Quiet first day for contentious code

After all the criticism hurled at the Higgs report earlier this year, it is amazing how quietly the first day is dawning for the new Combined Code on Corporate Governance.
The taming of the response from British business has taken a variety of forms. First, it has sunk in, particularly among those who never read the original report, that the new code represents evolution, not revolution. The role of senior
independent director, for instance, emerged five years ago. Derek Higgs has put flesh on the Sid's bones but, after tactful redrafting of the code, he should no longer be seen as having a forked tongue in dealings between the board and shareholders.
Second, the twitchiness of chairmen about reductions in their (sometimes abused) freedom has been partly addressed by one small climb-down: the boss will, rightly, be allowed to head the nominations committee. The remaining contentious restrictions - that a chief executive should not become chairman and that one chairmanship of a FTSE 100 company is enough - have been kept to encourage independence and ensure the job gets top priority.
There will still be rows over this. It will take a few years to turn round the supertanker of career-planning by such VIPs as Matt Barrett (Barclays) and Sir Peter Davis (J Sainsbury).
But the most interesting reason for the calming of boardroom indignation
has not sprung from changes to the Combined Code. It is shareholder activism.
The early mud-slinging at Higgs seemed to assume that institutional shareholders were either inattentive or dim. If they did intervene, it would be in an unthinking "box-ticking" way. In other words, they were no match for the intellectual giants running UK plc. Well, Anthony Bolton, the Fidelity fund manager who led the charge against Michael Green at Carlton-Granada, clearly is.
So are others at institutions that have triggered boardroom changes - at Royal & Sun Alliance for example - or curbed pay proposals at such companies as GlaxoSmithKline. Thinking activism also permeates their representative bodies, the Association of British Insurers and the National Association of Pension Funds. Both have, for instance, protested at British Sky Broadcasting's selection process - under Lord St John of Fawsley - for a chief executive.
It is difficult to tip the balance of power against Rupert Murdoch, who controls 35 per cent of the shares and wants his son to win. But the general assertion of shareholder power has been a big factor in taming UK bosses.
Such power must be used responsibly. An example in today's FT is a blueprint produced by Jonathan Charkham, a corporate governance expert, and Hermes Pensions Management for collective shareholder action at distressed companies.
Another is the Statement of Principles on Shareholder Activism published by the Institutional Shareholders' Committee, which the government wants to see incorporated into fund management mandates.
The new Combined Code backs these principles and specifically says that institutions should "avoid a box-ticking approach" and take into account a company's individual circumstances.
The quiet birth of the new code signifies that something important has changed after the early sound and fury