Cadbury Report

Introduction
Set up in 1992 by London Stock Exchange Addressing financial aspects of governance a report of a committee chaired by Adrian Cadbury. Sets out recommendations on the arrangement of company boards and accounting systems to diminish corporate governance risks and failures.

Introduction
Sir Adrian chaired the Cadbury Schweppes from 1965 until 1989. He developed a participative corporate management structure. The committee was formed with members drawn from the CBI, the accountancy profession, finance directors, the Bank of England, the Stock Exchange, the Institute of Directors, institutional investors, and the Law Society.

The Highlights
a) the responsibilities of executive and non-executive

directors for the reviewing and reporting on performance to shareholders and other financially interested parties; and the frequency, clarity and form in which information should be provided b) the case for audit committees of the board, including their composition and role. c) the principal responsibilities of auditors and the extent and value of audit. d) the links between shareholders, boards, and auditors.

The main recommendations of the Cadbury report were:

a division of responsibilities at the head of the company to ensure that no one individual has powers of decision. a majority of non-executive directors to be independent. at least three non-executives on the audit committee. a majority of non-executives on the remuneration committee. non-executives should be selected by the whole board.

The Contents of the Report

the position of Chairman of the Board be separated from that of Chief Executive, or that there be a strong independent element on the board. that the majority of the Board be comprised of outside directors.

The Contents of the Report

All directors are equally responsible in law for the boards actions and decisions . Their fees should reflect the time which they devote to the companys affairs. Occasions may arise when directors have to seek legal or financial advice in the furtherance of their duties. They should always be able to consult the companys advisers.

Directors Training
The weight of responsibility emphasize the importance of the way in which they prepare themselves for their posts. Given the varying backgrounds, qualifications and experience of directors, it is highly desirable that they should all undertake some form of internal or external training.

The Contents of the Report

The board should meet regularly, with due notice of the issues to be discussed supported by the necessary paperwork, and should record its conclusions. Have a formal schedule of matters specifically reserved to them for their collective decision.

Board Remuneration
Shareholders are entitled to a full and clear statement of directors present and future benefits, and of how they have been determined. Boards should appoint remuneration committees.

Balanced Scorecard
to provide the big-picture approach so that the executive does not lose sight of the goals when focusing on the details. provides a concrete strategy for evaluating intangible, nonfinancial objectives. four components of a Balanced Scorecard.

Components
Financial- provides discussion of the cost-revenue aspects of the project. Customer- links the customer and market activity to the financial success of the strategy. Organization- recognizes the actions that will have to occur to generate the market activity that will support the financial outcome. Development- links the internal development that will be required to support the organizations efforts.

Reporting Practice
Listed companies publish full financial statements annually and half-yearly reports in the interim.

Good Corporate Governance Components

Committee in charge of establishing such practices needs to be educated. Strong corporate culture. Strong ethical culture within the companyethics committee. Effective communication among shareholders, board members, and the executive.

Internal Dynamics of Good Corporate Governance

Viable relationship among all top-level groups and committees. Effective whistle-blowing policies and protections in place. Well-established controls for accurate accounting and financial reporting.

Components of a General Ethics Code

Strategies of ethical training Processes to facilitate whistle-blowing System for reviewing the code, its efficacy, and the companys overall compliance Elimination of situations that could create possible conflicts of interest