Corporate scandals boost UK campaign for effective non-executives

A seminar in London yesterday outlined just some of the possible changes to corporate governance in this country that would help Britain avoid a WorldCom, an Enron, or even another Marconi.

In a meeting headlined "The Effective Non-Executive Director", Pirc, the pensions and investment research consultants, called for a series of changes to make UK boards more effective.

Its proposals, made in the light of the ongoing Higgs review on the role and effectiveness of non-executive directors, included:

* Encouraging more boards to have a majority of non-executive directors over executives. Three- quarters of FTSE 100 companies have a majority of non-executives on the board, it says, but this is not the case in most midcap or smallcap groups.

* Making sure non-executives are genuinely independent rather than chums of the chief executive or non-executives of more than 10 years. Pirc says only 20 per cent of FTSE 100 boards have a majority of independent non-executives.

* Appraising of board members. "We want to be told that all board members are pulling their weight," Pirc says.

* A widening of the pool of non-executives. For example there has been a call for boards to in include union leaders, academics and other professionals. Companies could openly advertising for new recruits.

* Better resources for non-execs. This could include secretaries and researchers as well as access to independent research and advice.

* More contact between non-execs and shareholders. This would take more time and require higher fees.

* Question the future of the unitary board. "Perhaps we should be questioning whether trying to combine supervisory, advisory and executive functions in one body is tenable," Pirc's managing director, Alan MacDougall, says.

Other proposals made included paying chief executives higher base salaries but abolishing share options, lengthening fund management contracts and allowing remuneration committees to choose their own independent consultants.