Companies
are likely to have to change the structure of their boards following the
publication of an independent review into the role of directors.
A
report by former investment banker Derek Higgs recommends that at least half
the board directors of any company listed on the stock market should be
independent non-executives.
Higgs
also concludes that the role of chairman and chief executive should be
separated, and wants independent directors to work more closely with major
shareholders.
Last
year, the Government asked Higgs to put together proposals to prevent the sort
of boardroom abuses that led to Enron’s collapse from happening in the UK.
His
report challenges the ‘old boys network’ which, in the past, has allowed senior
company figures to appoint friends and colleagues to the board. Directors who
sit on a number of different boards could also be asked to limit their
directorships to between three and five posts.
However,
Higgs does not advocate a legislative approach and prefers instead to build on
the existing framework of UK corporate governance.
"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," he said.
Other
proposals include:
–
A more open and fair appointments procedure
– Better training for directors
–
Annual performance reviews
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