Insight - Higgs rules OK.

(From Financial Director)

Byline: Sarah Perrin.

Derek Higgs' first draft of the revised Combined Code virtually doubled the number of provisions. Under the Listing Rules, provisions must be complied with, or if not, an explanation given. Paul Chisnall, an executive director at the British Bankers Association, says: "The overriding concern was that the Code had become less 'comply or explain' and more 'comply or else'."

Peter Wyman, a partner at PricewaterhouseCoopers and member of the Financial Reporting Council's rewrite team, agrees the original version lacked the flexibility that Higgs himself wanted. "Once the Code was redrafted to allow that flexibility and to ensure that the 'comply or explain' approach would survive, people found they had very little they disagreed with - even though nothing of great substance had been changed," Wyman says.

The FRC's rewrite team redrafted most of the additional provisions as principles, creating a new category of "supporting principles". Companies must explain in their own words how they have applied all these principles.

The result is that the Code has not been watered down, but softened. "Nothing was given away," he says.

One aspect of Higgs' draft, seen as misconceived, has been changed. Higgs' original Code said that while the nomination committee could include the board chairman, it should be chaired by an independent non-executive. The revised Code says the board chairman may chair the nomination committee, except when dealing with the appointment of a successor to the chairmanship.