UK Corporate Governance Code Essay Example | Topics and Well Written Essays - 1750 words

UK somatic Governance Code - Essay ExampleAs a result, the placard of directors of a company, which is the ultimate decision making authority of a company, has been forced to become more accountable to the shareholders. However, the present Combined Code on Corporate Governance has been more of a reaction to worldwide business scandals rather than being a pro-active measure that ensures business legitimacy (Porter, 2009). Notwithstanding this fact, there has been a considerable amount of progress made in the direction of ensuring accountability and transparency, especially in Britain. It started with the formation of the Corporate Governance Code in the early(a) 1990s. Hence, in the below sections we study the Code and the legislative framework in its present form and determine its effectiveness in the face of modern scandals and financial debacles. UK Corporate Governance Code Since the 1970s, there has been an increased amount of focus on corporate governance. This may largely be attributed to the development of big multi-national companies however, the act is still in motion. As a consequence, some of the board of directors of listed companies, who form the most powerful body in the company, of the US and UK are required to be non-executive. The CEO is no longer the sole head of the company and shares responsibilities with the non-executive directors. The idea of creating an independent atmosphere where all perspectives can be included has been extended through with(predicate) a number of measures as a force for good in the economy. The comply or explain principle which is one of the main features of the Code has its grow in the Cadbury Committee or the Committee on the Financial Aspects of Corporate Governance report of 1992. Originally setup to come up with recommendations for financial auditing and some former(a) financial matters due to the scandals involving the Polly Peck and Robert Maxwell companies, the Cadbury Committee headed by Sir Adrian Cadbury made four important recommendations. These were with respect to the board of directors, non - executive directors, executive directors and reporting and fudge mechanisms. However, these were not mandatory and the companies were free to follow their own course since it was determined that a legalistic approach would result in compliance only to a negligible basic train that negated the main aims of the Code. It was also felt that a one size fits all formula essential not be adopted and that companies must be allowed the option to choose their own course that satisfies their unique requirements. Subsequently there was the Greenbury Report of 1998 that dealt with the remuneration of directors issue (Barker, 2008). The Code underwent a significant followup in 1998 when Sir Ronnie Hampel was charged with the duty of validating the effectiveness of the existent Code. It was recommended that there was no need for radical or revolutionary changes, instead the principles needed to be extended to detailed measures for the listed companies to implement. This was called the Combined Code on Corporate Governance which contained two levels of prescriptive practices, one of which was a set of detailed provisions and the other was a set of open - ended principles. The companies were similarly required to present a two level declaration of the compliance of the above measures in their yearly report. The Code underwent another review in 2003 following the Higgs and Smith report which added another layer of compliance norms to the existing Code. It was made up of high level main principles, mid