ABI attacks Higgs reforms of UK boardrooms
The powerful Association of British Insurers yesterday became the first major voice representing institutional investors to attack Derek Higgs' review of UK boardrooms.
The organisation, whose members control 20 per cent of the stock market, said the review could lead to the "most prescriptive corporate governance code the UK has yet seen".
Peter Montagnon, head of investment affairs at the ABI, said Mr Higgs had completed an "eminently sensible analysis" of the role of non-executive directors in the boardroom.
But he added that Mr Higgs had been "hasty" in the way he had translated his findings into proposals for change.
The ABI is particularly concerned about the likelihood that under Higgs boards would become more "collegiate", by giving the senior non-executive director as well as the chairman responsibility to pass the views of investors on to other directors.
Mr Montagnon also raised the alarm about Mr Higgs' key concept that companies that do not want to comply with his proposals should be free to explain why not.
He said that "comply or explain" should in fact put companies under pressure to step into line unless they had very good reasons. But, given the lack of support for aspects of Higgs in the City, "this rule could be debased" because companies would not feel under any pressure, Mr Montagnon said.
Meanwhile, Terry Smith, the outspoken chief executive of the stock brokers Collins Stewart, labelled the Higgs review "nonsense". Mr Smith's fear was that rather than giving companies too free a rein to explain, the code would in fact put directors under pressure to comply in order to avoid opposition from the corporate governance lobby. "I believe in flexibility like I believe in the tooth fairy," Mr Smith said.
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