CG costs big US companies $2.5 billion

 25 July 2003

Has the corporate governance bandwagon fuelled an important new business in the consulting sector, or is it just providind oxygen for firms that are struggling to find new clients?

This has become a holiday season talking point among observers in business and journalism who themselves have created a cottage industry conducting surveys, producing research or writing about the topic.

AMR Research conducted one such survey which found that Fortune 1000 companies expect to spend no less that $ 2.5 Billion meeting regulatory requirements this year, although it did not quantify how much of this would be spent on consultants.

At the other end of the food chain a New York fund manager is starting a mutual fund which will actively use its money and its clout to bring about changes in the companies in which it invests.

A filing by H Team Capital of New York with the Securities and Exchange Commission says its soon-to-be launched ABC Fund will look for companies "in need of remedial action designed to put management's interests in line with the investors' interests".

The risk is that corporate governance moves from being a basic management essential to an overstated cliche, much like 'total quality management' in the last decade of the last century.

The Conference Board's Christian Plath is already talking of ' corporate governance fatigue' as the seminars and conferences proliferate and public relations firms form CG divisions.

Perhaps the best comment came from Ira Millstein, an attorney who works in CG. "This is not rocket science", he told the Toronto newspaper Financial Post. "The only technical piece of this is the audit committee. The rest is plain common sense - knowing the business, going to meetings, not falling asleep, paying attention and keeping your eyes on the CEO.