This was damaging both to the British economy and to the City of London as a market for investors. This series of situations prompted the Stock Exchange to launch the Cadbury Inquiry into the financial aspects of corporate governance in 1990. Corporate governance had become important.
The Cadbury Committee Report of December 1992 defines corporate governance (CG) as ‘a system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders’ role in governance is to appoint the directors and the auditors and to satisfy themselves that the appropriate governance structure is in place.’ The Higgs Report, 10 years later, however, defined CG as, ‘a system that provides an architecture of accountability – the structures and processes to ensure companies are managed in the interests of their owners.’ The OECD Report of April 1998 provides an international view of corporate governance. It says that ‘Corporate governance comprehends that structure of relationships and corresponding responsibilities among a core group consisting of shareholders, board members and managers are best designed to foster the competitive performance required to achieve the corporation’s primary objective.’
A number of best practices code in CG has emerged as a result …
andard good practices for all company related matters such as board composition and development, remuneration, accountability and audit and relations with shareholders. The Cadbury Committee (1992) recognised that the board of directors in a company should be free to drive their companies ahead but at the same time function within a framework of accountability. The Code was updated by the Hampel Committee in 1998, embracing the recommendations of the Cadbury and Greenbury committee, as well as the Hampel committee. The Combined Code was updated in 2003 with the recommendations of the Higgs Report about the role of non-executive directors and the role of the audit committee (the Smith Report). During this time the UK Government also confirmed that the Financial Reporting Council (FRC) was to have the responsibility for publishing and maintaining the Code. In 2006, further changes were made by the FRC to the code. The latest consultations on a proposal to revise the Combined Code will end in March 2010, after which the UK Corporate Governance Code, as it will be known, will apply to financial years beginning on or after 29 June 2010. First introduced in 1998, The Combined Code has been updated at intervals. The current version of the Code isthe June 2008 edition, which applies to accounting periods beginning on or after 29 June 2008. CG is important as it contributes both to business prosperity and to accountability.
A Few Best Practices of CG in the UK
United Utilities – Company of the Year 2009
The largest listed water company in the UK, United Utilities, owns, operates and maintains utility assets such as water, wastewater, electricity and gas. The company’s commitment towards corporate social and environmental responsibilities has been demonstrated through its