Corporate Governance

Report

The Cadbury Committee report defines it as “the

system by which companies are directed and

controlled”.

CORPORATE GOVERNANCE

Set up in May 1991. It was formed by the Financial Reporting

Council, the London Stock of Exchange and the accountancy profession.

Its objective being “to help raise the standards of corporate governance and the level of confidence in financial reporting and auditing by setting out clearly what it sees as the respective responsibilities of those involved and what it believes is expected of them.”

CADBURY COMMITTEE

REPORT

In December 1992, the Cadbury Committee published their Code of Best Practice.

The recommendations included separating the roles of CEO and chairman, having a minimum of three non-executive directors on the board and the formulation of audit committees.

The Code also advocated that a more active role be taken by institutional investors in the promotion of good practice in corporate governance.

CADBURY COMMITTEE

REPORT

The report was mainly divided into three parts:-

1.Reviewing the structure and responsibilities of Boards of Directors and recommending a Code of Best Practice

2.Considering the role of Auditors and addressing a number of recommendations to the Accountancy Profession

3.Dealing with the Rights and Responsibilities of Shareholders

CADBURY COMMITTEE

REPORT

Reviewing the structure and responsibilities of Boards of Directors and recommending a Code of Best Practice

1. Board of directors:meet regularly, retain full and effective control over the company and monitor the executive managementbalance of power and authority

CADBURY COMMITTEE

REPORT

2. Non-Executive Directorsindependent judgmentindependent of management and free from any business

3. Executive Directorsfull and clear disclosure of directors’ total emoluments

4. Financial Reporting and Controlsa balanced and understandable assessment of their company’s positionshould report that the businessshould ensure that an objective and professional relationship is maintained with the auditors

CADBURY COMMITTEE

REPORT

Considering the role of Auditors and addressing a number of recommendations to the Accountancy Profession •external and objective check•professional and objective relationship between the board of directors and auditors should be maintained•to design audit•regular rotation of audit partners to prevent unhealthy relationship

CADBURY COMMITTEE

REPORT

Accountancy Profession should take the lead in:- (i)developing a set of criteria for assessing effectiveness; (ii)developing guidance for companies on the form in which directors should report; and (iii)developing guidance for auditors on relevant audit procedures and the form in which auditors should report.

CADBURY COMMITTEE

REPORT

Dealing with the Rights and Responsibilities of Shareholders •elect the directors to run the business on their behalf•appoint the auditors to provide an external check•Committee's report places particular emphasis on the need for fair and accurate reporting of a company's progress to its shareholders•to make greater use of their voting rights and take positive interest in the board functioning•effectiveness of general meetings could be increased

CADBURY COMMITTEE

REPORT

Thank You