Corporate Governance
16: CORPORATE GOVERNANCE – Combined Code
Question 1
“Early skepticism about the self-regulatory nature of the Cadbury Report has melted away. It is now clear that self-regulatory codes have a useful role to play in solving the crisis which has been facing corporate governance. Discuss.
i. Usefulness/doubts about Cadbury ii. Self-regulating code iii. Crisis-problem been solved?
Introduction
In as early as the 1960’s, successful commentators and businessmen have identified the significance and plurality of success and failure in the corporation. This is today known as the concept of corporate governance. It was also believed that the Watergate scandal was a trigger point that highlighted the importance of this concept in the success of a corporation. In the UK, the emergence of large public companies and the implication of separation of ownership from control presents a very practical problem of governance of the company and how it can effectively be done. It is felt that sometimes the laws enacted are inadequate to deal with such an area.
Body: Cadbury Report-what is it about
A series of shocking corporate scandals in the UK clearly giving rise to the idea that law alone may not be the proper mechanism to deal with corporate governance, led to a scramble by the Financial Reporting Council, the London Stock Exchange and the Accountancy profession ‘to address the financial aspects of corporate governance’. When this committee was formed, it was decided that corporate governance should be by way of self-regulatory mechanism. The Cadbury Committee produced the report entitled ‘The Financial Aspects of Corporate Governance’. Key emphasis by the Cadbury Report centred around the role of directors, the organs of a company’s functions, with a clear objective to reduce single individual power and with a sound (safe and secure) system of checks and balances ensuring that commercial reasoning takes paramount importance as the basis for a company’s decision.
Question 1
“Early skepticism about the self-regulatory nature of the Cadbury Report has melted away. It is now clear that self-regulatory codes have a useful role to play in solving the crisis which has been facing corporate governance. Discuss.
i. Usefulness/doubts about Cadbury ii. Self-regulating code iii. Crisis-problem been solved?
Introduction
In as early as the 1960’s, successful commentators and businessmen have identified the significance and plurality of success and failure in the corporation. This is today known as the concept of corporate governance. It was also believed that the Watergate scandal was a trigger point that highlighted the importance of this concept in the success of a corporation. In the UK, the emergence of large public companies and the implication of separation of ownership from control presents a very practical problem of governance of the company and how it can effectively be done. It is felt that sometimes the laws enacted are inadequate to deal with such an area.
Body: Cadbury Report-what is it about
A series of shocking corporate scandals in the UK clearly giving rise to the idea that law alone may not be the proper mechanism to deal with corporate governance, led to a scramble by the Financial Reporting Council, the London Stock Exchange and the Accountancy profession ‘to address the financial aspects of corporate governance’. When this committee was formed, it was decided that corporate governance should be by way of self-regulatory mechanism. The Cadbury Committee produced the report entitled ‘The Financial Aspects of Corporate Governance’. Key emphasis by the Cadbury Report centred around the role of directors, the organs of a company’s functions, with a clear objective to reduce single individual power and with a sound (safe and secure) system of checks and balances ensuring that commercial reasoning takes paramount importance as the basis for a company’s decision.