Corporate governance developments in the UK
Initial corporate governance developments in the UK began in the late 1980s and early 1990s in the wake of corporate scandals such as Polly Peck and Maxwell. Financial reporting irregularities led to the establishment of the ‘Financial Aspects of Corporate Governance Committee’ led by Sir Adrian Cadbury. The resulting Cadbury Report published in 1992 outlined a number of recommendations around the separation of the role of the chief executive and chairman, balanced composition of the board, selection processes for non-executive directors, transparency of financial reporting and the need for good internal controls. The Cadbury Report included a Code of Best Practice and its recommendations were incorporated into the Listing Rules of the London Stock Exchange.
Following Cadbury, a ‘Working Group on Internal Control’ was established to provide guidance to companies on how to comply with Principle 4.5 of the Cadbury Code ‘reporting on the effectiveness of the company’s system of internal control’. This led to the publication of the Rutteman Report in 1994 on ‘Internal Control and Financial Reporting’.
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