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Last time we were in recession in the Nineties, boards were so scared of the likely reaction of institutional investors if they suggested a dividend cut that they continued paying, even when the profits were not there, by dipping into reserves accumulated in the earlier good times.
They were mindful of the bloodletting in the depths of the previous recession of 1981 when ICI, then Britain's leading company, cut its dividend for the first time in a generation - and created one of the biggest rows with investors in a generation. However, in 1991 as the recession persisted and the need for companies to retain as much cash as possible became obvious to all, an understanding was reached between the corporates and institutions.
Under it, dividend cuts would not bring the wrath of shareholders down on the heads of hapless boards provided they were seen as an exceptional move for exceptional times. The corollary was that dividends would be restored as soon as the pressures eased and corporate activity picked up.
It is different this time round. Marks & Spencer last week slashed its dividend by a third in response to a sharp fall in profits - just as British Telecom had the week before - and the market simply shrugged. These companies were, after all, doing no more than a string of other leading names in recent times who, when occasion has demanded it, have been brutal with their payouts in pursuit of some wider corporate agenda.
We have already seen cuts at Legal & General, HSBC and Land Securities, and a complete wipe-out at ITV, Old Mutual, most of the banks and builders and some pub companies such as Enterprise Inns. Indeed, the statistics say that 99 companies cut dividends last year and, according to ratings agency Standard & Poor's, the amount of cash paid across dropped by a quarter. We have already got to 55 cuts in the first three months of this year. With the banks on the sidelines, the drop in payout is sure to be much greater.
Nor is there much chance the payout will be quickly restored - the jargon these days almost always talks euphemistically of rebasing the dividend, meaning there is no intention of engineering a quick bounce back to the old levels but rather that shareholders should prepare themselves for a long, lean haul.
Interestingly, institutional shareholders put up with this, partly perhaps because, with the globalisation of share registers, they hold a smaller proportion of any company's shares and think they therefore wield less clout, but partly perhaps because they were complicit in diminishing dividends in the first place when they encouraged companies to use the money instead to buy back their own shares.
It is a double irony that buyback policies in almost every case have proved to be an ill-timed, expensive mistake. Directors are useless at judging whether their shares are good value and worth buying, and really should not be allowed to do so, let alone encouraged down that path.
The erosion of income strikes at the heart of the stock market. The case for buying shares rests on dividends because in time it is the income not capital growth that provides the bulk of the return. Pension funds, already imperilled by the turmoil in financial markets, rely heavily on such income to meet their payments to members.
The ability of institutional shareholders to continue to refinance whole swathes of British business through rights issues requires that they find income from somewhere to meet the cash calls. And of course there are literally millions of retired people with savings in the market who need a steady income to live on.
In general it is hard to resist the conclusion that it has become too easy for boards to cut dividends, and that they have become the first option in belt-tightening rather than the last. In-coming chief executives too often think it is OK to slash the dividend as part of the general kitchen-sinking they like to put in place when they take over, reducing the value of the business so they can later appear to have grown it more. This needs to stop. Boards need to be reminded - again - that they are there to deliver returns to shareholders, and that dividend cuts are a sign of the failure of their stewardship. Institutions should once again make them too scared to cut.
There is at least a possibility this might happen. City Minister Lord Myners, himself a former fund manager, referred in his speech at the annual dinner of the Investment Management Association last week to a soon-to-be-published review by the industry into the corporate governance lessons to be learned from the current crisis.
As part of a shopping list of things he hoped would be in there, he said he wanted to see the "placing of dividends appropriately as a measure of corporate health and progress and possibly incorporating dividends as an important qualitative element in decisions on performance compensation".
In other words, no dividend no bonus. That should concentrate the executive mind.
