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Vodafone has done a great deal to advance the cause of corporate governance. That is the, admittedly, rather controversial view of one of the many in the City who devotes too much of their time to analysing and assessing the increasingly tortuous pay and perks packages dreamt up by remuneration consultants.
The £10 million 'catch-up' bonus awarded to Chris Gent two years ago produced such outrage that it strengthened investors' resolve to tackle companies on pay, and deterred other companies from coming up with audacious get-rich-quick schemes. Without it, they would never have stood up to the Prudential and forced it to withdraw its bonus package.
While it's true no other company has attempted one-off bonuses on that scale, there is little sign of the remuneration war between City and companies abating. Yet the barrage of fat cat headlines is damaging the reputation of corporate Britain. There is now an urgent need for some sanity, and that needs more determined action by investors.
The Vodafone affair would, perhaps, have been seminal had shareholders actually refused to back Gent's bonus payment. Instead, they approved a ridiculous fudge, allowing him to pocket £5 million in cash instantly while the remaining £5m was used to buy shares, which were handed over last week - now worth just £1.5m - although he has to keep them for a further year.
Likewise, the Prudential bonus scheme would have been approved. The company decided to pull it because the scale of protest could have compromised its position as a leader in the debate about corporate governance.
Episodes such as these send out the wrong messages to companies and, more importantly, to remuneration consultants. They say that, if you are prepared to make a few minor concessions to shareholders and stomach a bit of bad press, you get away with virtually anything. Some corporate governance experts believe consultants deliberately construct over-the-top schemes so the company can appear to climb down and still have a very generous package.
Vodafone claims to have gone the opposite way: its current scheme has been slimmed from seven layers to four, but the deferred share bonus has two elements and the rest have so many ifs, ands and buts that one wonders whether the directors themselves understand what they are expected to do.
Legislation, which surely becomes more inevitable by the day, should improve the situation - if only because it will force investors to focus on the whole remuneration package, rather than just bonus schemes. At the moment, investors can vote only on long-term bonus schemes that involve the issue of shares. The Government's intention seems to be to force them to vote on the salary as a whole. That means guidelines in remuneration, such as those from the Association of British Industry, will have to be re-written - a perfect time for institutions to re-examine their pay and incentive schemes.
That is straightforward to describe: simple packages with clear and challenging performance targets, no rewards for failure, and an end to the hyperinflation of recent years. Achieving it will be hard and will need determination from investors. The fat cat headlines may not disappear; these are too often based on envy rather than calm analysis of the facts. The difference is they will disappear after a day or so rather than remaining a running sore for months on end.
Houses in order
Let's hear it for Britain's accountants. The profession has had a dismal press since Enron's collapse and, given the accounting and auditing failures unearthed there, it is completely justified.
But these failures were in the US. While the aftermath of Enron has led to even corporate giants like General Electric amending their accounts, and brought scandals like Tyco out of the woodwork, so far there has been nothing similar here.
Despite that, the profession has adopted new rules on auditor independence - including introducing a two-year cooling-off period before an auditor can join his client's firm - well ahead of the deadline required by the European Commission. It is also considering, with government and regulators, making the Accountancy Foundation, the body set up a year ago to regulate the profession, completely independent by giving it public funding. The US, by contrast, is still working out what on earth it needs to do with this mess.
The British profession is right to be pre-emptive: the problem with scandals is that the only thing you can be sure about is that they will not emerge from the same place as the last one. By acting fast, it has more chance of avoiding two possible - and still present - dangers.
The first is that, rather than moving towards a system based on principles, which has, so far, worked well here, the US decides to introduce even more prescriptive and detailed rules that are then followed here. As Enron demonstrated, the more detailed the rules, the harder companies work to find a way round them.
In Britain, we moved away from prescriptive rules because accountants' ingenuity at finding ways round them sparked failures such as Burnett & Hallamshire (who now remembers that off-balance sheet financing scam?), Polly Peck and Colorol. The fact that we have to go back more than a decade to find them illustrates that a system based more on substance than form is proving effective.
The second risk is that the Government decides to introduce legislation forcing companies to change auditors every year, or creates a private-sector Audit Commission to appoint them. Neither change would serve much purpose - indeed, many investors warn that regular audit changes would increase, rather than reduce, the risk of failure.
Failures are inevitable; we can only hope to minimise them. We must keep the pressure on the profession to constantly improve its practice.
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