Corporate Governance in England Essay Example | Topics and Well Written Essays - 1000 words

Corporate Governance in England - Essay Example The current system of corporate governance in England endeavors to ensure transparency and accountability of particular individuals in companies via mechanism that reduce or eradicate the principal-agent dilemma Jill (2007p.9). Great Britain shares with the United States of America an arm's length/outsider system of control and ownership, with the ownership in large companies basically being spread over a huge number of institutional intermediaries and individuals as opposed to being placed solely on 'core investors' (for example, a family) and with the shareholders hardly being poised to intervene and participate in managing the business Wolfgang (2008 pg114). Being part of the United Kingdom, the current system of corporate governance in England conforms to the respective provision of UK's combined code of corporate governance (2003). The earliest developments in corporate governance commenced just before the end of 1980s and the early 1990s, following the emergence corporate scandals, for example, Maxwell and Poly Peck, which dealt a big blow to their images. The scandals were due to irregularities in financial reporting and consequently a committee led by Sir Adrian Cadbury was set up to look into the matter and make recommendations. The resultant Cadbury report which was published in 1992, contained recommendations that centered around: the need to separate the role of a company's chief executive and its chairman, the need to have transparent financial reporting and proper internal control. It also set out the process and rules for vetting of non executive directors as well as a code of best practice which were adopted among the rules of the UK's stock exchange Oliver (2005 p.111-115). Borrowing heavily from Cadbury, Rutteman Report: Internal control & Financial Reporting was published in 1994 and sought to provide companies some guidance on how to act in accordance with Cadbury code. This concerned reporting on the Company own system and process of internal control and its effectiveness. In 1995, following complaint about directors' share option and pay, the Green Bury report made recommendation that entailed detailing remuneration of companies' directors in their annual reports. As in Cadbury's case, majority of Green Burry recommendations were endorsed as part of the Listing Rules. In early 1996, Hampel Committee was set up to look into the performance of both Greenbury and Cadbury provisions. It was to examine the extent to which the two reports had been applied and whether the intended objective had been realized. The committee came up with the Hempel Report leading to the publication of the code, in 1998. It covered areas relating to, directors' remuneration, audit and accountability, relations with individual and institutional shareholders and their responsibilities. It also laid down the code governing the operations and structures of the board Jill (2007 p.300). In 2002, remuneration report were introduced which were intended to further solidify the shareholders' powers with regard to the directors pay. In addition to directors pay, the regulations resulted in shareholders obtaining other important information such as performance graphs. The shareholders were allowed to vote in an advisory capacity in approving directors, remuneration report. The code was revised again in 2003, and added to