Timidity seems to have temporarily overcome the members of the Hampel Committee judging by the draft report released recently. After two years of deliberation, 140 submissions and 200 discussions, the Hampel Committee has issued a preliminary report that lists a set of principles for good corporate governance that will be instantly familiar to virtually all successful businesses.
There is, however, an implicit lack of faith in the ability of principles alone to improve governance as the committee fully intends to produce a document in December that brings together the recommendations of both Cadbury and Greenbury - something that the Institute of Chartered Secretaries and Administrators (ICSA) urged the committee to do in January of this year. It would have been more helpful had the code been incorporated into this report.
This report adds very little to the current debates or indeed regulatory frameworks and yet there is an undercurrent of dissatisfaction running through it focusing on the operation of the board in its broadest sense. Its recommendation that the role of chairman and chief executive need not be separated is undermined by the view that a named non-executive takes a lead role in monitoring corporate governance.
This is clearly the role of the chairman. If the committee feels that the current role of chairman is flawed, then it is this problem that should be addressed, not compounded by the introduction of "lead non-executive directors".
Hampel notes that the National Association of Corporate Directors in the US recently recommended the introduction and adoption by companies of formal procedures whereby boards of directors assess their own performance. This may, if properly implemented here, prove to be of benefit.
The central role played by the company secretary in the present system has been completely ignored by Hampel yet it is the company secretary who is charged with turning principles into practicalities. Rather than merely bringing in a "super non-executive director" to undertake the role, it may have been more appropriate to re-enforce the full role of the company secretary as adviser to the whole board including non-executive directors.
The Hampel Committee needs to "bite the bullet" and come up with an authoritative, definitive framework document that will put an end to the creeping factionalism that is becoming more evident in today's environment and create a climate in which both shareholders and the Board are confident that they are both working towards the same ends - a successful and properly managed enterprise.
Tony O'Dwyer is a Manager in KPMG Corporate Legal Advisory Services and a member of the Irish Region of the Irish Region Council of The Institute of Chartered Secretaries and Administrators.
