company's shares could not be distorted by one party to a transaction on the Stock Exchange possessing information which was not available to another party to that transaction. That is the aim of the listing agreement which companies quoted on the Stock Exchange have to accept.

This Bill introduces compulsory disclosure of information to a small group, and that could include share sensitive information. If the information would have the effect of sharply increasing the value of a company's shares, it ought to be made available at the same time to the Stock Exchange information points. That was the effect of the Amendment. It is not enough to say, as Government spokesmen have, that there is nothing to prevent a company's directors from making available the information. They may not want to do so. They may think that the information ought not to be disseminated any further than it has to be if they have resisted disclosure and are being made to disclose information as a result of the system that is built into this Bill. The company's directors could defend not doing so by invoking an Act of Parliament—this Bill—and saying that it overruled the listing agreement.

Also, it is not enough to say that in future this matter will be dealt with in a Companies Bill. Many of us consider that two or three years are likely to elapse before the Government can have enacted a Bill on companies after its passage through both Houses of Parliament. In the meantime they ask what is to regulate the situation. Only a small number of companies would be affected by the Industry Bill but they are important manufacturing companies. I agree entirely with what was said about that by the noble Lord, Lord Beswick, when he dealt with the last group of Amendments. The Amendment of your Lordships' House would be the appropriate and simple way to solve this problem. It appears to be a problem which the Government have not recognised and I think that they must bear the responsibility if there are incidents in the next two or three years.

May I point out that this Bill does not provide for the disclosure of information for the purpose of negotiations. This is the point that the noble Lord, Lord Douglass of Cleveland, had not realised because he kept using the word "negotiations". If he looks at Clause 22 he will see that it is for purpose of consultations about planning the economy and various matters affecting the sectors of certain manufacturing industries. It is for consultations. It is not for negotiations on conditions and other matters. These are dealt with separately in other legislation.

I hope that the noble Lord, Lord Beswick, will realise that the question of share sensitive information is a side effect of this Bill. One of my noble friends who has personal experience and knowledge of these matters may also wish to speak on this Amendment. The Amendment that your Lordships put forward would have had no effect by disturbing the purposes of the Bill or restricting any information which would be disclosed under it. It inserted a safeguard merely to ensure that the Stock Exchange markets were not upset unintentionally by the effects of the Bill.


My Lords, as my noble friend has said all that I was going to say and a great deal more, I should like to add only a very short general point. My friends on the Stock Exchange are mystified that this Amendment has not been accepted, for in no way would it have upset any of the intentions of the Bill. Year in and year out the service industries produce a very large surplus for the country known as our "invisible earnings", and every help that the Government are able to give to them—they are certainly not lame ducks but very game ducks—should be given. The rejection of this Amendment appears to be unnecessary. One would like to feel that the Government are fully supporting the City in all that it is trying to do.


My Lords, may I apologise for having offended the Rules of the House and say quite briefly to the noble Lord, Lord Campbell of Croy, that negotiation and consultation are so intermingled that it is often difficult to differentiate between them. If you are talking about productivity, at the end of the day both sides have an interest, and negotiation becomes intermingled with consultation.

5.8 p.m.


My Lords, the noble Lord, Lord Campbell of Croy, made a very clear statement of the anxieties which he said had been created by this Bill. I think that both the noble Lord, Lord Torrington, and the noble Lord, Lord Cullen of Ashbourne, would probably agree that what has been said by the noble Lord, Lord Campbell of Croy, represents very much the contents of the Press release which was issued by the Stock Exchange. We considered very carefully that Press release to find out whether there was any substance in the fears which the Stock Exchange had expressed. We came to the conclusion—I hope honestly and in an informed fashion—that there were no grounds for the kind of fears they were expressing. Probably I ought to explain how we came to those conclusions. The Press release and the noble Lord, Lord Campbell of Croy, make two points. The Press release argued that: The Bill introduces a new situation, in that a company may be required by law to divulge to persons not being shareholders information which could be price sensitive". I think that the noble Lord, Lord Campbell of Croy, said much the same thing. In law it is true that that may be the case, but noble Lords opposite are putting an interpretation on the effect of the Bill which is not justified.

