Consultation breeds dissent

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The Independent Online
The Approach of the deadline for submissions to the Hampel Committee on Corporate Governance is bringing a flurry of soul searching over the best ways of preventing executive excess and corporate collapse, but little original or unpredictable thinking, writes Roger Trapp.

Each organisation responding to the consultation exercise put out by the Cadbury Committee's successor, led by Sir Ronnie Hampel, chairman of ICI, is fighting its own corner.

Accordingly, the proponents of Tomorrow's Company, a group investigating the secrets of sustainable success, called at the end of last year for the Cadbury and Greenbury Codes to be scrapped in favour of a general framework promoting business values. And last week the Institute of Chartered Accountants said that good corporate governance rested firmly with the boards of companies. Shareholders and auditors could "necessarily only play a secondary role", it added.

Building strong, balanced boards with effective non-executive directors would require amending the Cadbury Code to: demand rather than recommend that the chairman and chief executive roles be split; to strengthen references to non-executives to stress the importance of independence so that former executive directors, for instance, would not qualify; and to make all directors subject to re-election at least every three years.

The paper, from the institute's corporate governance group, also asks for consideration to be given to a requirement that all directors of listed companies pass a "fit and proper" test.

Sir Brian Jenkins, chairman of the group, says: "The key to good governance lies in getting the right board in place. A company with a properly balanced board and effective independent directors should be left to run its business, with the board being held accountable for its stewardship."

Meanwhile, the Institute of Personnel and Development points out that it is "easier for potential investors to find out about a company's environmental record than the skills and experience of their employees".

It argues that the way people are managed affects the share price and is calling for the Hampel committee to encourage organisations to publish annual statements showing the link between their people management and business objectives.

John Stevens, the IPD's director of professional policy, says: "To be successful, businesses need flexible, motivated and efficient people. It is time the City acknowledged that people are the most important asset, and that the way they are managed can have a critical effect on shareholders' dividends."