The Financial Aspects of Corporate Governance: The Cadbury Report- 1992

1.  Chaired by Sir Adrian Cadbury
2.  Set up in May 1991 by FRC, the Stock Exchange of London & the accountancy profession.
3. The impetus for the creation of the Committee was a growing lack of investor confidence in the honesty and responsibility of listed companies.
4.  Caused in particular by the sudden financial collapse of two companies.[wallpaper group Coloroll and Asil Nadir's Polly Peck consortium]
5. The final report 'The financial aspects of corporate governance' (usually known as the Cadbury Report) was published in December 1992 and contained a number of recommendations to raise standards in corporate governance.

The central components of this voluntary code, the Cadbury Code, identifies three themes: ü  The structure and responsibilities of boards of directors. ü  The role of auditors and recommendations to the accountancy profession, and ü  The rights and responsibilities of shareholders. Major Outcomes:

1. That Chairman and Chief executive role should be split.
2. That the majority of the Board be comprised of outside directors i.e. Non-Executive
3. That remuneration committees for Board members be made up in the majority of non-executive directors; and
4. That the Board should appoint an Audit Committee including at least three non-executive directors for better communication & disclosures through audit and accountability.
5. There should be need for greater dialogue to attain mutual understanding and objective of institutional investors to protect their interest.

The Cadbury Report (1992) has provided us with the legacy of definition of the corporate governance as the “system by which companies are directed and controlled”

                                                                                                            (Sir Adrian Cadbury)