Summary of Higgs recommendations
The recommendations aim to increase rigour and transparency in the appointment process, to encourage meritocracy and to widen the spread of experience in UK boardrooms. They include:
- 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 relationships that would, or could, affect a director's objectivity. At least half the board would need to meet the new test, as would members of the audit and remuneration committees and the 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 take longer to achieve for smaller companies.
Derek Higgs rejected a US-style legislative approach, opting instead to build on the existing framework for UK corporate governance.