The biggest hoot about the latest guidelines on best practice in the boardroom is that they have been produced by, of all people, a merchant banker. Derek Higgs, a former Warburg dealmaker, is behind the report, out a few days ago, on improving corporate governance. It's not his fault. No one else would volunteer for the job, I'm told.
But his conclusions cannot inspire confidence. A merchant banker's interests are not always, or even often, aligned with those of shareholders. It was John Mayo, another former Warburg chap, who bore a large chunk of responsibility for the collapse of Marconi. Moreover, Higgs was compromised before he began. He sits on the board of British Land, a company with an indulgent view of best boardroom practice. It breaches existing standards by combining the jobs of chairman and chief executive in the formidable figure of John Ritblat.
That said, Higgs's instincts are laudable. He proposes to curb the abuse of executive power by strengthening the hand of independent non-executive directors, and to improve the quality of directors by limiting their ability to take on directorships by the truckload. He pays lip-service to the idea of widening the pool from which non-executive directors are drawn - women, under-forties, foreigners, the public sector - though he struggles to suggest how this might be done. His recommendation for special senior non-executive directors, through whom shareholders can voice concerns that the chairman will not otherwise listen to, may help reform boards but sounds like a recipe for civil war in some companies.
A parallel report, published at the same time, from Sir Robert Smith, chairman of the Weir Group, recommends another type of non-executive director, a kind of financial supercop who would chair the board audit committee and carry the can in the event of Enron-style dodgy accounting. All company directors are equal, but some would be more equal than others. The two reports may help curb the ambition of reckless chief executives and finance directors, but they will create factions of a different kind. The danger is that less real decision-making will be done at the boardroom table. The idea of a unitary board, where everyone takes collective responsibility for decisions, is starting to crack.
Higgs (like the Cadbury, Greenbury and Hampel reports that preceded it) may help restrain the occasional corporate maniac but is largely window dressing. It doesn't address the big problem with boardroom behaviour, with company management or indeed with the entire edifice of capitalism.
This is that for the past 50 years, the ultimate beneficiaries have acted like the most feckless of absentee landlords. Until you and I and the 15 million other beneficiaries of pension funds and life policies wake up from our collective coma and start demanding better from the managers of our assets, nothing will really change.
That means tedious stuff like actually reading our annual pension fund statements, rather than shoving them in the "too difficult" drawer. It means electing committed and energetic pension fund trustees, who in turn hire fund managers instructed to hold company directors to account. It means refusing to accept the gobbledegook that life-assurers call communication with policyholders. It means demanding answers about how and where and why our nest eggs are invested.
In the meantime, company directors and their advisers will carry on doing what they've always done - structuring and running companies for their own benefit.
A postscript to the recent gaffe by Geoff Hoon. The Defence Secretary said that BAE Systems, formerly British Aerospace, was "no longer British," on the grounds that 54 per cent of its shares were owned by foreigners. Cue a storm of protest and (despite Hoon's claim he was quoted out of context) widespread speculation that the government intends to award a £10bn contract to build and maintain two Royal Navy aircraft carriers to the French defence contractor Thales. A Thales victory would be a blow for BAE and its two Glasgow shipyards, Govan and Scotstoun, though terrific news for Tyneside, where Thales would build the carriers.
But what is this? An advert for Thales in the Financial Times describes it as "the international company working for Britain". France, Frenchness and all things Gallic are entirely absent. Even the website address sounds reassuringly Anglo-Saxon.
So this Anglo-French business battle comes down to a British company, which the customer denies is British, bidding against a French company, which does everything it can to conceal it's French. It was all much simpler when the Dauphin sent Henry V insulting tennis balls.
Patrick Hosking is deputy City editor of the London Evening Standard
