Under the guidelines, released yesterday, Higgs recommends that more than half of company board member be non-executive directors.
But the ACCA said meeting this requirement would be difficult for smaller listed companies to implement, and could result in ‘less qualified and experienced people finding their way into boards.’
Despite welcoming both the Higgs’ report and the accompanying Smith report on Audit committee reforms, David Bishop, chairman of the ACCA’s working group on corporate governance, said some small companies would have to spend ‘considerable resources training and supporting’ the new NEDs.
According to the accounting institute, only 20% of listed companies fulfil the new NED guideline, putting significant strains on some board’s ability to continue working as a unitary team – echoing remarks made by the ICAEW.
The strain will be particularly felt amongst small caps, the ACCA said, even if the wider pool of non-executive candidates is achieved, as they may not have the necessary resources to train and support inexperienced and less well-qualified NEDs.
The ACCA also expressed an area of concern in response to the Smith report on audit committees, which accompanied the Higgs’ report.
It said the requirement that all audit committee members be independent non-executives could result in less-well qualified people, but who met independence requirements, taking decisions in the interests of the company, at the expense of ‘well-qualified non-executives, with experience of industry and an understanding of business processes and risk’.
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