Derek Higgs's report into the role and effectiveness of non-executive directors focuses directly on their effectiveness in promoting company performance, as well as on issues of accountability. The recommendations aim to increase rigour and transparency in the appointment process to foster meritocracy and widen the spread of experience in UK boardrooms.
Recommendations
- Proposals to promote meritocracy in the boardroom through an open, fair and
rigorous appointments process and to widen the pool of candidates;
- Proposing a new, clear description of the role of the non-executive director;
- That the roles of chairman and chief executive should be separated, and that the chief executive should not go on to become chairman of the same company;
- A new definition of “independence” that addresses both relationships that would affect a director’s objectivity and also those that could appear to do so. At least
half the board would need to meet the new test, as would all members of the audit and remuneration committees and a majority of the nomination committee;
- Promoting closer relationships between non-executive directors and major shareholders;
- Significantly improved induction and professional development for directors;
- Recommending that the performance of individual directors and of the board as a whole should be evaluated at least annually;
- Proposals to clarify the liabilities of non-executive directors;
- Recognising that some of the new Code provisions may be less relevant or manageable or take longer to achieve for smaller companies.
Rejecting a legislative approach, Derek Higgs’ recommendations build on the current framework of UK corporate governance and the “comply or explain” nature of the Combined Code.
Derek Higgs said: "Effective boards depend on the best people and on their behaviours and relationships.
My recommendations reflect this. My hope is that, taken together, the recommendations of this Review will significantly raise the bar for board practice and
corporate performance in the UK. I do not presume that a one-size fits all approach to governance is appropriate. The
Review is not a blue-print for box-tickers, but a counsel of best practice that can be intelligently applied."
