Rudd lays into 'absolutely barmy' Higgs reforms

Sir Nigel Rudd, one of Britain's leading industrialists, yesterday became the first influential figure to voice growing concerns in the Square Mile that the Derek Higgs review of company boardrooms could seriously harm the City.

Sir Nigel, who is non-executive chairman of the glassmaker Pilkington and the motor dealer Pendragon, said some of Mr Higgs's suggestions were "absolutely barmy", and could undermine good corporate governance in the UK.

"A lot of what Derek Higgs said is common sense, but you could say it was stating the bloody obvious, and what good companies do already. I increasingly come to the conclusion that we didn't need [the review]," Sir Nigel said.

While other business grandees have so far been unwilling to articulate their fears publicly about the potential impact of the Higgs review, Sir Nigel's views are believed to be supported by other executives at FTSE 100 companies.

The City veteran, who is also non-executive chairman of the safety products manufacturer Kidde and a board member of Boots and Barclays, said he chose to speak out to try to persuade the Government not to include all of Mr Higgs's findings in the Combined Code.

Mr Higgs's central premise, that companies should be free to decide they do not want to comply with his recommendations on corporate governance but ought to justify the breach to shareholders, came in for particular criticism from Sir Nigel.

"The problem with making companies comply or explain is that the explain part would be lost within a year. Even if some people at a company and institutional shareholders think something is good for the company, if it doesn't comply with the code, the compliance people at a company will vote against it," Sir Nigel said.

He warned that the Higgs review would add to the growing amount of concern in the City to be seen to fulfil corporate governance codes in order to avoid a public roasting by shareholder bodies and the media.

Sir Nigel reiterated widespread fears in the City that Mr Higgs's report, commissioned by the Government last year to try to prevent a repeat of the Enron and WolrdCom scandals in the UK, could undermine the role of the chairman on British boards. "The senior independent director will take power away from the chairman, which is quite insidious," he said. "It is also absolutely barmy that the chairman can't be chairman of the nominations committee because the chairman should have the best idea about how the board is performing and working together."

Sir Nigel's position goes against the Higgs review proposal that an individual should not be chairman of two companies. He said: "It should be up to boards to decide someone has enough time to do the job."