Voluntary codes

By THIS IS MONEY
Updated:

 

The Daily Mail's City desk takes a look at the self-policing of business and ask whether it can be relied upon to ensure correct practice.

What are they?

Self-imposed rules that allow an industry or a sector to police itself. The cynics reckon big business usually only resorts to voluntary codes when iniquitous practices are rumbled. Proponents say they avoid the heavy hand of Government regulation.

Do they work?

The experience is mixed. The City Takeover Code, which recommends how companies and financial-advisers handle public bids, has proved a decent rulebook for dealmakers. No one enforces it, but those who disregard it are blackballed by the City. On the flipside, the Combined Code on corporate governance is hardly a runaway success, while the rules underpinning the banking sector have failed to stop overcharging.

So what is new?

Well the private equity industry has been accused by politicians and unions of profiteering and asset stripping.

Enter former Morgan Stanley chairman Sir David Walker who has been tasked to come up with a voluntary code of practice.

Will they work?

Hard to tell. There are a number of startling omissions, not least on the hugely controversial tax breaks these Masters of the Universe enjoy.

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