For many years, as the Stock Exchange recognise in their Press release, many enlightened companies have disclosed information on a voluntary basis to trade unions on behalf of their work force. That is agreed, is it not? The only effect of this Bill is to make it possible to require what we all hope will be a small, unenlightened minority to do the same. All we are saying is that those companies which have not followed good practices in the past should come up to the standard of the other good companies. No difficulties were experienced then why should they be experienced now? Why is it a new situation in any sense that the noble Lord is suggesting?


My Lords, if the noble Lord will give way I shall be most grateful to him. It is a new situation, because there is compulsion. In the past, the voluntary system might be said to have operated quite well, and if a company's directors decided that certain information should not be passed on then, it would not be passed on. If they decided that it should be passed on, it would have gone to all the shareholders as well. Under the voluntary system, the kind of information to which the noble Lord is referring would not have been passed on, but under the machinery of compulsion they will be forced to pass it on.


My Lords, we are in danger of going back to square one. I have already said that if there is highly sensitive information which could be damaging to the interests of the company—


Not damaging.


What then, my Lords? What are we afraid of? If it is not damaging to the company, what is there to fear?


My Lords, I shall be very glad to answer that. This is information which is good information about the company. One example that comes to mind is where if the information came out the shares would suddenly go up. It is not damaging to the company, but it is damaging to the machinery of transactions on the Stock Exchange, because a small group of people would have the information weeks before it became public.


Let me try to deal with that, my Lords. If it is not damaging, there would seem to be no reason why it should not be given. The noble Lord is trying to construe an increase in the share price as being damaging. The noble Lord is putting it in two parts: First, that it might in some respects be damaging and, secondly, that it is giving an unfair advantage to one group of people. That is the other side of the argument. I am saying that there is absolutely nothing in this Bill which prevents the company from giving the same information to other people in the future as they could have done in the past. It will be their judgment as to whether it is sensitive in that sense. They could decide to disclose information to trade union representatives or to a body of their work force who may not he trade unionists, but if they felt that information gave an unfair advantage to that group of people, then it would be for them to judge whether it ought or ought not to be made generally available.

On the other hand, I should have thought there would be cases—and I know it to have been so in the past—where one could say to a body of responsible trade unionists, "These are our plans. We do not want our competitors to know. We are all in this together. Your interests are the same as ours. We give you this information on a confidential basis". In that case, it is true that an individual might run around the corner, and ask his broker to buy, but that is the kind of situation about which there are already safeguards.


My Lords, if the noble Lord would give way again I should like to ask for clarification, because the case which I was putting was rather different from the one described by the noble Lord. He says that there is nothing to prevent a company's directors from distributing the information more widely than the trade union representatives. The point is that there is nothing in the Bill to compel it, and the company's directors, having reluctantly been made to pass to the representatives the information which is not damaging to the company, but which they think is share-sensitive and ought not to be passed, then decide that they do not want to pass it any further. There is nothing in the Bill to compel them. The Bill compulsorily provides, after going through the machinery, for the disclosure of the information to the trade union representatives, but it does not compel them to make it available more publicly. Therefore, the situation would arise where a small group of people would have information which puts up the shares of the company. It is not information that is damaging to the company. That is what the whole system of the Stock Exchange is there to prevent; a small number of people with share-sensitive information, not damaging to the company—indeed, the opposite. Of course, there is nothing to stop the company's directors from issuing the information further, but there is nothing in the Bill to compel them, and that is why we thought this should be included if there was any compulsion at all.


My Lords, I am in danger of not being able to curtail the interventions of my noble friends behind me, if the noble Lord opposite extends his interruptions.


I am sorry, my Lords.


My Lords, the noble Lord, Lord Cullen, and indeed other noble Lords in this House are greater authorities on some of these matters than am I, but the position is surely this. Information can be given to trade unions; it is not damaging to the company so the company is prepared to give it to the trade union representative. The noble Lord now fears that we are in danger of creating a category of "insiders". If there is no reason why the information given to the selected body should not be given to others, I quite agree that the Bill—when it becomes an Act—will not compel the employer to give the information to the shareholders. But surely it will be in their interests to give to their shareholders information of this kind, unless it be information which could be damaging to them if it went outside a certain circle. On the assumption that this is so, we want to confine it to a body of people within the company, and do they not have to conform to other regulations? Would they not be breaking other restrictions if they used this information as insiders?


