Keep board reforms tough

IF Derek Higgs had his way we would just be entering the new age of powerful non- executives. Every board of management would have a senior non-executive through whom dissident shareholders could vent frustration.

But not a bit of it. Powerful company chairmen, the CBI and other business interests have watered down the Higgs model. One has to wonder what might have happened at Carlton and Granada had Fidelity and other disgruntled shareholders had an efficient means of letting the board know of their unhappiness at management dispositions.

A difficulty at present is that so many non- executives have to operate with one arm behind their back. A new survey by BDO Stoy Hayward, conducted among 100 non-execs, found that in most cases they are being told only what management wants them to hear.

Almost a quarter of non-execs have turned up at board meetings to be met with an unpleasant surprise. Often they are kept ignorant of key business risks, including accounting irregularities and perhaps most significant, in this week of all weeks, of shareholder concerns.

The problem is not confined to financial issues. Many are kept uninformed of matters such as consumer satisfaction and health and safety.

Again there is a telling lesson here in the light of Matt Barrett's careless comments on credit cards and the new disclosure on Jarvis and the railways.

All this suggests that Trade Secretary Patricia Hewitt and the Financial Reporting Panel which advised her have been wrong to allow themselves to be blown off course over Higgs.

A robust, independent director, with the ability to get at shareholder concerns and cause a stink in the boardroom, would be a welcome protection against arrogant chairmen and executives seeking to disguise mistakes.

Heart trouble

SPARE a thought for Astra-Zeneca. It produces a bumper set of third- quarter results, then along comes The Lancet medical journal to prick its confidence.

The drugs group has been remarkably successful in graduating wholesalers and patients from its ulcer pill Prilosec (now out of patent) to its successor Nexium. But much of the focus at AZ at present is on its anti-cholesterol drug Crestor.

Because it has seen Crestor as its next blockbuster, with eventual sales in excess of $1bn a year, there is strong media, analytical and medical interest in its progress.

This has been heightened by the fact that the company is committing a $1bn promotional campaign to the drug that is a latecomer in a crowded field.

Indeed, the scale of the push is already paying off in the American market where just weeks after launch it is claiming more than 2% of the prescriptions written - a phenomenal start.

Then, right on top of the quarterly figures, comes a tendentious Lancet editorial that challenges the marketing strategy approved by chief executive Sir Tom McKillop.

It claims that his approach 'raises disturbing questions about how drugs enter clinical practice and what measures exist to protect patients from inadequately investigated medicines'.

McKillop has hit back with a letter to The Lancet's editor. He argues: 'Crestor is an extensively studied and well-tolerated drug with a safety profile comparable to other marketed statins ( compounds used to deal with cholesterol).'

He notes that 80% of patients reach the goals of reducing cholesterol levels, thereby heading off heart disease.

AZ would say that, of course. Although the company has an excellent drugs pipeline, it needs mass market compounds to keep earnings moving up. There is concern- rightly - that the sums it is spending on promotion will eat into the profitability of Crestor. But, as critically, there is a moral question as to whether forcefeeding the medical profession and patients with any new drug can be justified.

Based on AstraZeneca's track record, investors appear willing to give the firm the benefit of the doubt. But the commercial (as opposed to the clinical) issues raised by The Lancet may still be valid.

In the bag

SO in the end Debenhams' gamble on paying CVC/Texas Pacific a fee to bid against Permira in the battle for control has paid off.

Credit must go to Simon Borrows of Greenhill for coming up with the device of paying up to £6m of costs for the second bidder.

Shareholders were right to question the payment. But in an era when it is private equity companies doing the bidding rather than PLCs - which can put advisers' fees through the profit and loss - it may yet prove a precedent.