Write a note on Corporate governance from Cadbury Committee to Narayan Murthy committee


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Corporate governance from Cadbury Committee to Narayan Murthy committee.

 

Sir George Adrian Hayhurst Cadbury (born 1929) is a former British Olympic rower and Chairman of Cadbury and Cadbury Schwepps for 24 years. He has been a pioneer in raising the awareness and stimulating the debate on corporate governance and produced the Cadbury Code, a code of best practice which served as a basis for reform of corporate governance around the world.

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.

 

Reasons for setting up the Committee.

  1. 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. The Committee’s membership and terms of reference are set out in Append. Its sponsors were concerned at the perceived low level of confidence both in financial reporting and in the ability of auditors provide the safeguards, which the users of company reports sought and expected
  1. These concerns about the working of The corporate system were heightened by some unexpected failures of major’ companies and by criticism of the lack of effective board accountability for such matters directors pay. Further evidence of the breadth of feeling that action had to be taken to clarity  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.
  2. The committee wherever possible drew on these documents, and a wide range of submissions from interested parties, in producing its draft report which was issued for public comment on 27 May, 1992.
  3. Since then, the committee has received over 200 written response to its proposals, the great majority of which broadly support the committee’s approach, and has carefully considered the balance of opinions expressed on particular issue. The committee is most grateful to all those who have taken the time and trouble to give us their comments. They have helped to shape our final report and, in addition, they are a valuable reference source for our successors.
  4. Corporate governance is the system by which companies are directed and controlled. Board of directors is responsible for the governance of their companies. The shareholders role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance in place.
  5. Within that overall framework, the specifically financial aspect of corporate governance ( the Committee’s remit ) are the way in which boards set financial policy and oversee its implementation, including the use of financial controls, and the process whereby they report on the activities and progress of the company to the shareholders.
  6. The role of the auditors is to provide the shareholders with an external and objective check on the director’s 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 interest’s boards have a statutory duty to take into account.
  7. The committee’s objective is to help to raise the standard corporate governance and the level of confidence in financial reporting and auditing by setting out clearly what it sees as the respective responsibilities of those involved and what it believes is expected of them.

 

 


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