My Lords, no doubt they would.


Of course they would, my Lords, and we should then see a situation which would have to be dealt with. The noble Lord is conjuring up a situation which I do not believe would arise at all.


My Lords, I should like to ask the noble Lord why this Amendment cannot be accepted. It would not do any harm at all to the Bill. I have had endless conversations with Stock Exchange authorities about this, and they are all absolutely determined that this is what should happen. I am not a very technical person and I cannot bore the House with endless details of exactly how it would work, but the Council of the Stock Exchange have the job of maintaining an orderly market. This is their view, and I cannot see what harm it would do to the Bill if it were accepted.


My Lords, the noble Lord asked me a question and I would ask him another, which I hope he will not answer owing to the Rules of the House. He asked: what damage would it do? I ask: what good would it do? I cannot see, with the safeguards now in the Bill, that it could do anything to prevent the sort of practice which I can understand the noble Lord is fearful about. It would not do anything more to prevent that practice than is now the case under the law of the land.


My Lords, may I intervene, with great trepidation, because I am not particularly interested in stocks and shares but have listened to the arguments and, if I may say so, I do not think the noble Lord, Lord Beswick, really answered the point of view that was put forward by experienced people. He was nice enough, and modest enough, to say that those who spoke on this matter knew far more about it than he did. If he feels that way, then I cannot see why he should not say that the Amendment can be accepted, because it is coming from experienced people.

All my political life I have tried to support experience. With great respect to the noble Lord, he first of all went right off the point of view put forward by the noble Lord, Lord Campbell of Croy, and went back to arguing about a general reason for the Bill, a matter which was not being argued at that time. What was being argued by the noble Lord, Lord Campbell of Croy, concerned a specific Amendment. After all, we on this side of the House know perfectly well that opposite us there are Members who know far more about certain matters than noble Lords on this side. I hope that every now and again we shall accept the experience of those on the Cross-Benches and from experienced people who sit on the Government side. The noble Lord Lord Campbell, has a lot of experience —which the noble Lord, Lord Beswick, modestly said he himself had not got. I doubt very much whether the Members in another place who spoke have as much knowledge as those in this Chamber who have spoken.

I was most interested when one noble Lord referred to invisible exports. Coming from my part of the world and knowing what the shipping community contributes to the country by way of invisible exports, and naturally, being interested, I got very excited about it. I have not got any experience, but when I listen to both sides, I say to myself, "If I had to choose, I would choose to adopt the views of the experienced people".

My Lords, so far as I understood it, part of the objection to this particular clause was that, sooner or later, there is going to be a new Companies Act. I think the noble Lord rather indicated that this particular issue would come into the new Companies Act. If that is what the noble Lord said, then it seems all the more extraordinary that we should leave a gap. It would not hurt anybody if he, or another place, accepted this Amendment, to cover the gap. If I may say so with respect, the noble Lord seemed to make a perfect argument for accepting what my noble friends have put forward.

My Lords, I have not been long in this House, so I know I can easily find myself out of order. But cannot the noble Lord go to the other place, tell them he has listened to some brilliant people who have great knowledge, much more knowledge, probably, than anyone in the other place, and tell them—since he has said this point could be included in a new Companies Act—that they have made such a good case, that he would like the other place to accept it. Is that suggestion completely out of order?


My Lords, with the permission of the House, I will have another go! It would seem I have given too much information and have confused the issue. So let me go over it again very briefly. In the course of the consultations with trade unions a good deal of information will be given. My noble friend Lord Douglass of Cleveland knows the volume of information that might well be given, and the consultation about work progress. If this Amendment were agreed to, all that information, every time, without exception, would have to be sent to every one of the shareholders of the company.


My Lords, that is not so.


My Lords, of course it would go to the members of the company concerned. It will not be relevant or of any other interest to all of them, and all it will do is to help solve the problem of the gap in the accounts of the Post Office, which we were talking about earlier this afternoon. If the information would be of interest and is really relevant to the members of a company, then the company will be obliged to give it to the members of the company by its listing agreement with the Stock Exchange, about which the noble Lord, Lord Cullen, knows more than I.

5.15 p.m.


