Sir Derek Higgs: Banker and chairman of Alliance & Leicester who brought sweeping reforms to Britain's boardrooms
Wednesday 30 April 2008
Derek Higgs enjoyed a glittering business career, first in investment banking and latterly as a company director of blue-chip businesses such as Prudential and Alliance & Leicester. However, it is for his work as a regulator and City reformer that he will be best remembered; his sweeping reforms to the way British companies are governed were hugely controversial when he drew them up in 2003, but are now widely accepted.
Higgs was born to a wealthy family in Coventry in 1944; his father was a building-society branch manager who went into property development in that city after the Second World War, and profited handsomely. Derek became a lifelong fan of Coventry City football club – later serving as a director (and losing a considerable amount of money when the club got into difficulties).
The son was not to benefit from the father's £25m fortune, which was instead left to set up the Alan Edward Higgs charity, whose aim is to benefit those living within 25 miles of Coventry. Higgs, who remained a trustee of the fund until his death, explained in an interview that his father believed that inherited wealth did more harm than good and could take away pride and self motivation. That belief seemed to serve Derek Higgs well.
He trained as an accountant with Price Waterhouse after graduating in Economics from Bristol University, but moved into merchant banking with Barings in 1969, the year before his marriage to Julia Arguile. However, it was at S.G. Warburg – which he joined in 1972 – that he found his true home, staying for 24 years. There he quickly stood out as one of a new breed of bankers who attained their positions on merit and lacked the grandness of their predecessors. He was swiftly promoted and by the 1980s had become one of Britain's foremost deal-makers, notably working on the hostile takeover of Debenhams by the Burton Group at the height of the 1980s deal boom, a cause célèbre at the time.
He left the bank in 1996 to become a director of Prudential, the life insurance company, and chairman of its fund management business, lured by Sir Peter Davis, who hoped to utilise Higgs's skill as part of his attempt to reinvigorate a grand old name of British business that had become mired in scandal as a result of pension mis-selling.
In 2000 Higgs stepped down to concentrate on a variety of part-time roles but found himself at the centre of a storm when he was appointed by Gordon Brown, then Chancellor of the Exchequer, to undertake a review of the role and effectiveness of the non-executive directors in Britain's boardrooms. The resulting report, published in 2003, generated huge controversy, prompting the former Dixons chairman Sir Stanley Kalms to describe Sir Derek as "a previously intelligent banker who has obviously been brainwashed".
Among its provisions was a call for boards to hold a majority of "independent" non-executive directors; for the senior non-executive director to be given a greater role in communicating with shareholders; and for an end to the practice of people holding the chairmanship of more than one FTSE 100 company. He also wanted to see a strict separation between the roles of chairman and chief executive at leading companies.
Higgs, generally affable and approachable in public, took on his critics in combative style, but privately some of the brickbats sent his way caused him considerable pain, not least because companies were given the option to offer an explanation if they felt they had good reasons for not complying with the rules. Many of his supporters noted that his loudest critics were often those whose companies could most do with a dose of the Higgs' reforms.
While the reforms were watered down to an extent before being incorporated into the Combined Code on Corporate Governance, many of those who at first criticised the rules have come to see them as very much working in the City of London's best interests.
The Higgs reforms, in fact, were a notable example of principles-based "light touch" regulation and Derek Higgs always made it quite clear that the rules were not intended to be a straitjacket. The flexibility this afforded – by contrast to more rigid approaches such as those adopted in the United States – has done much to enhance London's attractiveness as a venue for international companies looking to raise capital and list shares.
After the report, Higgs returned to his part-time directorships. He was appointed chairman of Nicola Horlick's Bramdean Asset Management in 2004 and became chairman of Alliance & Leicester in 2005 when, true to his report, he stepped down from many of his other directorships.
However, he was again involved in controversy earlier this month when it emerged in A&L's annual report that it was consulting shareholders about easing a key performance target in its incentive plan for directors. In the report, Higgs said the bank had been treated unfairly by the City, arguing that the collapse of Northern Rock had wrongly thrown the spotlight on his company and that commentators had failed to recognise how different the two companies' business models were.
But, it is the Higgs code on corporate governance that will be seen as his lasting legacy. As time has passed, the reforms have become less controversial, with companies recognising the value of complying with a system that exemplifies best practice – a testament to the quality of Derek Higgs's work.
Derek Alan Higgs, banker: born Coventry 3 April 1944; chartered accountant, Price Waterhouse 1965-69; corporate finance executive, Baring Brothers 1969-72; corporate finance executive, S.G. Warburg 1972-86, Head of Corporate Finance 1986-94, director 1987-96, chairman 1994-96; chairman, Prudential Portfolio Managers 1996-2000; director, Prudential 1996-2000; chairman, Parnerships UK 2000-07; Head, Inquiry into Role and Effectiveness of Non-executive Directors 2002-03; chairman, Bramdean Asset Management 2004-08; Kt 2004; chairman, Alliance & Leicester plc 2005-08; married 1970 Julia Arguile (two sons, one daughter); died London 28 April 2008.
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