Guernsey Firms Anxious Over Higgs Review Recommendations

by Robin Pilgrim, LawAndTax-News.com, London

12 August 2003

In a commentary recently published for the local business community, the Guernsey branch of the Institute of Directors (IoD) examined the potential impact of recommendations made in the Higgs Review, which dealt with corporate governance issues, focusing in particular on the role and effectiveness of non-executive directors.

Key among the 55 recommendations published in January were proposals which stipulated that at least half of a firm's board, excluding the chairman, should be independent non-executive directors, and that the roles of chairman and chief executive should be separated.

The review was felt by many in the United Kingdom, and by subsidiaries of UK firms located in the Channel Islands, to be overly prescriptive in its approach to improving corporate governance. However, according to Carol Goodwin, of the Guernsey IoD:

'The amendments and changes made as a result of a UK working group's redrafting look remarkably close to those recommended by the IoD.'

In a recent report on the subject, Ms Goodwin warned that when the new code takes effect for UK listed firms in November, local subsidiaries of UK banks, and Guernsey firms listed on the UK's Alternative Investment Market (AIM) may be obliged to adopt all of the recommendations.

She went on to suggest that Island-based companies not affected directly by the review should apply the new code's provisions as appropriate to the size, structure, and complexity of their operations.

According to the local media, however, the forthcoming reforms are unlikely to be welcomed by the Island's business community. The Guernsey Press and Star, reporting on the IoD commentary, quoted an unnamed industry source as observing that:

'Searching for non-executive directors will be like bobbing for apples - it will cost money, be messy and there will be no guarantee of a tasty result.'

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