Derek Higgs, a former Warburg investment banker and now a professional director, issued a government-commissioned one-man report last month calling on British companies to give a majority of their board seats to independent directors. Just as important, Higgs’s report exhorts companies to cast a wider net for nonexecutive directors and train them to do their jobs effectively.
The changes, which are expected to become part of an updated corporate governance code this summer, could challenge the U.K.'s long-standing old boys’ network. Only 6 percent of nonexecutive director posts are held by women. Companies, Higgs says, have to be more assertive in looking for new talent. British hospitals, charities and other large public and nonprofit organizations appointed no fewer than 4,000 people to senior positions just last year. “That’s pretty relevant experience,” notes Higgs.
Among his other recommendations: No individual should serve as chairman of more than one big company; CEOs should not be kicked upstairs to the chairman’s suites of their own companies; and companies should name an independent nonexecutive to be a conduit for shareholders.
The proposals were welcomed by the government and by institutional shareholders. They shouldn’t expect miracles, however. Although Britain’s revised code will demand either corporate compliance or a persuasive explanation, Higgs cautions: “There are very few, if any, original ideas in this game, because it’s about people and behavior. It’s hard to legislate. You can’t direct people to behave in a specific way.”
