Business Comment: Sir Ronnie rides into town firing blanks

Click to follow
The Independent Online
Mercury Asset Management has a simple but effective rule when it comes to rooting out rotten management. It votes in favour of the board at the annual meeting and then, when its patience runs out, it sells all its shares. The effect is to concentrate executive minds wonderfully and in the way that a thousand Cadbury committees could never manage.

Perhaps Sir Ronnie Hampel had this form of summary justice in mind when his corporate governance bandwagon rolled into town yesterday firing a mixture of blanks and bland truisms.

Sir Ronnie is correct that no amount of box ticking can ever eradicate the lazy, unscrupulous or just plain bent. All of which makes endless lists of prescriptive rules something to comply with on paper and then promptly ignore in practice.

But he is even more accurate in his candid reflection that the Hampel Committee on Corporate Governance might never have been necessary.

Reading through the 40-odd pages of its preliminary report it is easy to see his point of view. Sir Richard Greenbury, who was the last man at he controls, advised Ronnie not to accept the job and he didn't let him down. For once the advance publicity was no exaggeration.

The committee started from the premise that good corporate governance is all about adopting broad principles and then applying them flexibly and with common sense to individual circumstances. Over 140 written submissions and 200 discussions later it never really gets very much further. The list of 50 conclusions and recommendations boils down to the incontrovertible and uncontroversial conclusion that businesses are better run when equipped with informed, independent-minded and qualified directors, shareholders and auditors.

Small wonder that the plaudits flowed in thick and fast from a grateful business community confronted with nothing more exacting than the odd recommendation on the correct proportion of non-execs a board should sport and handy tips for goodhousekeeping at the agm.

Of course, it is not just businessmen who will be relieved. The last thing New Labour wanted was a report that actually required it to legislate. Corporate profligacy was a perfect stick with which to beat the Tories while in opposition. In office it quickly becomes a minefield into which only the bombproof should venture. Remember what happened to Ken Clarke when he tried to scrap tax breaks on share options for Asda check out staff?

The lesson has not been lost on Labour. Suddenly it has a lot of better things to do than forcing companies to obtain shareholder approval for executive pay packages.

Sir Ronnie has wisely not left any hostages to fortune. Recommendation 51 does not appear in Sir Ronnie's report but what it says is that his committee should be the last committee on corporate governance. That is one box everyone will tick.