The Cadbury Committee recommendations on corporate governance – a review of compliance and performance impacts

Abstract

In December 1992, the Cadbury Committee published their Code of Best Practice. The recommendations, which largely reflected perceived best practice at the time, included separating the roles of CEO and chairman, having a minimum of three non-executive directors on the board and the formulation of audit committees. The Code also advocated that a more active role be taken by institutional investors in the promotion of good practice in corporate governance. This paper discusses how agency problems may be (partially) resolved by corporate governance, reviews the evidence on compliance with the Cadbury Code and examines the relationship between board structure and firm performance, looking for evidence that the Code has enhanced board performance. While there is no empirical evidence of an association between board structure and firm value, there is some evidence that compliance with the Cadbury recommendations enhances board oversight with respect to the manipulation of accounting numbers and the discipline of the top executive.

Understanding the Determinants of RiskMetrics/ISS Ratings of the Quality of UK Companies' Corporate Governance Practice

“…Small firms or financial firms might have different disclosure patterns, and this might restrict the generalizability of our findings. Compliance with the UK code of corporate governance is also explored (Dedman, 2002;Hegazy & Hegazy, 2010;Pass, 2006). It would also be interesting to examine the effect of audit committee characteristics such as audit committee size, number of audit committee meetings, and audit committee expertise.…”

Shareholder Protection: The Role of Multiple Large Shareholders

“…This Code was mostly inspired by the Cadbury Report (Aguilera & Cuervo-Cazurra, 2009), which aimed at addressing both types of agency problems in relation to deficiencies in shareholder protection (Fernández Rodríguez, Gómez Ansón, & Cuervo García, 2004;Zattoni & Cuomo, 2008). Like in many countries, the Code was issued by the stock exchange (Aguilera & Cuervo-Cazurra, 2004) and focused on elements such as the separation of the CEO and chair positions, a minimum number of non-executive directors, composition and roles of board committees, and the enhanced role of institutional investors (Dedman, 2002). Thus, Switzerland offers a unique context for examining how ownership concentration and heterogeneous shareholders influence shareholder protection through the adoption of corporate governance mechanisms.…”

L'attrait psychologique des codes de « meilleures pratiques » en France

“…Ils prennent notamment la forme de codes de bonne conduite, tels le rapport Cadbury au Royaume-Uni et les rapports Viénot et Bouton en France. Sur le fond, les pratiques recommandées dans ces codes sont d'inspiration anglo-saxonne et convergent au niveau international, quel que soit le pays (importance accordée à la discipline et à l'encadrement des conflits d'intérêts, à la transparence, à l'indépendance des administrateurs, à l'existence de comités spécialisés …) (Weil, Gotshal et Manges, 2002).De nombreux travaux ont étudié en quoi les pratiques recommandées méritaient le qualificatif de « meilleures », en évaluant notamment l'impact de leur adoption déclarée sur la performance financière des entreprises (Becht, Bolton et Roëll, 2005;Bhagat et Black, 1999;Dedman, 2003). 3 «The striking schism between firmly held beliefs of business people and academic research calls for an explanation.…”

“…De nombreux travaux ont étudié en quoi les pratiques recommandées méritaient le qualificatif de « meilleures », en évaluant notamment l'impact de leur adoption déclarée sur la performance financière des entreprises (Becht, Bolton et Roëll, 2005;Bhagat et Black, 1999;Dedman, 2003). 3 «The striking schism between firmly held beliefs of business people and academic research calls for an explanation.…”