Describe fully how corporate governance has developed in the UK from Essay

Describe fully how corporate governance has developed in the UK from the early 1990's to the present day, outlining as appropriate the key influences on the development - Essay Example The Cadbury Report came up with a significant number of recommendations. Amongst the most important ones were the separation of the role of chairman and chief executive, an increase in the number of non-executive directors on the board of a company, the selection process of non-executive directors and the need for good internal controls over the operations of a company. The issue of thick amounts being paid out as director’s salary and share options being granted to the top management led to the issuance of the Greenbury Report in 1995. The report recommended the creation of a remuneration committee comprising of non-executive directors (BOURNE 2007). The purpose of this committee was to determine the pay of executive directors. Moreover, the report required extensive disclosure in the financial statements about directors’ salary and other benefits granted to them by the company. In early 1996, a committee by the name of Hampel Committee was established to determine whether the principles laid down by the Cadbury and Greenbury Reports were even put into practice by companies or not. The Hampel Committee came up with the Hampel Report which led to the eventual publication of the much famous Combined Code of Corporate Governance in 1998. The Combined Code covered a lot of important areas like director’s remuneration, accounts and auditing, company’s dealings with major or institutional shareholders, operations of the board of directors and the responsibilities of institutional shareholders. The Code applied to all the listed companies in the UK from almost the start of 1999 till November ’03 when the Revised Code was issued. The Combined Code also required companies to provide a statement in their annual reports telling how they have complied with the principles laid down in the code (LYSANDROU 2007). There was much confusion over how companies should implement the teachings of various codes into their business.