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CADBURY COMMITTEE REPORT

ON
CORPORATE GOVERNANCE, 1992

Submitted by:
Harjot Kaur
M.Com (Hons.)
153706008
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CONTENTS
• Meaning of committee
• Reasons for establishment
• Objective
• Cadbury Committee Report
• Recommendations relating to-
Board of Directors
Non-executive directors
Executive directors
Reporting and controls
• Other recommendations
• References
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MEANING OF COMMITTEE
• A committee is a type of small deliberative assembly,
appointed when a job is too large for the organization
to handle it properly.
• It helps in define an issue, resolve a complex problem
and involve group members.
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REASONS FOR ESTABLISHMENT

• Sharing responsibilities
• Involving more members
• Using the specialized skills of members.
• Allowing the parent body to complete its business
more efficiently by delegating work to committees.
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OBJECTIVE

• “to help raise the standards of corporate governance

and the level of confidence in financial reporting and
auditing by setting out clearly what it sees as the
respective responsibilities of those involved and what
it believes is expected of them”.
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CADBURY COMMITTEE REPORT

• The Cadbury Committee was setup in May 1991 by
the Financial Reporting Council of the London Stock
Exchange.
• The committee published its report “Code of Best
Practices” in December 1992.
• Adrian Cadbury was the chairman of this committee.
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Cont’d…
• The Cadbury Code of Best Practices had 19
recommendations.
• While the recommendations themselves are not
mandatory, the companies listed on LSE were
required to clearly state in their statement of whether
or not the code had been followed.
• The companies, which do not comply, were required
to explain the reasons for the lapse.
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Board of Directors

Non-executive Directors

Executive Directors

Reporting and Control

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Relating to Board of Directors

• The board should meet regularly, retain full and
effective control over the company and monitor the
executive management.
• The board should include non-executive directors of
sufficient calibre and number.
• All directors should have access to the advice and
services of the company secretary, who is responsible
to the board for ensuring that board procedures are
followed and rules and regulations are complied with.
• Any question of the removal of company secretary
should be a matter for the board as a whole.
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• They should bring an independent judgment to bear

on issues of strategy, performance, resources,
including key appointments and standards of conduct.
• They should be appointed for specified terms and
reappointment should not be automatic.
• They should be selected through a formal process-
this process and their appointment- should be a
matter for the Board as a whole.
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Relating to Executive Directors

• Directors’ service contracts should not exceed 3 years
without shareholders’ approval.
• There should be full and clear disclosure of their total
emoluments and those of the chairman.
• Their pay should be subject to the recommendations
of a remuneration committee made up of wholly or
mainly non-executive directors.
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Relating to Reporting and Controls

• It is the boards’ duty to present a balanced and
understandable assessment of the company’s
position.
• The board should ensure that an objective and
professional relationship is maintained with the
auditors.
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Cont’d….
• The board should establish an audit committee of at
least three non-executive directors with written terms
of reference, which deal clearly with its authority and
duties.
• The directors should report on the effectiveness of the
company’s system of internal control.
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OTHER RECOMMENDATIONS
• A single person should not be vested with the
decision making power i.e. the role of chairman and
chief executive should be clearly separated.
• The interim company report should give the balance
sheet information and reviewed by the auditor.
• The information regarding audit fee should be made
public and there should be regular rotation of
auditors.
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REFERENCES
• Fernado, A.C.. Corporate Governance. India: Dorling
Kindersley, 2009. Print.
• Sharma, J.P.. Corporate Governance Business Ethics
and CSR. India: Ane Books Pvt. Ltd., 2016. Print.
• https://www.google.com/images
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