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Some of the shrewdest observations on corporate governance come from the Institute of Chartered Secretaries. This is perhaps not surprising because their members are flies on the wall at the nation's board meetings silent, observing how boards behave at their best and worse.
It was particularly smart therefore for the Financial Reporting Council to delegate to this organisation responsibility for updating the Higgs guidance on the effectiveness of boards and the chairman's role. The second stage of the guidance on improving board effectiveness was published this morning.
What comes through strongly in the document is its emphasis on the need for high-quality decision making. It is one of the hallmarks of an effective board and it does not happen by accident, the report says.
This may seem self evident but so many board decisions fail this basic test and result in massive destruction of shareholder value.
Indeed there was an example earlier this week when Sir John Bond came under fire at the annual meeting of Vodafone the mobile operator of which he is chairman. Some shareholders led interestingly by a Canadian pension fund, not any of the home-grown lot urged shareholders to vote against his reappointment on the grounds that the company had made a pretty poor fist of its strategy in recent times.
Some might think Bond got off very lightly because only 6% of the votes went against him. Yet this is the company which in May wrote off £2.3 billion, or 25% of the purchase price of a mobile company it bought in India but three years ago. Think about that for a moment. Entrepreneurs such as Sir Richard Branson, Sir Tom Hunter, Sir Stelios and Lord Sugar spend their life building up businesses and making a mark but they rarely, if ever, create an empire which is worth anything like as much the value so casually lost by Vodafone on just this one deal.
It is surely even more bizarre in this context that one of the names mentioned as a possible next chairman for BP is Arun Sarin, the man who as Vodafone's chief executive saw this as his signature deal. A rather blotted signature one might think and not really what BP needs right now.
But that disaster pales into insignificance compared with what Bond himself thinks of as his signature deal while running HSBC. Talk about going out with a bang: in his last few months in 2002 he decided to buy Household, a US subprime lender, for £9 billion.
So much for boards taking well-informed decisions. As Michael Lewis writes in The Big Short his book on the origins and winners in the subprime crisis Household was so notorious in the months before HSBC bought it that there was a nationwide newspaper campaign to highlight its unscrupulous lending practices and it had settled a class action suit out of court by agreeing to pay a $484 million (£310 million) fine distributed across 12 states. All this was available on Google as some of us pointed out at the time but obviously the HSBC board doesn't do Google.
That deal and the subsequent bailouts and write-offs cost HSBC more than the oil spill has so far cost BP. Perhaps Barrack Obama should call Sir John Bond in and give him the Congressional Medal of Honour or at least a copy of the Institute of Chartered Secretaries' new guidance.
Cracking the Chinese code
Rebalancing the British economy to lessen the dependence on finance and position it better to trade with the growing economies of the world is easy to say but hard to do.
Putting to one side the fact that the UK at present does more business with Ireland than it does with China, the rebalancing has to be on rather a greater scale than the term implies.
An equally pressing issue is that few of those businesses which are already in China actually make any money.
Oddly, most are loath to admit it, and certainly most unwilling to come clean about just how difficult it is to do business there in the face of China's aggressive mercantilist policies.
But there are hints. The head of one business said the biggest challenge his company faced was in deciding how much to spend over the next 20 years in that country to get a foothold. Spending decades getting footholds is not the way business usually speaks.
Another who had several joint ventures complained that every time after years of losses any of the joint ventures got to the point of making money, the rules changed. Nor is there any guarantee it will get easier with the passage of time. Some Asian markets are almost impossible to crack witness Japan. It may be the world's second-largest economy but there are almost no British exporters other than purveyors of some luxury products for whom it is the second-largest market.
China similarly represents a graveyard for most Western companies precisely because it is a Chinese market and not a Western one. Too few recognise that to overcome the vast cultural barriers, infrastructure and good management foundations must be painstakingly laid as well as appearing to be Chinese.
It can be done. Tesco at one end of the scale seems to have cracked it, while this week at the other end Chi-Med a favourite of this column but still a small company with a diversity of health and drug-related businesses once again showed it knows how to deliver consistent, spectacular growth.
Chi-Med, however, has strong roots in Hong Kong, so the company had the connections but even it has relied heavily on joint ventures to help it get to the heart of the Chinese economy.
