Outlook: A supercode of tedious flannel

MENTION THE phrase "corporate governance" at a City drinks party these days and you can guarantee that eyes across the room will glaze over. The issue of what does and does not constitute good boardroom practice is about as far away as you can get from a political hot potato at the moment. Not surprisingly, therefore, the publication yesterday of the final version of the Hampel supercode was greeted by a round of barely stifled yawns.

But even if corporate governance was the hottest topic around, it's hard to imagine that the new supercode could ever make the blood run hot. The code - a remarkably flimsy pamphlet, given the amount of work that has supposedly gone into it - is a hotchpotch of tedious flannel and the downright obvious.

Try this for size: "When evaluating companies' governance arrangements, institutional investors should give due weight to all relevant factors." You don't say. And then there's this little gem: "Institutional shareholders have a responsibility to make considered use of their votes.. Here's another: "Boards should use the AGM to communicate with private investors." So that's the point of an annual general meeting of shareholders, is it?

None of this is to say that corporate governance is an unimportant issue. It is easy to be complacent about corporate governance when we're at the top of the economic cycle, and the Maxwells of this world are nothing more than a dark and distant memory. But when the downturn comes - as it seems to be with gathering speed - you can bet the abuse and malpractice will come crawling out of the woodwork. Recession, it is often said, is like a withdrawing tide, exposing the corporate wrecks that lie beneath the waves.

What we need is a code with teeth - not a code that tiptoes around the issues. Perhaps more important, we also need a radical change in our shareholding culture. The determined rotten apple will always be able to circumvent even the strictest, most rigorously enforced code on corporate governance.

What can make a real difference, are institutional shareholders who take a genuine interest in the company's health, who liaise with the company on a regular basis and are not afraid to make their opinions heard. We must continue to expect the worst as long as the owners of our companies remain so apathetic. Certainly they only have themselves to blame if things go wrong for them.