The Stern Review: Mitigation

After eight years of haggling, endless meetings, U-turns and broken promises, the Companies Act became law on 8 November 2006. Billed as the most important reform of corporate regulation for 150 years, the new Act is symbolic of the decline and fall of Tony Blair’s ‘third way’ approach to modern capitalism.

Rejecting the twin poles of state-controlled communism and untrammelled free markets, the early Blair had promoted a ‘stakeholder economy’ in which the private firm would cease to be ‘a mere vehicle for the capital market to be traded, bought and sold as a commodity’. Instead – as he told an assembly of Singapore business executives in January 1996 – the company would become ‘a community of partnership’, in which ‘each employee has a stake’ and where a company’s responsibilities would be ‘more clearly delineated’.

An in-depth review of company law was duly launched when Blair took office. But under pressure from the corporate establishment, the fuzzy logic of stakeholding was replaced by the even fuzzier notion of ‘enlightened shareholder value’, catchily known as ESV. In a wonderful piece of...

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