Cadbury pension legacy is growing

Cadbury pension legacy is growingThe findings of the Cadbury Committee have paved the way for shareholders to take a role in governance, writes Robert Bruce

If anybody ever suggests that change is difficult to bring about in a business culture, simply point them to the rise of corporate governance in recent years. It has been astonishing. Just 15 years ago what became known as the Cadbury Committee was formed.

The conclusions of its first report seem simple and modest today. But they laid the foundations for today’s rulings: chairmen and chief executives ought not to be the same people, it should be clear why particular non-executive directors are being appointed and so on. It was a plan for what are now seen as obvious structures of accountability.

It is startling to think that the Cadbury recommendations were seen as revolutionary. They now seem almost mundane. And that is the strength of the change in corporate culture that they set in motion. The change is now so embedded that no one, even across a 15-year period, thinks of any of it as strange or new. It is simply how good companies protect themselves and prosper.

Even more startling is what went on before the Cadbury revolution. It is hard to believe that some of the shady characters in business back then ever existed. In that 15-year period we have gone from Long John Silver to Lord (John) Browne. The piratical bully has been replaced by calm and control. And it is the change in the culture that has brought about the triumph. It would be impossible for a bullying crook to force his way to becoming the head of any sort of large corporate organisation. People who are described by the press as being ‘larger than life’ can still flourish. What has changed is that the people who always attracted the tag of ‘a lovable rogue’ can no longer last any length of time in the public eye.

Now companies are run, so the theory goes, for their shareholders. And who are these shareholders? Invariably they are pension funds run on behalf of ordinary citizens.

There is just one problem with this analysis. The world outside has yet to catch on. But it slowly will. And the consequences for the way the business world is perceived are huge. But, fortunately, the corporate governance work that enables all this to function more or less sensibly has already been put in place. This is the other reason why the corporate governance revolution is so important.

This is underlined by a new book, The New Capitalists: How Citizen Investors are Reshaping the Corporate Agenda, which explains how this works. This is how the authors – Stephen Davis, Jon Lukomnik and David Pitt-Watson – explain it: “Each pensioner owns a tiny sliver of a vast numbers of companies. From IT pacesetters in Silicon Valley to the oil wells of Nigeria, citizens collectively are now the ultimate owners.” The argument in the book is that “until recently, this historic transfer of ownership has been effectively immaterial – a peculiar factoid, rather than a development of general significance to companies or countries”. But it has happened. And, although it is only slowly seeping into the collective consciousness of the world at large, that basis of understanding will grow.

The interesting twist in this is that there are two speeds of movement towards that understanding. There is the US and then there is the UK, Europe and the rest of the sophisticated business world.