The Higgs reforms will be painful for some, but protesting
against them could make things worse, says Chris Quick
Critics of the Higgs review on the role of non-executive directors will be aware that they wouldn' t have got away with speaking their minds in last year' s climate of corporate scandals. But now that the attentions of the government and press are distracted by other matters, they feel they can voice their concerns, without fear of vilification, over the tightening up of rules affecting non-executives and company boards put forward by Higgs.
they will give the proposals their bite.
This will mean that, for all accounting periods beginning after 1 July this year, companies will have to comply with the new guidelines, or explain why they haven' t.
Some recommendations - such as splitting the roles of chief executive and chairman and a new independence test for at least half the directors of a board - will require significant changes by some companies.
Among the protests, calls have emerged from bodies such as the ICAEW and the London Stock Exchange for a rewriting of Higgs' suggested changes to the code.
Bending over backwards not to be seen to criticise the review itself - Higgs, after all, is a chartered accountant - these bodies argue that they are pro-Higgs but have concerns about the way this code has been drafted. They also want implementation delayed for six months.
It is, they say, too ' prescriptive' and risks the UK ' inadvertently creating a system of box-ticking' . There are also concerns that shareholders might view any departure from the code with suspicion, however reasonable or understandable the explanation.
If I were an institutional investor, I might regard such a view as less than flattering. And indeed, in a letter to the last month, 15 institutional investors, calling for the Higgs recommendations to be instituted without delay, said they would continue to give consideration to meaningful explanations of why a company was not complying with the Combined Code.