Corporate Governance: Historical Development of Corporate Governance in United Kingdom

Historical Development of Corporate Governance in United Kingdom:

The impetus for development in corporate governance arose from a number of events including.

• Black Monday, 19 October 1987
• Polly-Peck, 1990
• The Collapse of BCCI 1991, and
• The UK’S own Corporate Responsibility Scandal relating to the mirror group and its owner, Robert Maxwell also referred as Pension Scandal.

Further a wave of scandals and financial collapses were visualized in the late 1980’s and early 90’s which were the result of inefficient and insufficient practices of governance and principles. The absence of proper structure and objectives in the top management led to numerous corporate failures, which was affecting the shareholders and other interested parties.

This led the UK government to set up the revolutionary Cadbury committee report on the financial aspects of corporate governance in the early 1990s. The committee submitted its report and code of best practice in 1992, aimed at all listed companies and enhanced standards of corporate behaviour and ethics.

In 1995, again the failure of Barings Bank stem the rot of corporate misdeeds, in response to that the Greenbury Report added a set of principles on the remuneration and compensation package of directors, and in 1998 the Hampel Report brought the two together and produced the first Combined Code of 1998.

A year later, the Turnbull Report concentrated on risk management and internal controls. In 2002 Derek Higgs, an investment banker was given the brief to look again at corporate governance and build on the previous reports to produce a single, comprehensive code. The report reviews the role of independent directors and audit committee. The FRC consulted further and produced a revised Code that followed most of Higgs’s recommendations but softened a few of the more contentious points, and so gained general acceptance.

At the same time, Robert Smith & Tyson, leading a review on role of auditor and audit committee, recruitment and development of non-executives directors. The 2003 code was again updated and revised into combined code of 2006 published by FRC.

A complete review of corporate governance following the financial crisis 2008-09 again resulted into consolidation of series of publications, under the chairmanship of sir, David Walker and FRC. It was the latest edition of the UK CG Code issued in June 2010 by the FRC. The Code was found to be fit for the purpose and the name changed to “UK Corporate Governance Code”

"The current version of the Code was published by the Financial Reporting Council (FRC) in July 2018 and is effective for periods commencing on or after 1 January 2019".