UK: Editorial - The problem with Hampel.

UK: Editorial - The problem with Hampel. - What gets measured gets done. It's a simple enough philosophy yet one whose basic logic most of us recognise, particularly in frantic times.

Last Updated: 31 Aug 2010

What gets measured gets done. It's a simple enough philosophy yet one whose basic logic most of us recognise, particularly in frantic times.

Hence the search for new metrics - particularly new tweaks on the balanced scorecard or its equivalents - to replace the more traditional stand-alone financial measures. These, it is widely accepted, simply do not go far enough towards reflecting or measuring some of the crucial non-financial performance indicators, and therefore fall short of encouraging the corporate behaviour that will assure future success.

It is strange, therefore, that the latest recommendations on corporate governance, hot off the Hampel Committee presses, represent a move away from measurement and accountability towards statements of general intent and direction, a move away from tangible codes to more nebulous principles.

So, for example, where Cadbury created a blueprint splitting the roles of chief executive and chairman, Hampel concludes it is quite reasonable for the two roles to be combined (although it would be nice if the posts were separated). Further confusion is created by the suggestion that where there is no heavyweight chairman for non-execs to consult, a lead non-executive director should be selected to argue their case when it differs from that of executives on the board. It is difficult to see why this system should be any more effective that the one it seeks to replace.

Much has been made of the failings of the 'box ticking' approach that the Cadbury and Greenbury reports were said to enshrine but at least it had the effect of making change happen. After all, relying on good intentions has never been a substitute for action. And surely it is not unreasonable to argue that where companies have experienced difficulties in complying with the new rules, this was not an issue of box ticking being a problem, more a question of coping with change. Five years on from Cadbury, the dust has settled and to ease the reporting requirements is simply to slow the pace of change. It also cuts even further into the muscle smaller investors can flex towards the companies they finance. While observation of the letter of the law does not always translate into observation of the spirit of the law, it is usually not a bad place to start.

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