slide 3 recommendation of cadbury committee

8/13/2019 Slide 3 Recommendation of Cadbury Committee

http://slidepdf.com/reader/full/slide-3-recommendation-of-cadbury-committee 1/13

ETHICS & CORPORATEGOVERNANCE

BM055-3-2

Cadbury Committee



Module Code and Module Title Title of Slides

Learning Outcomes

• 1. Appreciate the relevance and practicalapplication of business and professionalethics in the working world;

• 2. Explain how corporate socialresponsibility and corporate governancerelate to ethics;

• 3. Highlight the main ethical issues relatingto the natural environment.




• 4. Recognise ethical issues and proposesolutions to these issues.

• 5. Convey an enhanced awareness of the

role of business and professional ethics infinancial reporting;

•




Cadbury Report

• The Cadbury Committee issued a range ofrecommendations for good corporategovernance in a Code of Best Practice.Many of these recommendations appliedto UK listed companies were aimed atimproving financial reporting, theeffectiveness of the board, the rights ofdirectors in getting information & theiraccessibility to information particularly tothe services of the company secretary




• The Code should be voluntary butcompanies would be required to explian intheir annual reports and accounts theextent to which they had complied with theCode and the reasons for any non-compliance. It was also suggested thatexternal auditors should be asked to

review this statement of compliance aspart of their annual report to shareholders




• London Stock Exchange introduced a

requirement into its listing rules that listedcompanies should include such asstatement of compliance or non-

compliance in their annual report andaccounts. Institutional investors andinvestment banks also brought pressureon companies to adopt the Cadbury Coderecommendations and many LondonStock Exchange companies changed theirconduct in compliance.


http://slidepdf.com/reader/full/slide-3-recommendation-of-cadbury-committee 7/13Module Code and Module Title Title of Slides

Major provisions of the CadburyCode

BOD-that the control over the companyshould be exercised collectively by theboard of directors as a whole. Thereshould be no domination of the board byany single individual, such as the chiefexecutive officer, chairman or by a smallgroup of executive directors. It would benecessary for the board to meet regularly



• The Chief Executive and the Chairman- separating the powers of the CEO & thechairman of the board, the Code arguedthe importance of separation of suchpositions so that the same person did notcarry out the functions of chief executivewho is in charge of the executive mngt &

bus. operational matters. The chairman ofthe board is responsible for leading theboard of directors in decision and policy

making.



Independent Director

• The Code made specific recommendationsthat non-executive directors should bringindependent judgment and experience tothe deliberation of the board that executivedirectors on their own may lack.

• Executive directors service contracts andremuneration, the Code recommendedthat this be disclosed in the annual reportsand accounts



Enhancement of Audit Committee

• communicate with both the internal auditdepartment and the external auditors onissues pertaining to the review of theinterim and annual financial statementsbefore submission to the board for theirapproval and tabling before shareholdersat the annual general meeting. The audit

committee should include at least threenon-executive directors and should havewritten terms of reference and their

functions explicitly expressed.•



• the Cadbury Committee viewed that audit

committee is the key board committee thatshould review Financial Reporting and Audit

• The financial reports and statement of accountsshould be reviewed by the audit committeewhich has the task of communicating with boththe internal and external auditors



• The Cadbury Committee also expressed

the view that the board should beresponsible for the entire system ofinternal control in the company and

therefore accountable to the shareholdersfor risk management generally, not just thequality of financial reporting and financialcontrols.

slide 3 recommendation of cadbury committee

Documents