Introduction

The Adrian 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 committee was formed in May, 1991 by the Financial Reporting Council, the London Stock Exchange & the group of accountancy professionals & its role was to consider the UKs corporate governance system The Report and Code of Best Practice published by this committee in December 1992 have ever since been known as the Cadbury Report and the Cadbury Code. The report's recommendations have been adopted in varying degree by the European Union, the United States, the World Bank, and others. The encourage for the Committee's creation was an increasing lack of investor confidence in the honesty and accountability of listed companies, occasioned in particular by the sudden financial collapses of two companies, wallpaper group Chloral and Asil Nadir's Polly Peck consortium: neither of these sudden failures was at all foreshadowed in their apparently healthy published accounts. Even as the Committee was getting down to business, two further scandals shook the financial world: the collapse of the Bank of Credit and Commerce International and exposure of its widespread criminal practices, and the posthumous discovery of Robert Maxwell's appropriation of 440m from his companies' pension funds as the Maxwell Group filed for bankruptcy in 1992. The shockwaves from these two incidents only heightened the sense of urgency behind the Committee's work, and ensured that all eyes would be on its eventual report. The effect of these multiple blows to the perceived probity and integrity of UK financial institutions was such that many feared an overly heavy-handed response, perhaps even legislation mandating certain boardroom practices. This was not the strategy the Committee ultimately suggested, but even so the publication of their draft report in May 1992 met with a degree of criticism and hostility by institution which believed themselves to be under attack. Peter Morgan, Director General of the Institute of Directors, described their proposals as divisive', particularly language favoring a two-tier board structure, of executive directors on the one hand and of mom-executives on the other.

The suggestions which met with such disfavor were considerably toned down come the publication of the final Report in December 1992, as were proposals that shareholders have the right to directly question the Chairs of audit and remuneration committees at AGMs, and that there be a Senior Non-Executive Director to represent shareholders interests in the event that the positions of CEO and Chairman are combined. Nevertheless the broad substance of the Report remained intact, principally its belief that an approach 'based on compliance with a voluntary code coupled with disclosure, will prove more effective than a statutory code.

Impact on todays Management style

Companies are now complying with Adrian Cadbury Code and enjoyed widespread of acceptance.

Due to Adrian Cadbury Report, the business practice became more

transparent, flexible & proves more effectiveness.

Inspired trust in the mind of shareholders about the companies.

The quality of financial report increased due to Adrian Cadbury Committee.

There is a lot of faith in the scrutinizing powers of non-executive

directors.

There is increasing the compensation to shareholders out of profit or success of the companies.

 The Cadbury Report resulting Code of Best Practice may succeeded in

their aims of providing a model for effective corporate governance.

Now the board meets regularly, retaining full and effective control over the company and monitoring the executive management.

Reasons for setting up Adrian Cadbury Committee

The Committee was set up in May 1991 by the Financial Reporting Council, the London Stock Exchange and the accountancy profession to address the financial aspects of corporate governance. Its sponsors were concerned at the perceived low level of confidence both in financial reporting and in the ability of auditors to provide the safeguards which the users of company reports sought and expected. The underlying factors were seen as the looseness of accounting standards, the absence of a clear framework for ensuring that directors kept under review the controls in their business, and competitive pressures both on companies and on auditors which made it difficult for auditors to stand up to demanding boards. These concerns about the working of the corporate system were heightened by some unexpected failures of major companies and by criticisms of the lack of effective board accountability for such matters as directors pay. Further evidence of the breadth of feeling that action had to be taken to

clarify responsibilities and to raise standards came from a number of reports on different aspects of corporate governance which had either been published or were in preparation at that time. The committee draft report which was issued for public on 27th May, 1992.Since then the Committee has received over 200 written responses to its proposals, the great majority of which positively support the committees approach. The committees have helped to shape companies final report and in addition, they are a valuable reference source for companys successors. The role of the auditors is to provide the shareholders with an external and objective check on the directors financial statements which form the basis of that reporting system. Although the reports of the directors are addressed to the shareholders, they are important to a wider audience, not least to employees whose interests boards have a statutory duty to take into account.