Do boards of directors of UK manufacturing companies always act in the best interests of UK manufacturing?

In England, company directors owe their duty to shareholders subject to laws protecting employees, consumers and the environment. Directors Duties. The 2006 Companies Act says they should have regard to the interests of other stakeholders, but in practice it is the body of shareholders who reign supreme. This is in contrast with company law in other countries which recognises as stakeholders other interested groups. I recall from my studies for my Bar exams in the seventies that there was a lively debate to change English company laws along similar lines. Nothing came of it. More recently the debate had reopened as is clear from a recent publication A BRIDGE TO BETTER BUSINESS: THE POSITIVE CASE FOR UPDATING DIRECTORS’ DUTIES from City solicitors Slaughter and May. They pick up on the campaign being pursued by the Better Business Act. In presenting the case for change Slaughter and May point to the shareholder gains from energy companies as a result of the hike in gas prices, but also the shortcoming of the water companies in terms of the environment. The more general point is surely about companies serving not only those who provide finance (shareholders), but employees, suppliers and customers and their wider communities.

In my research into the question Whatever Happened to British Manufacturing, I have seen time and time again boards of directors selling the company for which they are responsible to the highest bidder and this has had the effect of more and more British manufacturers having foreign parents. Lucas, which fell in the arms of Varity, only to disappear, is but one example; another more recent is Aerospace manufacturer, Meggitt. Yet, I am certain that Jaguar shareholders would acclaim their board for the price achieved in the sale to Ford, and hindsight may acclaim the success of the company under Tata ownership. Hindsight too may see the current success of both Bentley and Rolls-Royce as derived in some good part from their new respective parents.

For me the philosophical point remains, to whom should directors owe their duty? Would a duty to perhaps competing groups of stakeholders be unwieldy? The cynic might argue that boardrooms seem to struggle with their single current duty. As Slaughter and May make clear, the duty must be clearly defined for the protection both of directors and the stakeholders they serve.

I was prompted to re-explore this line of thinking by a post from Siemens Mobility celebrating their investment in their Goole railway train factory. This will be British manufacturing in terms of location and employees, but the boardroom is ultimately in Germany. Does this matter? Melrose took over GKN to release shareholder value. It has done this by demerging GKN Automotive as Dowlais Group plc. Was this in the interests of all stakeholders? Was the sale of Cadbury? The list goes on.

Better Business Act are suggesting that companies adopt a statement of purpose against which their actions can be measured. Is this the answer?