Call to replace Cadbury and Greenbury codes

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The Independent Online
The Cadbury and Greenbury codes on executive pay and corporate governance should be replaced by a clearer framework allowing businesses to be transparent and accountable about their values, an influential group of companies will urge today.

This would include heads of companies setting out consistently where their business is going, what it stands for, where success is expected to come from, who is crucial to the achievement of that success and what could stop it from happening.

The recommendations are published by the Centre for Tomorrow's Company in its evidence to the Hampel Committee on Corporate Governance, the successor to the Cadbury Committee.

The centre, formed earlier this year by a group of businesses, says widespread adoption of this approach would create a common language of accountability and provide a framework for measuring and communicating present performance and future prospects.

It would also overcome one of the key causes of public cynicism about business - the tendency to have different messages for different audiences.

In its submission, the centre urges that the basis of the framework should be the agenda for action produced by the Royal Society for the encouragement of Arts, Manufactures and Commerce's Tomorrow's Company Inquiry.

The centre's evidence to the Hampel Committee, which has taken over from the Cadbury Committee, is also a response to a "climate audit" carried out among leading chief executives and chairmen by Greenly's, a management consultancy focusing on boardroom issues.

It found that there was widespread support for Cadbury and a more negative view of Greenbury, which was seen as a "knee-jerk response to public outcry". But even with Cadbury there was concern that it encouraged a "box-ticking, bureaucratic mentality".

BT's Sir Iain Vallance, for instance, is quoted by the research as likening the governance rules to the highway code and saying the important thing is to reach the point "where you don't ignore it but simply act naturally in its observance".

Martin Taylor of Barclays is reported regretting that the Cadbury code had prompted non-executive directors to concentrate on the "policing function of their role rather than the encouraging, visionary aspect of the role...."

The submission also urges the Hampel Committee to remind all listed companies that their legal duty is to the company as a whole and not to the holders of shares at any one time.