7.1.5 Combined Code 2003, 2006 and 2008

The recommendations of the Higgs Committee and the Smith Committee are used for the revised Combined Code of 2003 (Financial Reporting Council 2003: 1). The Combined Code of 2003 incorporates a list of seven independence criteria (code provision A.3.1) and the requirement that half of the board should comprise independent NEDs (A.3.2). The list of independence criteria is a difference with respect to the previous Combined Code of 1998. In accordance with the proposed definition of the Higgs Committee, the Combined Code 2003 states that the board should determine the independence of a NED in code provision A.3.1: ‘The board should state its reasons if it determines that a director is independent notwithstanding the existence of relationships or circumstances which may appear relevant to its determination.’ The seven independence criteria are relationships or circumstances that must be considered, but there might be others. The Combined Code 2003 does not only focus on independence in form, but considers independence in fact and in appearance as well.

The Combined Code 2003 did not include suggestions by the Higgs Committee for the role of the NEDs, but included them in the appendix. With respect to structure the Combined Code, in addition to main principles, also has supporting principles and code provisions. To help companies in applying the internal control and risk management recommendations, an update of the Turnbull Report was published in October 2005 (Turnbull Review Group 2005: 1-2). In 2006 and 2008 the Combined Code underwent some adjustments, but these were not focused on independence-related issues (Financial Reporting Council 2006; 2008).