UK – Former S G Warburg banker Derek Higgs made his recommendations on reforming the role of non-executive directors (see separate story). Below is a summary of Higgs’ key proposals:

-Board’s role to be described, with meetings stated in the annual report, together with the attendance of individual directors
- Board should be of an appropriate size with at least half
the members of the board, excluding the chairman, should be independent non-executive directors

-The roles of chairman and chief executive should be separated and the division of responsibilities between the chairman and chief executive set out in writing
-A chief executive should not become chairman of the same company

Non-executive directors
-Role of the non-executive director should be described
-Non-executive directors should meet as a group at least once a year without the chairman or executive directors present and the annual report should include a statement on whether such meetings have occurred
-Prior to appointment, potential new non-executive directors should carry out due diligence on the board

Senior independent director
-A senior independent director should be identified who meets the test of independence set out in the Review. The senior independent director should be available to shareholders

-All directors should take decisions objectively in the interests of the company, with a definition of independence to be proposed

Recruitment and appointment
-Nomination committee of the board to conduct the process for board appointments and make recommendations to the board
-Nomination committee should consist of a majority of independent non-executive directors
-Board should set out to shareholders why they believe an individual should be appointed to a non-executive directorship pool of candidate should be broadened

Induction and professional development
- Comprehensive induction programme should be provided to new non-executive directors
- Performance of the board, its committees and its individual members, should be evaluated at least once a year

-The remuneration of a non-executive director should be sufficient to attract and fairly compensate high quality individuals.
- Non-executive directors should not hold options over shares in their company

Relationships with shareholders
- All non-executive directors, and in particular chairmen of the principal board committees, should attend the Annual General Meeting (AGM) to discuss issues that are raised in relation to their role
- The senior independent director should attend sufficient of the regular meetings of management with a range of major shareholders to develop a balanced understanding of the themes, issues and concerns of shareholders
- The senior independent director should communicate these views to the non-executive directors and, as appropriate, to the board as a whole
- Boards should recognise that non-executive directors may find it instructive to attend meetings with major investors from time to time
- On appointment, meetings should be arranged for non-executive directors with major investors, as part of the induction process
- A company should state what steps it has taken to ensure that the members of the board, and in particular the non-executive directors, develop a balanced understanding of the views of major investors
- The Review endorses the Government’s approach to more active engagement by institutional shareholders with the companies in which they invest. Institutional investors should attend AGMs where practicable.