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CorpG Evolution
Corporate Governance
| Keyword | Study | Findings |
|---|---|---|
| 1 | Cadbury (1992) | Foundation of UK Board Commitees, NED independence, comply or explain |
| 2 | Greenbury (1995) | Remmuneration commity, pay transparency, link to pay performance |
| 3 | Hampel (1998) | Combined Code, principles based approach, governance links to improved performance |
| 4 | Turnbull (1999) | Internal controls guidace; boards must review and report on controls |
| 5 | Higgs (2003) | Strenghtened NED role: 4 key roles, independence criteria and training |
| 6 | Smith (2003) | Enhanced Audit Commitee: external auditors oversight, internal audit review |
| 7 | Walker (2009) | Financial service governance: risk oversight, estimation in banks and financial sectors |
| 8 | UK CGC (2010-2024) | 5 principles; internal controls statement, NED tenure, ESG oversight |
| S1 P1 | PURPOSE | -principes based - explain or comply unlike US statutory mandate rules (Sarbanes Oxley 2002) criminal penalties -three decades driven from corporate failures and govt crises -Purpose: accountability,transparency,alignment of objectives with flexibility |
| S1 P2 | BACKGROUND (Cadbury) | -Created after the colapse of Maxwells communications and Bank of Credit and CommerceInter, which exposed fund weak in board accountability and financial reporting |
| S2 P1 | Code of Best Practice | -first structured framework for board composition, sub commitee governance and shareholder accountablity Main Outlines 1)Seperateration of CEO and Chair roles (PA) 2)Min 3 IndeNED 3)3 Commitees (Nomination,Remuneration, Audit) 4) COE principle |
| S2 P2 | Focuses on Executive Pay | -Required RC to compose wholley of independent NEDs >> Transparency, LR plans and OBJ -Incorporated into LSE (Code of Best Practice) giving it formal rules |
| S3 P3 | Combined Code | - principle that good governance should support rather than constrain corporate governance while rejecting the use of box ticking methods - Consolidated C&G studies and reviews which created a unified governance framework based on comply or explain basis |
| S3 P4 | Guidance and Review | -Completed the combined code and provided guidance on internal controls -Required boards to review and report on the effectiveness on their IC systems on an ongoing basis |
| S3 P5 i | Post Enron, 4 principles | -It was found independence was too nominal rather than geniune -effectiveness of NEDs as monitors of EM too variable 4 roles NED- contributing to strategy, scrutinising management perf, ensuring inte in FP, determining ER (better clarity compared to C |
| S3 P5 ii | Requirements for NEDs | 1/2 to consist of NEDs and formalised the Senior indepedent role as a alternative shareholders contact where concerns could not be addressed through chair |
| S3 P6 | Audit Committees | -motivated by the collapse of AA- where audit indep was compro - Expanded Responsibilities of AC: 1) rec the appoint or remo of external A 2) Oversea non audit services 3) Review inter aud func 4) require at least 1 mem with RAR fianncial exposure |
| S3 P7 i | Companies Act 2006 | - Codified director's duties in stature >> promote the sucess of its company for benefit of its member (legal force) |
| S3 P7 ii | Post Financial Crisis | -Exposed weak governance and reummuneration scuits in banks and financial instituitions -Absence of risk oversight and reummunerration scrutures >>enhanced risk governance and reummuneration |
| S3 P8 i | UK CGC | replaced the combined code with UK CGC 2010 and consolidated it 2010,12,14,16,18,24 strenghtening provisions |
| S3 P8 ii | 2018 | 18 - nine year tenure limit for iNED, exectutive contributions workforce level, CEO-to-median-employee pay ratio |
| S3 P8 iii | 2024 | Five principles structure 1) Board leadership and Purpose 2) Division of Responsiblities 3) Composition, Succession and Evaluation 4) Audit, Risk and Internal Control 5) Remmuneration Closer to US standards |
| S3 P8 iv | 2025 | Persistent Gap Between FTSE 350 and smaller companies listed with common explanations (boilerplate) for non compliance and impairments of assets being the most changed (increase risks) |
| S4 P1 i | FOR (COMPLY AND EXPLAIN) | - Flexibiliy (Size,Sector, ownership status) - Substantial improvements in board compositions without statutory compulsion and has been adopted by over 20 international jurisdictions - showing strong balance between accountability and flexibility |
| S4 P1 ii | FOR | Hampell report - suggests that govenrance quality cannot ve measured by a checklist and geniune board commitment to good governance is more valuble |
| S4 P2 i | AGAINST | - Dependence on quality of shareholder engangement and willingness for companies to provide genuine company specific explanations -E.g High governance failures despite full compliance eg Carillon (2018) misled auditors for years while meeting obligations |
| S4 P2 ii | AGAINST | absence of meaningful enforcements can lead to it just becoming a function license for non-compliuance rather than geniune accountablity |
Created by:
csrix