My Lords, I hope I shall he in order if I ask two questions. First, is the purpose of this rule that we are now going to enable the two sides of industry—the employers and the employees—to get a better working arrangement and not just to operate on the old style; for instance, if the trade union does not like what the management is doing, it goes on strike. Instead of that, this will enable the management to understand the workers and the workers to understand the management. They will be able to come to conclusions for the good of the company, and therefore for the good of all. Is that the purpose of it?


No, my Lords.


My Lords, perhaps the noble Baroness will be good enough to be quiet while I ask my second queston. I have listened to the attractive arguments so far as the Stock Exchange is concerned, and I accept some of the validity within them. However, if I accept the validity within that situation, where do we stop? If the bank has loaned a company a considerable amount of money, surely it is of interest to the Stock Exchange, which would have a right to know. Suppose the company is a small company supplying components to a large company; for instance British Leyland. Would British Leyland have a right to this information, because they would be equally affected as would the Stock Exchange? There are thousands of small components companies. Would not all those thousands of small companies have the same right as the Stock Exchange to information? If we have a situation like this, can we not see that we are going to throw the information around, left, right and centre, willy-nilly? If I may add a third brief question—does not company law and common law deal adequately with information divulged legally?


My Lords, I am afraid there is some misunderstanding here. We are talking about information likely to be opposed; in other words, information which the companies are reluctant to give to the representatives of the trade unions. That may be because there are special reasons, and the Government may think there are no special reasons. What my noble friends have been "going on about", if that is the right phrase, is to make certain that where that is price sensitive information—and in this kind of case it will often be price sensitve nformation—then it should be passed on to the members of the company.

My Lords, it depends what you mean by "necessary" and "unnecessary". The Commons stated their disagreement in terms: Because it is unnecessary to provide for the furnishing of information to members of companies". For the purposes that the noble Lords opposite have been mentioning, that would be unnecessary. It is unnecessary for the good of the company, and unnecessary for the good of the representatives of the trades unions. It is unnecessary for the Government. It does not concern the Government, either, but it is necessary for the shareholders. It is necessary that they should have this information, not in the sense that in every case it will be essential for them to have it, but that there is a risk that if they do not have it there will be trouble.

The question we are really asking is whether it is necessary, or whether it is desirable, to cover that risk in the Bill. It is not covered. It should be. That is why this Amendment has been put down. I venture to think that unless the Government cover this in future company legislation, there will be trouble. Our view has been that it should be covered now to avoid trouble in the meantime.


My Lords, I am reluctant to enter into this debate, but I was involved in the same argument in relation to the Scottish Development Agency Bill. The reason the other place have given for not accepting this Amendment in my view is completely sensible. If I may repeat the reason it is, Because it is unnecessary to provide for the furnishing of information to members of companies". We have to treat that in relation to the Bill, and when it is said that it is unnecessary to give information we must read that as meaning that it is unnecessary to provide for this in legislation.

What are the duties of a director of a company? One of them is to look after the interests of the shareholders, and in the giving of certain information to members of the trade unions—which they will be compelled to do by law—it is obviously part of their duty, in this field of price-sensitive information, to which the noble Lord, Lord Drumalbyn, has just referred, to make that information available to their shareholders. There is nothing in this Bill which will prevent them from doing so, but it is their ordinary practice which should require them to do so. It may be that there would be directors or companies who would not do this, and the suggestion in the Amendment, therefore, is that we should legislate and compel them to give information that they would otherwise withhold.

There have been references, particularly by the noble Baroness, to the expert opinion on Stock Exchange matters. I would go the other way and say that there is probably no one in this House who is more ignorant of Stock Exchange matters than I am. But during these discussions I have heard about certain things, and one is the Code of Practice of the Stock Exchange, and the way in which they operate in certain directions. If the Stock Exchange authorities are so determined that this is the right thing to do, could they not deal with this in the same way as they have required good business practice to be operated by companies in other directions? They have not required an Act of Parliament to enable them to do that, and it is carried out. They can bring the force of moral compulsion to bear on companies to give this information, if this is what is wanted. But it is certainly quite correct, as is said in the Commons Reason on this Amendment, that it is unnecessary to do this in an Act of Parliament.

On Question, Motion agreed to.

5.22 p.m.