A Review of Compliance with Cadbury

Conyon, Martin and Mallin, C (1997) A Review of Compliance with Cadbury. Journal of General Management, 22. pp. 24-37.

Abstract

The report by the Cadbury Committee on the financial aspects of corporate governance is widely viewed as the most far-reaching publication in corporate governance, not only in Great Britain but also in many overseas countries. The Code of Best Practice represents the essence of the principles which are fully discussed in the Cadbury Committee report. This article discusses to what extent have companies implemented the recommendations of the committee on the financial aspects of corporate governance. The review of the most recent research literature confirms that there is a very high degree of adherence to the principles contained in the code. Sir Adrian Cadbury has stated that an important factor in achieving compliance was the London Stock Exchange rule requiring listed companies to disclose in their annual report to the extent to which they complied with the code, and to provide an explanation of any area that they did not comply with. In the area of boardroom committees, companies have nearly universally adopted both audit and remuneration committees. There are important areas where the authors feel that improvements could be made. These are that the audit, remuneration, and nomination committees should comprise solely of non-executive directors who should be independent.