'Code fatigue' stalks Britain's boardrooms, yet the governance issue rages on in the US
The words 'corporate governance' in the first sentence of an article are guaranteed to put off a large percentage of the potential readership. After Higgs and Smith, there is certainly an acute case of code fatigue in many British boardrooms.
The key battles - over the place of independent directors, the role of audit committees and separation of the posts of chairman and CEO - were won and lost some time ago. So there is a sense that the new codesmiths are touring the battlefield, bayoneting the wounded.
The focus has now switched to the more interesting question of just who is personally suitable for the newly defined roles. Ian Prosser, who withdrew after being named as chairman of J Sainsbury, is the latest to discover that shareholders will not simply nod through traditional names in future.
But on the other side of the Atlantic, the debate on board structure is warming up nicely, stimulated in part by John Reed's decision to split the chairman and chief executive roles at the New York Stock Exchange. He hasn't found a new part-time chairman yet, but that is the declared intention. After the Dick Grasso affair (which is by no means over), it seems odd to say so, but the NYSE has traditionally been seen as a leader in corporate governance practices.
Other influential voices can be heard advocating a split, roughly on the British model: Paul Volcker, for example, the former chairman of the Federal Reserve, and Richard Breeden, the former SEC chairman, whose battles with Conrad Black on behalf of the Hollinger board have provided vivid evidence of the dangers for shareholders in an over-dominant chairman.
However, many others still see virtues in the combined role. Arthur Levitt, who ran the SEC for seven years under Bill Clinton and whose trenchant views on accountants and auditors have been proved right many times over since he left, remains a solid upholder of the traditional US model. So the supporters are not just those who have something to lose.
Over here, it has been so non-PC to advocate a combined role for so long that we can scarcely remember the arguments. But Americans maintain that one leader can provide firmer strategic direction and that a split at the top creates risk. You are betting the company on the personal relationship between two individuals. If things go wrong, a chairman can either muck in with the CEO or call the headhunters.
Most choose route two, which may not aid long-term goals.