1. Corporations, whether public or privately owned, are the chief working units of a modern economy. Their success is fundamental not only to productivity, exports, and industrial relations, but to many national policies, such as incomes policy, and to the whole political climate. 2. Companies (particularly the larger ones) and nationalised industries are faced today with converging, similar, and fundamental problems of aims and organisation: (a) Aims. Both accept, with some difference of emphasis, that they owe a duty to a wide variety of interests, including customers, employees, and the local and national community as well as their public or private owners. Both use profit as a working criterion. But the way in which they are to strike a balance between these interests is not set out satisfactorily in company law or the nationalisation acts, and needs further definition in practice. (b) Organisation. In both companies and nationalised industries it is accepted that executive directors must be appointed by and accountable to the representatives of owners (public or private). This relationship has become more difficult as executives have become increasingly professional and independent. It may become still further complicated, for proposals exist for participation in the direct control of executives by the representatives of employees and possibly, in some private industries as well as in public corporations, of the State. The ideal relation between executives and representatives of the interests to which they are accountable has not yet been laid down in either law or practice. 3. Since the problems to be solved are fundamental-not merely matters of detailed amendment-and are common to public and private corporations, the right solution is not to amend the Companies and Nationalisation Acts separately but to follow the proposal by Professor L. C. B. Gower, in his Modern Company Law,1 that the two be re-cast into a single Corporations Act laying down a reformed organisation and set of aims for both. The unified Act might also, as Professor Gower indicates, extend to mutual societies such as building societies, trustee savings banks, and perhaps co-operatives. 1 Gower, L. C. B., Modern Company Law, 2nd ed., Stevens, 1957. 4. In drafting a unified Corporations Bill there will be a great deal to learn not only from British and American but from German experience, including both existing German law (especially on company aims, on Supervisory Boards, and on employees' codetermination) and current discussion in Germany on proposals for a unified "enterprise law". 5. These proposals do not supersede those of the Jenkins Committee on Company Law for the detailed repair and improvement of the existing Companies Acts. The Jenkins proposals are ready for early action, and entail no basic revision of either company law or the nationalisation acts. The more fundamental proposals set out here need further preparation, including the preparation of public and expert opinion by widespread discussion. If undertaken thoroughly, this will take some years to complete; the Government should not delay in setting the process of preparation in train. COMPANIES BEYOND JENKINS Michael P. Fogarty INTRODUCTION The terms of reference of the Jenkins Committee on Company Law required it: .... "To review and report upon the provisions and working of the Companies Act, 1948, the Prevention of Fraud (Investments) Act, 1958 . . . . and the Registration of Business Names Act, 1916, as amended; to consider in the light of modern conditions and practices, including the practice of takeover bids, what should be the duties of directors and the rights of shareholders; and generally to recommend what changes in the law are desirable". These are wide terms, but in practice the Committee interpreted them more narrowly. Its report1 was described by a number of reviewers as "emphatically a technicians' report. . . . a meticulous job well but undramatically done", presenting recommendations most of which "are of interest chiefly to lawyers and accountants"3, and containing no bombshells for the City: "the comment of 'milk and water' was fairly widespread”4. "We were essentially a group of technicians, and not people who regarded ourselves as competent to re-think the broad aspects of where the modern company fits into the whole social context. Perhaps we ought to have been, but we were not. Had that been what the Government wanted they would have appointed an entirely different committee. We therefore assumed that our role was to make recommendations for making the Companies Act 1 Company Law Committee: Report (Chairman: Rt. Hon. Lord Jenkins), Cmnd. 1749, HMSO, 1962. 'The Economist, 23rd June, 1962. * Financial Times, 22nd June, 1962. |