HIGGS COMMITTEE REPORT (2003): A RESPONSE TO THE ACCOUNTING SCANDALS

THROUGH

CORPORATE GOVERNANCE REGIME

-

Shreya Singh1

Abstract
As part of the UK Government's response to the issues raised by Enron and other high-profile
accounting scandals, the DTI commissioned in 2002 Derek Higgs to lead a short independent
review of the role and effectiveness of non-executive directors. The Higgs Report was
published in January 2003 and set out recommendations to increase rigour and transparency
in the appointment process for non-executive directors and to widen the spread of experience
in UK boardrooms. The Report also set out the draft of a revised Combined Code,
incorporating these recommendations, which was intended to become effective from 1 July
2003.
The Higgs Report (2003) had a primary focus on the role and effectiveness of non-executive
directors. The most significant aspects of this report were the recommendations that at least
half of the board of directors (excluding the chairman) should be independent non-executive
directors, and the very detailed definition of the term 'independence'. Thus, this paper would
make a deep study with the help of various cases throughout the world to learn the
effectiveness of independent non-executive directors and the effect of non-compliance to this
principle.
The methodology used would be a qualitative analysis of the report with a critical study of
suggestions made in the report. The main aim of the project is to see the Higgs report in the
context of a wider review of the substance and procedures of corporate governance.
The Higgs Report builds on the Combined Code, which constituted the framework
of corporate governance and which itself results from three different reports i.e.
Cadbury Report, Greenbury Report and Hampel Report. Thus the scope of the
paper would also be to deal with the effects of these reports on the Higgs Report
and consequently on building the Corporate Government Regime to avoid the
accounting scandals which are a menace to the corporate world and a growing
economy on the whole.

1 BBA LL.B (7thSem), College of Legal Studies, University of Petroleum and Energy Studies.

Keywords: Smith Report- Enron- Tyco- WorldCom- Sarbanes-oxley Act of 2002- NonExecutive Directors- Boardroom- Combined Code- Criticism.