It might not have registered particularly highly on Rupert Murdoch's radar, but the Higgs code on corporate governance was incorporated into the listing rules for British public companies yesterday. Of course, Rupert might argue that BSkyB, where he is still chairman, has a board structure that doesn't depart too far from Derek Higgs' idea of best practice. Sure Mr Murdoch is not an independent chairman, and there are four other non-executives dependent on 35.4 per cent shareholder News Corporation for their income, as well as two executive directors. But there are also six supposedly independent non-executives.
Independent non-execs are like tea bags - you don't know how strong they are until you add hot water. The fight over whether Rupert's 30-year-old son James is the right person to succeed Tony Ball as BSkyB's chief executive has unleashed gallons of the stuff. Some non-execs have come out more at the lapsang souchong than the PG Tips end of the scale. Lord St John of Fawsley has been seen as so much of a sap that the National Association of Pension Funds wants him booted off the board, while John Thornton's critics wonder how he will manage to keep up with events while running a university in Beijing. The other four indies should be made of sterner stuff: there is the Allied Domecq chief exec, Philip Bowman, Gail Rebuck of Random House, Jacques Nasser, the former Ford firebrand, and the retired Whitehall mandarin Lord Wilson of Dinton.
Now is the time for them to show their worth. The Higgs guidelines are all well and good, but if the non-executives cave in like the English middle order in the face of a hostile executive team, then this does no one any good (apart from the aggressive executives).
Research released tomorrow by The Change Partnership, part of headhunters Whitehead Mann, questions whether many non-executives are up to the job. The survey spoke to executive and non-executive directors of mostly UK-listed companies. It was a small sample, but then again there aren't that many in the roles.
What it found was that over half of non-executive directors felt they were not good enough at challenging executives, which is a key element of what they are supposed to do. Worse, when asked if their boards were performing well, only just over two fifths of directors said "yes". Even with the most generous interpretation, this leaves you with a fifth of directors on underperforming boards, too scared to do anything about it.
The answer is to get good people, and give them damn good training. To get good people you have to pay up and make sure they are legally protected against any future litigation. The Enron and Equitable Life cases have put the frighteners on many potential non-executives. And the Michael Green battle has led them to think they will end up being the puppets of meddling institutional shareholders. But this is to misunderstand the role of non-execs. They are there to represent the interests of shareholders.
Having lots of high-powered non-executives is not always a sign of good governance. Lord Black of Crossharbour has always had good names on his board, yet the media mogul's troubled empire is a black spot of best practice. BSkyB may have thrived in the past as a puppet state of Rupert Murdoch's kingdom, but letting the septuagenarian ride roughshod over the wishes of minority shareholders isn't good for it, or UK plc in general.
The indecisive Mr Green
Philip Green's caring side was shown a while ago when he was told by one of his friends that her husband had left her. "Why?" asked the Bhs and Arcadia owner. "He said he'd been thinking about it for six years and decided he didn't love me any more," she sobbed. "Well, I wouldn't employ him if he took that long to make up his mind," was Mr Green's consoling comment.
Mind you, he doesn't seem to be that much more decisive on Safeway. First he was thinking about bidding, then he told me last month he wouldn't bid. Then he denied that, only to admit on Thursday he wasn't bidding. Unless he changes his mind and bids anyway.
Of course, we all know he won't bid. He's just trying to force Wm Morrison to make a high offer. But Sir Ken Morrison's old enough to remember when Mr Green ran a small-time jeans seller, so he won't be spooked by his dilly-dallying.Reuse content