Higgs failing to change UK boardrooms

Jan 11 2006 by Nic Paton Print This Article

British boardrooms remain conformist and conservative, and the role of non-executive directors is still unclear, despite the Higgs governance reforms, research has suggested.

The shake-up of boardrooms in the wake of the Higgs report has failed to materialise, added the research by business school Roffey Park and HR consultancy Cedar International.

Under the Higgs reforms, non-executive directors should be scrutinising and judging board strategy and performance, but more than not are failing to do so, it argued.

"Our study has highlighted how boards are becoming overly risk-averse with an emphasis on box-ticking style compliance rather than embracing diversity and utilising non-executive directors from a range of different backgrounds," said Linda Holbeche, head of research at Roffey Park.

The study of chief executives, chairmen, board directors and non-executive directors (Neds), along with trainers and recruitment experts, also found there was little appetite in British boardrooms to alter the status quo.

Board selection was frequently a closed shop, with non-execs drawn from listed public companies and, therefore, more likely to embrace a conservative approach to boardroom debate.

Little help was provided to help non-execs develop and make a significant impact.

"The non-executive director can play an important and beneficial role in business strategy and development, yet there is still a lack of clarity about what the non-executive director's role is but the perception exists that the task is becoming increasingly onerous," said Roffey Park chief executive John Gilkes.

This, combined with boards' preference to seek known candidates who will value unity, is discouraging potential Neds," he added.

Diversity amongst Neds can help an organisation broaden its thinking and, despite Higgs' recommendations, the study suggested there has been very little change in the last three years.

"Old boy networks" continue to appoint each other to boards creating a stale atmosphere, it suggested.

This was contributing to the pool of Neds becoming shallower and making it more difficult for forward thinking businesses to find Neds.

"The need to develop a wider talent pool of potential Neds should be seen as a national business priority," said Gilkes.

"Board development and evaluation needs to be taken more seriously and Neds must be offered plenty of formal support to enable them to play a significant part in making the boardroom a more dynamic and debate filled arena," he added.

Legislation in recent years has raised corporate governance to the top of the boardroom agenda, and the way governance is being exercised may be having a negative effect on business success, the report also suggested.

By taking a diverse approach to selecting Neds and enabling them to become fully involved at board level, Neds may be the solution when looking to balance legal and strategic considerations, it added.