The Higgs Report (2003)The British government asked Sir Derek Higgs to evaluate the role, quality, and effectiveness of nonexecutive directors. Higgs recommended that at least half of the board be nonexecutive directors, that the board appoint a lead independent director to serve as a liaison with shareholders, that the nomination committee be headed by a nonexecutive director, and that executive directors not serve more than six years on the board.

The Higgs Report also advised boards to undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors.Higgs believed that the elevated status of nonexecutive directors on the board would be pivotal in creating conditions for board effectiveness. The UK Higgs Report suggested that the professional directors could be a possible sources of non-executive directors.

Required

Illustrate the qualifications of non-executive directors should hold by using appropriate examples.

Explain why the Higgs Report recommended 1) that at least half of the board be nonexecutive directors, that the board appoint a lead independent director to serve as a liaison with shareholders, 2) that the nomination committee be headed by a nonexecutive director, and that executive directors not serve more than six years on the board.

Discuss the advantages and disadvantages of having a professional director to work as a full-time non-executive director in the board.