Business is leading a counter-revolution against corporate reform. John Plender sees a problem for Lord Simonby John Plender / October 20, 1997 / Leave a comment
Is british business a victim of excessive accountability? Not if you believe John Kay, who compares corporate democracy in Britain with the sham democratic process that prevailed in communist eastern Europe.
But now we have the Hampel committee on corporate governance leading a counter-revolution against the reformers. In its interim report published in August (timing that arouses suspicion), it says accountability is being emphasised at the expense of efficiency. Who is right?
The answer becomes obvious if you look at the composition of Ronnie Hampel’s committee. Six of the 11 members are from quoted companies. By some unhappy freak of fate shares in five of the six, at the time of writing, just happen to have underperformed the FT All-share index since the start of the year. For these men accountability is thus a career threat.
Then there is the small matter of the individual members’ own governance arrangements. Sir Nigel Mobbs of Slough Estates, for example, has been criticised for combining the roles of chairman and chief executive, while the Slough board has fewer independent directors than is necessary to make this concentration of power look acceptable. Slough’s poor longterm record would justify a place on any activist institutional shareholder’s hit list.
Chris Haskins of Northern Foods is also open to criticism on the score of combining the roles of chairman and chief executive. His company has been going through a bad patch because of problems in the dairy industry. Clive Thompson, chief executive of Rentokil Initial, is on a two-year rolling contract, which is not best practice as defined by the Greenbury committee, and Michael Hartnall, finance director of Rexam, is open to the same criticism.
Hardly a surprise then, that the committee attacks a so-called “box-ticking” approach to corporate governance. It proposes replacing the detailed prescriptions offered by the Cadbury committee on corporate governance with broad principles.
The governance process does carry a risk of excessive bureaucracy. But this plea for more power and less responsibility in the boardroom is so transparently self-interested that it invites robust scepticism. The committee is, of course, accountable to no one.
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britain’s institutional shareholders are famously supine, yet they show occasional signs of activism. The latest instance is at GEC, where nearly 40 per cent of the votes were cast against the company’s share incentive proposals last month.
Yet a majority of institutions still fail to vote…