CADBURY REPORT

ON CORPORATE
GOVERNANCE
 CADBURY COMMITTEE
REPORT
The Cadbury Committee was set-up
in May 1991 by the Financial
Reporting Council of the London
Stock Exchange
The committee published its report in
December 1992.
Adrian Cadbury the chairman of the
Cadbury committee.
The code of best practices has been
divided into four section.
Role of Board of Directors, duties of
the board and its compositions.
Role of Non-Executive Directors.
Dealing with their Remunerations.
Addressing questions of financial
reporting and financial controls.
Role of Board of Directors, duties of the board and its
compositions.

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 caliber and number for their views to carry
significant weight in the boards decisions.
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 that applicable rules and regulations are
complied with. Any question of the removal of the
company secretary should be a matter for the board as
a whole.
 Role of Non-Executive Directors.

Non-executive directors should bring an

independent judgment to bear on issues of
strategy, performance, resources, including key
appointments, and standards of conduct.
Non-executive directors should be appointed for
specified terms and reappointment should not
be automatic.
Non-executive directors should be selected
through a formal process and both this process
and their appointment should be a matter for
the board as a whole.
 Dealing with their Remunerations.

we recommend that future service contracts

should not exceed three years without
shareholders approval and that the Companies
Act should be amended inline with this
recommendation.
Shareholders require that the remuneration of
directors should be both fair and competitive.
The Annual General Meeting provides the
opportunity for shareholders to make their
views on such matters as directors benefit
known to their boards.
 Addressing questions of financial reporting and
financial controls.

It is the boards duty to present a balanced

and understandable assessment of the
companys position.
The board should ensure that an objective and
professional relationship is maintained with the
auditors.
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 explain their
responsibility for preparing the accounts
next to a statement by the auditors about
their reporting responsibilities.
The directors should report on the
effectiveness of the companys system of
internal control.
The directors should report that the
business is a going concern, with supporting
assumptions or qualifications as necessary.
 The major recommendations made
by committee are as follows
A single person should not be vested with the
decision making power. i.e., the role of
chairman and chief executive should be
separated clearly.
The Non-executive directors should act
independently while giving their judgment on
issue of strategy, performance, allocation of
resources, and designing the code of conduct.
A majority of directors should be independent
non- executive directors, i.e., they should not
have any financial interests in the company.
 The term of the Directors can be extended beyond
three years only after the prior approval of the
shareholders.
A remuneration committee with majority of non-
executive directors should decide on the pay of the
executive directors.
The interim company report should give the balance
sheet information and reviewed by the auditor.
The information regarding the audit fee should be
made public and there should be regular rotation of
the auditors.
 An objective and professional
relationship with the auditors must
be ensured.
It must be reported that a business is
a growing concern.