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Wednesday, 27 February, 2002, 10:40 GMT
Probe launched into non-executive directors
DTI Secretary Patricia Hewitt
DTI Secretary Patricia Hewitt to launch probe

The UK government is to launch an inquiry into the role of non-executive company directors as part of a bid to tighten safeguards against Enron-style corporate failures.

The inquiry, to be announced later on Wednesday by Trade and Industry Secretary Patricia Hewitt, reflects concerns that non-executive directors may not be independent enough to blow the whistle on questionable boardroom decisions.

A separate government inquiry, also to be announced on Wednesday, will look into whether the commercial interests of supposedly independent auditors have become too closely aligned with those of their corporate clients.

The government has asked Sir Peter Davis, chief executive of the UK's second-biggest supermarket chain, Sainsbury's, to head up the review into non-executive directorships, according to press reports.

Independent role

The inquiry into the role of non-executive directors - appointed to protect shareholders' interests - is expected to look at ways of distancing them from boardroom influence.

British non-executive directors tend to be selected from a limited number of leading business figures, raising fears that close professional relationships with company directors may compromise their independence.

The probe into the audit profession, meanwhile, is expected to consider forcing companies to switch to different accountancy firms at regular intervals, among other remedies.

Enron's non-executive directors included former UK energy minister Lord Wakeham, who has temporarily stepped down from his current position as chairman of the Press Complaints Commission in order to assist with a US inquiry into the company's collapse.

Debt auction

The energy giant's London-based European operation - now in administration - owes about $1bn (600m).

The launch of the government probe on Wednesday coincides with an auction of office equipment and other physical assets at Enron's London office, designed to raise money to meet some of the company's bills.

The collapse of the former energy trading giant, which left investors out of pocket and wiped out many employees' retirement savings, has been blamed on inadequate checks by its auditors Andersen, and lax controls within the company.

Enron had hidden crippling debts through a series of complex financial partnerships.

Enron and Andersen are both facing legal challenges from aggrieved investors and former employees.


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26 Feb 02 | Business
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