Blue-chip firms fall foul of Higgs

Boardroom shake-up: Leading companies and businessmen in breach of new corporate governance rules

A large number of blue-chip companies are in breach of a new code on boardroom standards unveiled yesterday by the Government in a bid to prevent an Enron-style corporate scandal hitting the UK.

Well-known business figures who would fall foul of the new clampdown on corporate governance include Lord Marshall of Knightsbridge, Sir Christopher Hogg, Sir Dick Evans and Derek Bonham.

The Higgs inquiry into the role of non-executive directors proposes sweeping changes in the rules, including a ban on individuals being the chairman of more than one major company and an end to the practice whereby chief executives of quoted companies move up to the chairman's job. The review, carried out by the City financier Derek Higgs, also recommends that at least half the directors of public companies should be non-executive and that the roles of chairman and chief executive should be split.

Mr Higgs, a senior adviser with UBS and a director of four other public companies, also calls for the appointment of a senior independent director to company boards to act as a champion for shareholders and says that executive directors should not take on more than one non-executive directorship.

Mr Higgs is deputy chairman of British Land, the property company where John Ritblat combines the roles of chairman and chief executive and where a majority of the board are executive directors. However, Mr Higgs denied that the company was contravening the recommendations in his own report because it had explained to shareholders why it chose not to comply with best practice.

"You are only in breach of my recommendations if you neither comply with them nor explain why you aren't in compliance," he said. "I don't consider British Land to be in breach. If it were I would resign."

According to the corporate governance watchdog Pensions Investment Research Consultants (Pirc), 10 per cent of companies in the All-Share Index currently combine the roles of chief executive and chairman while 24 FTSE 100 companies have an executive chairman. As well as Mr Ritblat at British Land, Charles Brady at Amvescap also operates as chairman and chief executive.

Pirc also calculates that only 31 per cent of FTSE 100 boards meet the independence criteria for non-executives set out in the Higgs review while nearly a quarter of FTSE 100 companies have a current chairman who was previously chief executive. These include Sir John Bond, the chairman of HSBC. Cadbury Schweppes recently said its current chief executive, John Sunderland, would step up to become chairman. Cadbury's current chairman, Derek Bonham, also breaches the new Higgs code because he is also chairman of Imperial Tobacco.

Lord Marshall, a former chief executive of British Airways, is now chairman of BA and the FTSE 100 engineering company Invensys. Other businessmen in breach of Higgs include Sir Richard Evans, the chairman of BAE Systems and United Utilities, and Sir Christopher Hogg, who chairs Reuters and GlaxoSmithKline. The recently appointed Michael Miles at Schroders is also chairman of Johnson Mattheys.

However, only 95 or 3.4 per cent of the 2,809 directors in the FTSE 350, would be affected by moves to stop executive directors holding more than one non-executive post, according to the management consultancy firm Metapraxis.

Mr Higgs, whose recommendations should start affecting companies from July, said the pay of non-executives should rise "modestly, but not as a major step change".