Cadbury Report

Cadbury Report

The Cadbury Report, titled "Financial Aspects of Corporate Governance", is a report of a committee chaired by Adrian Cadbury that sets out recommendations on the arrangement of company boards and accounting systems to mitigate corporate governance risks and failures. The report was published in 1992. The report's recommendations have been adopted in varying degree by the European Union, the United States, the World Bank, and others.

Background

Sridhar Arcot and Valentina Bruno in their article called 'In Letter but not in Spirit: An Analysis of Corporate Governance in the UK' [Available at the SSRN [http://papers.ssrn.com/sol3/papers.cfm?abstract_id=819784#PaperDownload website] ] explain the background to the Cadbury Committee.

cquote|Robert Maxwell's death while cruising on the Canary Islands in 1990 shone a spotlight on his company's affairs. A series of risky acquisitions in the mid-eighties had led Maxwell communications into high debts, which was being financed by diverting resources from the pension funds of his companies. After his disappearance, it emerged that the Mirror Group's debts (one of Maxwell's companies) vastly outweighed its assets, while £440 millions (GBP ) were missing from the company's pension funds. Despite the suspicion of manipulation of the pension schemes, there was a widespread feeling in the City of London that no action was taken by UK or US regulators against the Maxwell Communications Corp. Eventually, in 1992 Maxwell's companies filed for bankruptcy protection in the UK and US. At around the same time the Bank of Credit and Commerce International (BCCI) went bust and lost billions of dollars for its depositors, shareholders and employees. Another company, Polly Peck, reported healthy profits one year while declaring bankruptcy the next.

Following the raft of governance failures, Sir Adrian Cadbury chaired a committee whose aims were to investigate the British corporate governance system and to suggest improvements restore investor confidence in the system. The Committee was set up in May 1991 by the Financial Reporting Council, the London Stock Exchange, and the accountancy profession. The report embodied recommendations based on practical experiences and with an eye on the US experience, further elaborated after a process of consultation and widely accepted. The final report was released in December 1992 and then applied to listed companies reporting their accounts after 30th June 1993.

ee also

* Combined Code
* King II
* Corporate Governance

Notes

External links

* [http://www.ecgi.org/codes/documents/cadbury.pdf Financial Aspects of Corporate Governance (aka the Cadbury Report) Caution - PDF]
* [http://rru.worldbank.org/Documents/PapersLinks/1253.pdf Just another link (There are missed words at some paragraphs in Annex 4)Caution - PDF]


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