The two objectives, of satisfying the public desire to see excess curbed and of producing a voluntary code that will work, are extremely hard to reconcile. The ace up Sir Richard's sleeve, at least in political terms, has proved to be the pay committee's recommendation to abolish capital gains tax relief for executive share options.
This is almost irrelevant to the real debate about executive rewards, but looks like taking much of the political heat off Sir Richard and his committee, who would otherwise have had a tough time justifying a report that is based largely on existing best practice and contains little to shock or horrify the chairman of a well-run company. The backwoodsmen of the CBI and the Institute of Directors are another matter, but they have been deprived of a voice by the backing for the report of their own senior representatives.
Capital gains tax, Sir Richard's diversionary tactic, was the issue Gordon Brown, the shadow Chancellor, made the cornerstone of his attacks on executive pay excesses. Mr Brown's calculation was that he could force the Government on to the defensive or even a retreat, and he was right. But Mr Brown himself must have known in his heart of hearts that the tax issue hardly mattered to the people at boardroom level whose behaviour started the whole row.
Since income tax and capital gains tax rates were aligned at 40 per cent, CGT treatment of options has had only marginal benefits for the recipients of really big windfalls. Tax advisers have been pointing out for months that since most executives sell their shares as soon as they exercise their options, they pay the 40 per cent tax up-front anyway.
This is a political decision by the Chancellor that will only seriously affect middle managers, whose share options are much smaller than those held by electricity company directors. A committee of highly paid businessmen and City folk has clearly decided that it is expedient at the moment to put politics above the needs of their more junior executive colleagues.
But while the capital gains tax change is pure politics, Sir Richard may have been rather tougher on the privatised utilities than the Labour Party and some of the executives concerned may yet realise. By telling the companies' remuneration committees to overhaul executive pay policy and report back at the next annual meeting, he has also done no favours to the Government.
If carried out to the letter, the proposal will ensure the fat cat issue will continue to hit the headlines right through next year's annual report season and beyond. Utility directors will either have to struggle to justify their existing pay packages, or bite the bullet and admit they were wrong in the first place, by abandoning the old methods and devising new structures that meet the requirements of the Greenbury code.
Every single change - or failure to change - will now have to be published and justified. The whole affair could end up being dragged out uncomfortably close to the election - not quite what Mr Heseltine intended when he nudged the CBI into setting up the committee.
The shape of the argument to come was already visible yesterday in British Gas's reaction to the report, which was to say that its remuneration practices were at the leading edge of best practice and largely in line with the new code already. Tell that one to the voters, the customers or the staff. The new British Gas pay structure may be much better than the old, but few will forget that it was inaugurated with a 71.2 per cent pay increase for Cedric Brown, the chief executive. British Gas will be under heavy pressure to make changes yet has virtually said it does not need to do anything major.
The rest of the Greenbury report is complicated and at times quite subtle in its compromises between warring members of the committee. As a result it contains more potential for loopholes and delays than its defenders are prepared to admit.
Take the apparently tough recommendation that directors' contracts should be for no longer than a year. This is hedged about with qualifications, including the statement that in some cases contract periods of up to two years may be acceptable. Those whose contract periods are cut will actually be entitled in law to compensation, so the committee was reduced to calling for "leadership"from directors in refraining from putting in large bills.
The Stock Exchange has been dragooned into implementing the key parts of Greenbury through the listing rules, though not without a lot of negotiation, reflected in a less than wholeheartedly enthusiastic response from the exchange yesterday.
What sounds like a blanket inclusion of the Greenbury code in the listing rules is in fact rather less than complete, at the exchange's insistence. The rules are to include the Greenbury section on remuneration committee composition and duties, as well as those on disclosure and approval by shareholders.
But a closer reading shows that with the exception of a ban on issuing share options at a discount, the rest of the code - on remuneration policy, service contracts and compensation for loss of office - will only be caught indirectly. Remuneration committees must simply confirm, under the listing rules, that they have given full consideration to these issues.
Voluntary codes, even if incorporated in the Stock Exchange's rules, take years to seep through into general business practice. Look at how long some companies stood out against the Cadbury recommendation that all boards should include non-executive directors, or the number that delayed the setting up of formal remuneration committees.
In fact, it is in its determination to continue and reinforce the process of modest improvements started by Cadbury that the Greenbury committee has really shone. There are no panaceas or revolutions here, just a series of practical compromises between conflicting views among shareholders, companies and the City.
The committee has rejected a number of quite sensible ideas, such as the suggestion from the pension funds that non-executives should be re- elected every year. And only in a few areas, such as the details of disclosure and the need to put new long-term incentive schemes to shareholders, has it got beyond what the very best companies already do. Corporate governance is, however, an area where attempts at revolution are likely to be self- defeating, because they will be ignored by the people who matter. Sir Richard's report is worth backing, because much of it can be made to work.
Edited by Peter Rodgers