Jonathan Djanogly writes with Dame Margaret Hodge for The Times.

Last month, 800 people were sacked over Zoom. That was the culmination of a chain of poor corporate decision-making at P&O Ferries.

Directors at the company’s parent entity opted to pay out dividends of £270m in 2020. Just two years later, one of those directors was pleading before our colleagues in parliament that the business was not viable. He claimed that their decision to lay off hundreds of staff was the only option on the table. This is the antithesis of responsible business behaviour.

Over 16 years ago, we sat on opposite sides of the House of Commons as what became the Companies Act 2006 came before parliament. The landmark act, the longest piece of legislation ever to be passed, aimed in part to provide a framework for good corporate decision-making.

It was the first time as a country that we laid out, in statute, what the job of the director should entail. After much debate, including between the two of us at the despatch box, parliament settled on a compromise. We enshrined a shareholder-first approach while nodding to other constituencies. We called it Enlightened Shareholder Value.

As currently drafted, the Companies Act is widely understood to say that the task of directors is to return as much profit as possible to shareholders. The law allows directors to consider other stakeholders when making decisions, but this can only be done in the course of pursuing the success of the company for the benefit of the shareholders. This is the default position of “shareholder primacy” for all companies.

Having shadowed one another, we’re both now firmly of the view that this was a fudge that needs urgent re-examination. Considering the needs of employees, the environment and local communities should no longer be optional. We believe that the directors of our businesses should work to ensure that the interests of shareholders are advanced alongside those of wider society and the environment.

The legal framework for corporate decision-making we established all that time ago is frankly no longer fit for purpose. It’s not only us who’ve come to this conclusion, but also a broad and growing coalition of business leaders from across the country.

Over 1,000 businesses from local firms to beloved high-street brands have joined a campaign calling for a Better Business Act. Iceland, Suez, innocent drinks and Anglian Water, as well as the Institute of Directors — the UK’s largest organisation for business leaders — are among those calling for a change.

The Better Business Act would require boards to exercise their judgement and do their best to align the interests of shareholders, the planet and society. We must ensure that decisions like those taken by P&O Ferries’ board are no longer justified on the basis of fulfilling a narrow obligation to shareholders.

As the government looks at the parliamentary year ahead, we believe that it should bring forward the Better Business Act in the Queen’s Speech, and empower directors to exercise their judgement in weighing up and advancing the interests of all stakeholders. Britain needs business at its best.

by Dame Margaret Hodge MP and Jonathan Djanogly MP , joint chairs of the APPG on Corporate Responsibility