The cadbury committee report on corporate governance

The Cadbury Committee was set-up in May 1991 by the Financial Reporting Council of the London Stock Exchange.

The committee published its report in December 1992.

Adrian Cadbury the chairman of the Cadbury committee.

The report sets out recommendations on the arrangement of company boards and accounting systems to mitigate corporate governance risks and failures.

1. The cadbury committee report on corporate governance Kalhari- 16YACMD080

2. INTRODUCTION The Cadbury Committee was set-up in May 1991 by the Financial Reporting Council of the London Stock Exchange. The committee published its report in December 1992. Adrian Cadbury the chairman of the Cadbury committee. The report sets out recommendations on the arrangement of company boards and accounting systems to mitigate corporate governance risks and failures . Reasons..

3. The code of best practices Role of Board of Directors, duties of the board and its compositions. Role of Non-Executive Directors. Dealing with their Remunerations. Addressing questions of financial reporting and financial controls.

4. 1. Role of Board of Directors, duties of the board and its compositions. The board should meet regularly. The board should include non-executive directors of sufficient caliber. All directors should have access to the advice and services of the company secretary.

5. 2. Role of Non-Executive Directors. Non-executive directors should bring an independent judgment. Non-executive directors should be appointed for specified terms. Non-executive directors should be selected through a formal process.

6. 3. Dealing with their Remunerations. It recommend that future service contracts should not exceed three years without shareholders. The remuneration of directors should be both fair and competitive. The Annual General Meeting provides the opportunity for shareholders

7. 4. Addressing questions of financial reporting and financial controls. It is the board’s duty to present an assessment. Professional relationship is maintained with the auditors. Establish an audit committee.

8. Cont.. The directors should explain their responsibility for preparing the accounts. The directors should report on the effectiveness of the company’s system of internal control. The directors should report that the business is a going concern.

9. The major recommendations A single person should not be vested with the decision making power. The Non-executive directors should act independently. A majority of directors should be independent non- executive directors. The term of the Directors can be extended beyond three years only after the prior approval of the shareholders.

10. CONT.. A remuneration committee with majority of non- executive directors should decide on the pay of the executive directors. The interim company report should give the balance sheet information and reviewed by the auditor. The information regarding the audit fee should be made public and there should be regular rotation of the auditors.

11. Cont.. An objective and professional relationship with the auditors must be ensured. It must be reported that a business is a growing concern.

12. Conclusion Compliance with the Code of best Practice was not enforced and it was not mandatory. How ever, many firms conformed because they did not want to fall victim to the destructive consequences resulting from the disregard of corporate governance.