Combined code needs force of law

Link: Higgs report

Less than two weeks after the combined code on corporate governance came into effect, finance directors have called for the introduction of legislation to give it real teeth.

This week’s Accountancy Age/Reed Accountancy Big Question found that 60% of those asked supported legislation to bolster corporate governance.

The findings come on the back of controversy surrounding the appointment of James Murdoch as chief executive of BSkyB. Rupert Murdorch’s News Corporation owns a 35% stake in the business, and many feel that good corporate governance has been sacrificed in the name of nepotism.

‘With a father and son partnership it is difficult to remain independent,’ said one respondent. ‘This brings back memories of Maxwell.’

Others feel this is just one symptom of the problem with self-regulation, and that more examples will arise if we are left with the code alone.

‘There are so many ways around the code and it has no teeth,’ said Elizabeth Sell at Hotel and Catering Training. ‘Big companies are not following the rules.’

Some, however, are concerned about the potential damage that could be done by the introduction of laws to control governance. ‘You don’t want to be too bogged down in bureaucracy within corporate governance,’ said Sean Daniel at Corporate Planning Group.

Others doubt whether legislation would be any more effective. ‘How could you legislate for not having the chairman’s son as CEO?’ said one FD.

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