THE CADBURY REPORT ON

CORPORATE GOVERNANCE
The Cadbury Report,titled-Financial Aspects of Corporate
Governance, is a report of a board committee chaired by Adrian
Cadbury that gives out recommendations on the arrangement
of company boards and accounting systems to relieve corporate
governance risks and failures.
Thereport was published in December, 1992. The establishment of
the committee was made in May,1991 by the Financial Reporting
Council, the London Stock Exchange.
The report'srecommendations have been adopted in varying
degree by the European Union, the UnitedStates, the World Bank,
and others.

The Cadbury Committee
Sir Adrian Cadbury
Ian Butler
Jim Butler
Jonathan Charkham
Hugh Collum
Sir Ron Dearing
Andrew Likierman
Nigel Macdonald
Mike Sandland
Mark Sheldon
Sir Andrew Hugh Smith
Sir Dermot de Trafford

The Committee investigated accountability of the Board of Directors to
shareholders and to thesociety. It submitted its report and associated
"Code of Best Practices" in Dec 1992 wherein itspelt out the methods of
governance needed to achieve a balance between the essential powersof
the Board of Directors and their proper accountability
The resulting report, and associated "Code of Best Practices," published in
December 1992, wasgenerally well received. Whilst the recommendations
themselves were not mandatory, thecompanies listed on the London Stock
Exchange were required to clearly state in their accountswhether or not
the code had been followed. The companies who did not comply were
required toexplain the reasons for that.
The Cadbury Code of Best Practices had 19 recommendations. Being a
pioneering report onCorporate Governance, it would be in order to make a
brief reference to them. Therecommendations are in the nature of
guidelines relating to the Board of Directors, Non-executiveDirectors,
Executive Directors and those on Reporting & Control
Origin of the Report
The need arose for the Committee's creation was an increasing lack of
investor confidence in thehonesty and accountability of listed companies,
occasioned in particular by the sudden financialcollapses of two big
companies, Wallpaper group Coloroll and Asil Nadir's Polly
Peck Consortium: neither of these sudden failures was at all foreshadowed
in their apparently healthypublished accounts.Even as the Committee was
getting down to business, two more further scandals shook thefinancial
world: the collapse of the Bank of Credit and Commerce International and
exposure of its widespread criminal practices; and the posthumous
discovery of Robert Maxwell'sappropriation of 440m from his companies'
pension funds as the Maxwell Group filed forbankruptcy in 1992. The
shockwaves from these two incidents only increased the sense of urgency
behind the Committee's work and ensured that all eyes would be on its
eventual report
Recommendations
The Board should meet regularly, retain full and effective control over the company andmonitor
the executive management.
There should be a clearly accepted division of responsibilities at the head of a company,which will
ensure balance of power and authority, such that no individual has unfetteredpowers of decision.
In companies where the Chairman is also the Chief Executive, it isessential that there should be a
strong and independent element on the Board, with arecognized senior member.
The Board should include non-executive Directors of sufficient caliber and number for their views
to carry significant weight in the Boards decisions.
The Board should have a formal schedule of matters specifically reserved to it for decisions to
ensure that the direction and control of the company is firmly in its hands.
There should be an agreed procedure for Directors in the furtherance of their duties totake
independent professional advice if necessary, at the companys expense.
All Directors should have access to the advice and services of the Company Secretary,who is
responsible to the Board for ensuring that Board procedures are followed and thatapplicable rules
and regulations are complied with. Any question of the removal of Company Secretary should be
a matter for the Board as a whole