Putting Sid back in his box

THE City is in grave danger of overindulging on corporate governance. What began as a movement to prevent the worst excesses in the boardroom - represented by cheating bosses like the late Robert Maxwell and directors overpaying each other - is in danger of drowning in red tape and claret.

We now have three separate corporate governance codes, a lengthy consultation by the Department of Trade and Industry and the creation of a strengthened Financial Reporting Council.

Despite all this effort and energy, boardroom salaries continue to increase at obscene rates, the payoff culture proceeds apace and the relationship between firms and their shareholders appears to be worse than ever.

The business answer to these problems is to organise a dining club. But the idea that this will prevent Sir Brian Pitman signing off a £17m payout to Michael Green - who helped to lose at least £1bn at ITV Digital and left the network without its own 21st century platform - is improbable.

Sir Bryan Nicholson has come up with some useful ideas for tidying matters up. It makes no sense for every investor organisation to have its own governance code - some like Hermes and Standard Life subscribe to several.

He suggests that they all unite behind one blueprint, then businesses might have a clearer idea where they stand. It could also mean that governance reports could be slimmed down from the present 30 or so incomprehensible pages to something easy to understand and produced to a single model.

The problem is that simplicity is not wanted. The corporate governance-revolution has unleashed a new industry. Pay consultants have effectively taken remuneration practices away from the boards. Headhunting firms are expanding on a grand scale as they search the globe for suitable nonexecutives.

Investing institutions and companies have established serried ranks of experts to pore over governance practices. Government ministers make endless speeches about curbing greed and the need for better standards.

But perhaps the greatest innovation of all is the invention of Sids. The first Sids were the early British Gas investors who queued around the block to buy a share of what they already owned as taxpayers. Then came the boardroom Sids, the senior independent directors, whose job it is to butter up investors. Now it is proposed that the investors themselves appoint Sids. Soon someone will be proposing a society of Sids and a new Sids code.

One would feel much better about all of this if Matt Barrett were not walking away with a 71% uplift in pay, if Sir Martin Sorrell was curbed in his ambition to receive a £34m bonus package and the Shell board had come clean with investors much earlier.

We don't need more Sids. We need less greed and more good old-fashioned common sense and morality.

Noble bonus

THERE was something of a contrast at the BP get-together with the investment community. Instead of the chief executive hiding out in his office, as was the case when one former Shell boss disclosed that 20% of the group's reserves were missing, Lord Browne was there in person with his full management team to unveil the strategy.

Browne has believed for some time that the energy industry has been misreading the oil market.

The combination of strong economic expansion, notably in Asia, healthy demand in the United States and strategic uncertainty in the Middle East is keeping the oil price well above $20 a barrel. This in turn is going to deliver huge windfall profits upstream at the production, storage and transport level.

Rather than keeping the proceeds to itself BP is promising to share the benefits with shareholders in the shape of share buybacks and improved dividends. This is excellent news for investors in oil shares who, after the Shell fiasco, must have been wondering about the quality of delivery across the industry.

But while the special payouts may please investors it could also store up political difficulties. Browne and his team will face awkward questions when the super profits start to flow through and investors and management benefits while petrol customers face steeper prices at the pumps.

BP's boss is clear that the benefits cannot be passed on to consumers without risk of the company attracting regulatory scrutiny over cross-subsidies. It is wonderful that the group is so scrupulous about regulation, in contrast to Shell. But it would also make good commercial sense for BP to share additional benefits with the consumer.