In October 2024, Liberal Democrat MP, Martin Wrigley, presented to the UK Parliament a Private Member’s Bill to amend section 172 of the Companies Act 2006 to “require company directors to balance their duty to promote the success of the company with duties in respect of the environment and the company’s employees”.
The Company Directors (Duties) Bill was published ahead of its second reading in the House of Commons on 4 July 2025. However, the second reading of the Bill was adjourned on 4 July 2025 after a brief discussion and is now scheduled to take place on 12 September 2025. This is perhaps unsurprising, given the limited parliamentary time usually given to Private Members Bills. Moreover, as the Bill was put forward by an MP of a party currently sitting in opposition, its progression into legislation would likely require cross-party support.
The wording of the Bill
The proposed amendment to the Companies Act would introduce a new subsection 172(1) as follows:
“(1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of —
(a) its members as a whole,
(b) the environment, and
(c) the company’s employees.”
In this regard, the environment would be defined as both the natural and social environments.
The Bill would also largely restate 172(1) (now termed section 172(1A)) as it currently stands in the Companies Act, albeit with the removal of the wording (“amongst other matters”) in the first sentence. In addition, subsection 172(1B) would also be introduced, as illustrated below:
“(1A) In carrying out the duty under subsection (1), a director of a company must have regard to—
(a) the likely consequences of any decision in the long term,
(b) the interests of the company’s employees,
(c) the need to foster the company’s business relationships with suppliers, customers and others,
(d) the impact of the company’s operations on the community and the environment,
(e) the desirability of the company maintaining a reputation for high standards of business conduct, and
(f) the need to act fairly as between members of the company.
(1B) In carrying out the duty under subsection (1), a director of a company must seek to reduce (so far as is reasonably practicable) harms the company creates to the environment.”
Finally, the Bill would require non-medium-sized companies to prepare a statement that includes a description of the steps that the directors have taken to comply with their duties under subsections 172(1) to 172(1B).
The wider implications of the Bill
During the brief discussion of the Bill’s Second Reading in the House of Commons, before it was adjourned until September, Mr Wrigley set out his reasons for its introduction:
“Under current UK law, company directors have one overriding duty: to maximise shareholder interest. This narrow, outdated legal framework of shareholder primacy has created a culture in which short-term financial performance overrides long-term sustainability. The Bill will amend section 172 of the Companies Act to change the duty of company directors by requiring them to balance the needs of shareholders with those of employees and the environment, thereby building better and more sustainable businesses.”
As previously mentioned, it is unlikely that the Private Member’s Bill will be enacted into law without cross-party support. In response to Mr Wrigley’s comments, The Parliamentary Under-Secretary of State for Business and Trade, Justin Madders, stated that the Bill would not be one that the UK Government could support, although he intends to engage with Mr Wrigley on its provisions in the future. Mr Madders also highlighted that section 172 of the Companies Act already places a legal duty on directors to take into account the interests of employees, the wider community and the environment when making decisions, as well as the impact of any decision on a company’s long-term success.
However, the Bill is not without its supporters outside parliament. B Lab, a non-profit organisation that certifies companies as ‘B Corporations’ or ‘B Corps’ (i.e., businesses that meet certain high thresholds of social and environmental performance, transparency and accountability), highlighted the Bill at its 2025 Better Business Day in June. In addition, CEO of B Lab UK, Chris Turner, called the Bill a “major step forward”, and called on UK corporate governance to reflect the realities of doing business in the 21st century.
The ongoing shareholder-stakeholder debate
In many ways, the Private Member’s Bill can be seen as a by-product of the long-running debate between the advocates of ‘shareholder primacy’ and ‘stakeholder theory’, which continues not only in the UK but also internationally. In brief, this debate separates those who believe in the primacy of shareholders as the stakeholder above all others and see companies as mechanisms by which shareholder value is maximised, from those who believe shareholder interests should be placed alongside those of other stakeholders and that companies have other obligations besides the maximising of shareholder value.
This dichotomisation of the debate is of course somewhat illusory as it overlooks the presence of other, often more nuanced, schools of thought. For instance, another school contends that it is in the long-term interests of shareholder primacy that considerations of other stakeholders are taken into account, as ignoring them will likely have future impacts on a company’s bottom line. However, for the sake of clarity, it is worth noting that this debate often takes place on a spectrum between the two ‘shareholder’ and ‘stakeholder’ positions.
In recent years, this debate has extended into various other related global discussions, including climate change, workers’ rights and pay, and even geopolitics, in light of recent questions surrounding the efficacy of globalised trade and the protection of national interests.
For instance, the UK government recently opened a consultation on possible changes to the National Security and Investment Act, which would add water as a new protected category and carve out critical minerals and semiconductors as separate from the advanced materials sector. Given recent concerns in relation to Macquarie Group‘s ownership of Thames Water, and the current geopolitical competition for critical minerals globally, these changes are perhaps unsurprising. Nonetheless, they do underline the importance of national interest, which may override that of shareholders.
Also relevant is responsible investment advocacy group, ShareAction’s, tabling of three shareholder proposals at Next, Marks & Spencer Group and JD Sports Fashion during this year’s UK proxy season. The resolutions, which were also co-filed by a consortium of investors, asked the companies to disclose how many of their workers and contractors are paid below the real living wage and conduct a cost-benefit analysis of adopting this wage as a minimum pay rate. Shareholder proposals remain a rarity in the UK. Although none of the resolutions passed, they did receive sizeable levels of support from investors.
Nonetheless, despite the changing nature of global geopolitics, international trade, and the efforts of some organisations, UK corporate governance standards generally remain more oriented towards their traditional norms of shareholder primacy than those of many other markets (e.g., Japan and much of continental Europe). Whether the Private Member’s Bill marks the beginning of a gradual move towards a more stakeholder-centric approach is yet to be seen. However, given recent pressures on the UK Government to reduce regulatory burdens in light of UK competitiveness concerns, this currently seems unlikely.
By: Tom Inchley
