The Higgs report was commissioned by the government in response to the revelations of fraud at two giant US corporations, Enron and WorldCom, and disastrous management decisions at firms such as Amey and Atkins.
The recommendations include barring a chief executive from becoming chairman and ensuring that executive directors do not outnumber their non-executive minders. They will not become law, but companies will be expected to follow them once the final report is published this summer.
A number of contractors and consultants, including Carillion and WSP, are examining the composition of their boards.
A spokesperson for Carillion said: “We shall be addressing the recommendations of the Higgs review in relation to Carillion. If we conclude that any changes are needed we will make them progressively over time.”
Carillion is in breach of the proposed guidance because its chairman, Sir Neville Simms, was previously chief executive and has sat on the board for longer than 10 years. The Higgs report says that if these rules are broken, the chairman of the company cannot be considered independent.
Mike Jeffries of Atkins falls foul of Higgs’ recommendations as he is chief executive and chairman of the company. Housebuilder Wilson Bowden only separated the roles this week.
A prospective non-executive director at consultant WSP turned down the role after the Higgs report was published. He already held a non-executive and an executive post at another firm. Higgs advises against an executive director holding more than one external non-executive post. WSP chief executive Chris Cole said: “It was disappointing for us and disappointing for him.”
Cole criticised the report for recommending that there must be the same number of non-executive directors as executives on a main board. Four of the five leading consultants – according to the top 200 consultants table in Building (27 September 2002) – are in breach of this rule.
