FDs split on Higgs reforms and non-executive power

Link: FRC hints at Higgs concessions

This week’s Accountancy Age/ Reed Accountancy Big Question found that 27% of those questioned thought that non-executive directors would have too much power if Higgs’ proposals were implemented fully, while 38% believe they will not cause a significant alteration in the power base. A further 35% were unsure how much the report will affect the boardroom workings.

A major concern of those worried about the proposals was that non-executive directors would be making decisions without having the necessary knowledge to do so, or at least less knowledge than executive directors.

‘Non-executive directors would only have a degree of understanding of the business’ day-to-day activities so critical decisions may be made on limited knowledge,’ said one financial director.

‘The balance of power is being moved too much in one direction,’ complained another.

Even from those who feel the proposals are positive, there are concerns over some of the practicalities involved.

‘There is a big assumption that there are sufficiently high quality non-execs available to make recommendations workable,’ said one respondent. ?Non executives need to take a closer involvement in the company. It will not be enough to simply turn up to board meetings.?

‘What a board needs is more expertise in an increasingly complex world rather than less,’ said another.

‘Explaining company specific technical points to existing non-executives is bad enough, let alone having half a board full of them.’

Others however were much more optimistic about the proposals. ‘This is a step in the right direction, anything that gives reassurance to investors must be a good thing,’ said Mark Stephens, financial director at Sappi Nash Mills.

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