The cadbury committee report on corporate governance

Kalhari- 16YACMD080
 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..
 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.
 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.
 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.
 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
 It is the board’s duty to present an
assessment.
 Professional relationship is maintained with
the auditors.
 Establish an audit committee.
 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.
 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.
 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.
 An objective and professional relationship
with the auditors must be ensured.
 It must be reported that a business is a
growing concern.
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.
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The cadbury committee report on corporate governance

  • 2.  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.  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.  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.  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.  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.  It is the board’s duty to present an assessment.  Professional relationship is maintained with the auditors.  Establish an audit committee.
  • 8.  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.  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.  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.  An objective and professional relationship with the auditors must be ensured.  It must be reported that a business is a growing concern.
  • 12. 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.