Outlook: Company law: If it aint broke, why fix it?

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The Independent Online
IF A CAMEL is a horse designed by committee, then perish the thought of what Margaret Beckett's review of company law might come up. What we are dealing with here is a Steering Group advised by a Consultative Committee backed up by at least six Working Parties.

Thankfully, this new beast, whatever it might be, will not be worrying the body corporate too much this side of the millennium. It will take three years to complete the review, meaning there is no danger of anything as revolutionary as a new Companies Act until well into Labour's second term.

Since the last overhaul of company law was 50 years ago and since the existing legislation is still largely based on the model the Victorians dreamed up 150 years ago, another four or five years doesn't seem like a long time to wait.

But there's the rub. If there was anything fundamentally wrong with company law as it stands, then present Act would be ripped up now and replaced with something more appropriate. The fact that the Government cannot find time in its legislative programme in this Parliament rather proves the CBI's point that it is hard to detect pressure for radical change. Nor, it appears, do ministers have strong views on what to do with it.

Admittedly, it is early days and who knows how many humps might be discovered to add to the final design. But it is hard to see what the review can amount to other than an exercise in good-housekeeping. The consultative document that launched the process yesterday is not exacly laden down with examples of how unscrupulous businessmen are driving a coach and horses through existing legislation. About the worst it comes up with is the antiquated nature of a law which requires companies to have to maintain registers of past shareholders and file their accounts manually. Phew!

If there were to be another Maxwell, Guinness or Polly Peck, then the Government could easily amend the present law to deal with it. Is it really necessary to rewrite the whole thing? From the outside, this review looks suspiciously like a way of ducking the issue of legislating on corporate governance. That, and the fact that the DTI has to justify its existence somehow or other.

Mrs Beckett claims the words "fat cat" never passed her lips, even when Labour was in opposition. It was certainly a favourite phrase of her minister Ian McCartney, who will also take a hand in the review. Luckily, he will play second fiddle to Lord Simon. The ex-BP chairman has brought some common sense to the debate within government, on corporate governance and much else. Hopefully he can be relied upon to counter any dromedary tendencies.

NAO's lessons on rolling stock sell-off

We perhaps didn't need yesterday's National Audit Office report on the privatisation of the rolling stock leasing companies to know that the last Government sold us short when it auctioned off British Rail's rolling stock. That was already obvious, since all three of these companies were sold on for very substantial profits within two years of being privatised.

It was also obvious at the time of privatisation that this was a buyers market; for reasons of ego and ideology, the government rushed to get these things irrevocably sold into the private sector so that nobody moving into Downing Street could change the policy. In the process, according to the NAO report, the government surrendered at least pounds 700m of value - enough to build and equip four new hospitals.

Since both the government that did the deed, and the merchant bank that advised on it, Hambros, are now deceased, the NAO's report on it all might so long after the even might seem academic. There are some lessons that can still be learnt from it all, however, especially with privatisation of the London Underground back of on the agenda.

The main problem seems to have been the speed with which the privatisation was undertaken. These leasing companies were sold before the great bulk of the rail operating franchises were awarded, so that the purchasers didn't know who their customers were or what their creditworthiness was. They were also sold with little or no operational track record within the restructured rail industry. And bidders could not be certain the industry would be wholly privatised because of political opposition and the approaching general election.

As if all this were not reason enough for delaying the sales until a better price might be obtained, the Department of Transport and its advisers in any case failed to update their early valuation of these businesses or carry out a comprehensive valuation before the sale. Furthermore, no provision was made for the government to share in any gains resulting from a resale, as in some previous privatisations.

A bad business all round, then. But before the present Government gets on its high horse to lambast its predecessors for failing in their public duties, it should remember that Labour bears a large part of the blame for what happened. Labour's persistent carping about rail privatisation and its pledges to reverse it once in power severely depressed the price capable of being realised not just for the leasing companies but for all the other bits of British Rail too. As it turned out, Labour's opposition was just political point scoring. It has done nothing to reverse the process nor does it look likely to.

City puts question mark over Psion

There are two views on Psion. One is that it is a superbly innovative and fast-moving company which has established a market-leading position in an industry with huge potential. Another is that Psion is British Apple Macintosh, producing a superior product which is loved by those who use it, but ultimately destined to be crushed by the industry juggernaut known as Microsoft.

Judging by the 20 per cent fall in Psion's share price yesterday, the City is beginning to lean towards the latter camp. And for good reason. While Psion's Series 5 handheld computer - a device of mind-boggling sophistication crammed into a box no larger than a pocket diary - got an unqualified thumbs up from the nerds, its commercial merits are not so obvious. To begin with, sales were held back by production problems. Now Psion is blaming a proliferation of competing products on the market for confusing the consumer.

For competing products, read Microsoft. Although the boxes on display at Dixons may be made by a rabble of different electronics firms, everyone except Psion's uses Windows CE, the stripped-down operating system which Microsoft has developed for use on portable computers. Because Bill Gates is wholly convinced that the future of computing is mobile. And being Bill Gates, he wants to own it.

David Potter, Psion's charismatic founder and chairman, knows that going head to head with the world's largest software company is not the way to riches. He also understands that Psion needs to share its operating system with others if it is to survive. But licensing deals have been slow in coming. And there are worries that the Series 5 is just too clever (and, at pounds 500, too expensive) for those who want it mainly as an electronic diary and address book.

It's too early to write Psion off. The potential for palmtops - doubling up as mobile phones, linking stressed-out executives to their office networks and providing access to the internet - is huge. But if palmtops are to become a big boys game, can Psion hope to stay in it. The prognosis is still reasonable, but after yesterday's setback the worried looks are spreading.

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