Wednesday, October 18, 2006

Why a majority of NEDs on UK boards?

I must admit that I cannot see reasons that are good enough for increasing the number of non - executives on the boards of listed UK companies to a majority, as recommended by Higgs and now incorporated into the Combined Code. If the team of non - executives is made up of strong members, unafraid to speak their mind, directors of "sufficient calibre" then it makes no difference whether they are in the majority or not. Even if they are not headstrong then a total of three NEDs would well suffice in most cases.

This provision leads to a far worse scenario for the companies in question from a business perspective, as the executives, with detailed, finger-on-the-pulse knowledge can easily be outmanoeuvred by non-executives who may not have sufficient understanding of the business and its needs. To move away from Cadbury's requirement of numbers that carry significant weight is taking it a step too far.

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