Outlook: Higgs does the business in heading off a Sarbanes Oxley

It is impossible to think of any sensible proposal for improving the role and effectiveness of non-executive directors that hasn't been thought of before, so it shouldn't come as any surprise that the Derek Higgs review has so few surprises in it. On one level, his report is no more than a reworking of previous codes and ideas, updated and strengthened to take account of recent scandals. Those hoping for more will be disappointed.

Business and the City, on the other hand, will be counting their blessings, for what Mr Higgs has done is perform the vital public service of defusing the debate and heading off at the pass the army of do-gooders hell bent on root and branch reform or something worse. Post the scandals of Enron and WorldCom, the chances of what Mr Higgs refers to as the corporate equivalent of a Dangerous Dogs Act were high. In the US, they already have one, in the shape of Sarbanes Oxley Act, and jolly poor, divisive, badly thought out, prescriptive legislation it is too.

Previous standard bearers for the corporate governance reviews occasionally foisted on the City by hostile public opinion have generally come bitterly to regret ever taking the job, most notably Sir Richard Greenbury, who by the end thought it a poisoned chalice. The fact that his business, Marks & Spencer, was going to hell in a handcart while he was off undertaking the review is almost by the by. All he got for his trouble was criticism and mockery.

Mr Higgs is a different kettle of fish altogether. He's a former corporate finance adviser and head of investment at Prudential, and as such he's had as much experience as any in dealing with issues of poor corporate governance. As a consequence he's been criticised as a bit of a poacher turned gamekeeper, a perception to some extent supported by the fact that his own position as a non-executive director of British Land is compromised by his role as a former adviser to the company and a consultant to the company's existing investment bank adviser, UBS Warburg. Furthermore, corporate governance has been a big issue at British Land.

Mr Higgs neatly sidesteps the suggestion that his review puts him in breach of his own guidelines by making his recommendations "a counsel for best practice", and not an absolute obligation. It is "a comply or explain" regime that he wants to put in place and it is surely the right approach.

Tiny Rowland, former chairman of Lonrho, once famously described non-executive directors as "decorations on a Christmas tree". In some respects things haven't changed much since. Both Marconi and Cable & Wireless had a star-studded array of non-executive directors, but it didn't stop executives pursuing flawed and high risk strategies in either case. The same is true of Enron, where outright fraud was involved. You can have as many codes, checks and balances as you like, but it isn't going to stop companies occasionally going off the rails, nor should it, for if you removed all risk from corporate life, there would be no innovation, growth or renewal at all.

On the other hand, Wm Morrison has the most politically incorrect board in the FTSE 100, but it's a hugely successful company. Sir Ken Morrison has had to bow to convention with his bid for Safeway by promising to bring in some non-executives, but he'd still sooner have check out girls on his board than non-execs. Cases like Morrison are the exceptions that largely prove the rule and it is why Mr Higgs doesn't want to make his code obligatory or prescriptive. It's right that companies such as Morrison exist, but it is also right that shareholders understand the risks and are content with the explanations.

The crucial thing is that shareholders are able to trust the chairman and chief executive, as well as the mechanisms that hold them in check and make them accountable. It seems to me that the Higgs report provides an excellent blueprint for rebuilding trust in the effectiveness and accountability of the British boardroom. In attempting to strengthen the role of independent non-executive directors Mr Higgs has also come up with some useful suggestions for dealing with the thorny issue of director liability.

This is becoming a serious deterrent to the recruitment of decent non-executives, particularly in the US, for as things stand, the law makes no distinction between executive directors and non-executives. As Equitable Life has demonstrated, non-execs can be held equally culpable when things go wrong. Nobody's going to sign up to a high-risk company if they think they could lose their house in the event of a corporate meltdown.

There are obvious practical problems with some of the proposals, not least with the idea that at least half of all boards are made up of independent non-executives. As things stand, non executives are in a majority in only 20 per cent of cases, and in hardly any of these would all the non-execs be genuinely independent. Even so, Mr Higgs gets 10 out of 10 for his report. As the Government ominously points out, it's now up to shareholders to make sure it's implemented.

Safeway frenzy

A sixth potential bidder is about to enter the battle for control of Safeway, I can exclusively reveal. Yes, it is me. The approach has been made through Jeremy Warner Global Enterprises, a company recently formed especially for the purpose. I know that some of you will dismiss the whole thing as publicity mongering, but I'm deadly serious. In fact I notified David Webster, the Safeway chairman, of my interest some months ago, and am surprised by his failure so far to announce it to the Stock Exchange.

Unlike Asda, Sainsbury, or even Morrison, my offer carries no regulatory risk at all, as I don't have any other business interests to speak of, let alone own a supermarket. As for finance, I'm confident that the long standing keepers of the Warner family overdraft, Royal Bank of Scotland Group, will bankroll the deal. They lent me £10,000 for a second hand car some years ago, so I can't see a problem. I know that RBS is already one of Safeway's bankers. but a similar conflict of interest didn't seem to bother Credit Suisse First Boston. In the end, it's money that speaks and my fee will more than compensate for any resulting reputational damage.

I have to admit to stealing my business plan from Philip Green, a fine man and a model to all us aspiring billionaires. I get £500m back immediately by pushing out the suppliers' credit by a further month. I'll also be asking them for Asda prices or better. They'll scream blue murder but I'm not forcing them to agree. It's just that if they don't they won't be suppliers for much longer.

Sale and leaseback of the freeholds might yield me another £2.5bn, which gets me close to my purchase price. I'm told there's plenty of flab to be cut from the Safeway body before you get down to the bone, and if that's not enough there's always the marrow. Stick some clothing ranges into the mix and bob's your uncle.

To sweeten my offer, I'll be adding some "stub equity", which nobody else has thought of so far. This is an idea I've borrowed from the Isosceles bid for Gateway back in the late 1980s. The rival bidders said the stub would be worth nothing and they were right, but that didn't stop the shareholders thinking otherwise. In any case, it'll get me round the problem of Sir Ken Morrison putting an extra 50p a share in cash on the table, on top of his existing all-share offer. I'm told he'll be playing that card quite soon. Both Archie Norman and Allan Leighton seem to be anyone's right now, so I look forward to them joining my team some time soon. Anyone got Royal Bank of Scotland's telephone number?

Microsoft yield

A reader e-mails to point out that the 16 cents a share dividend declared last week by Microsoft would put the shares on a 0.3 per cent yield, not the 0.003 per cent we reported. It's reassuring, as well as instructive, to know we have such eagle eyed readers, though the point – that Microsoft's dividend yield hardly qualifies the stock as a must for income investors – still stands.

jeremy.warner@independent.co.uk