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TOPIC VI
STANDARD SETTING, BEST PRACTICES,
AND CORPORATE GOVERNANCE REFORM
6.3 HIGGS REPORT, CADBURY REPORT, AND OTHER
REPORTS
SUBMITTED BY:
JAMAICA ROSE SALAZAR
SUBMITTED TO:
PROF.CAROLINA GUERERRO
APRIL 10, 201
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The Cadbury Report……………………………………………….……..Page 2
The Rutteman Report…………………………………………………….Page 2
The Greenbury Report……………………………………………………Page 3
The Hampel Report……………………………………………………….Page 3
The Turnbull Report……………………………………………………….Page 3
The Myners Report………………………………………………………..Page 3
The Higgs Report………………………………………………………….Page 4
The Smith Report………………………………………………………….Page 4
Reeren!es…………………………………………………………………Page "
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The Cadbury Report #$%%2& 'as entitled Financial Aspects of Corporate
Governance 'hi!h 'as issued by The Committee on the (inan!ial )spe!ts o Corporate
Go*ernan!e !haired by )drian Cadbury. +t had a remit to re*ie' those aspe!ts o
!orporate go*ernan!e relating to inan!ial reporting and a!!ountability. The report sets
out re!ommendations on the arrangement o !ompany boards and a!!ounting systems
to mitigate !orporate go*ernan!e ris,s and ailures. +ts re*ised and inal *ersion 'as
issued in -e!ember o the same year. The reports re!ommendations ha*e been used
to *arying degrees to establish other !odes su!h as those o the /uropean 0nion1 the
0nited States1 the orld an,1 et!.
The report begins by re*ie'ing the stru!ture and responsibilities o boards o
dire!tors. e5t1 they !onsider the role o auditors and address a number o
re!ommendations to the a!!ountan!y proession. They then deal 'ith the rights and
responsibilities o shareholders.
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• +t is the board6s duty to present a balan!ed and understandable assessment o
the !ompany6s position.
• The board should ensure that an ob7e!ti*e and proessional relationship is
maintained 'ith the auditors.
• The board should establish an audit !ommittee o at least three non8e5e!uti*e
dire!tors 'ith 'ritten terms o reeren!e 'hi!h deal !learly 'ith its authority and
duties.
• The dire!tors should e5plain their responsibility or preparing the a!!ounts ne5t to
a statement by the auditors about their reporting responsibilities.• The dire!tors should report on the ee!ti*eness o the !ompany6s system o
internal !ontrol.
• The dire!tors should report that the business is a going !on!ern1 'ith supporting
assumptions or 9ualii!ations as ne!essary.
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The +nternal Control or,ing Group 'as established to ulill the re9uirements o
the Cadbury Committee or the proession to de*elop guidan!e on internal !ontrol. +t
'as !haired by Paul Rutteman and !omprised indi*iduals put or'ard by The HundredGroup o (inan!e -ire!tors1 +C)/ and +C)S. The inal report rom the group1 +nternal
!ontrol and inan!ial reporting8 guidan!e or dire!tors o listed !ompanies registered in
the 0:1 'as published in -e!ember $%%4 and is usually reerred to as the Rutteman
Report.
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+n ;anuary $%%" the Conederation o ritish +ndustry #C+& established the Study
Group on -ire!tors Remuneration under the !hairmanship o Sir Ri!hard Greenbury
'ith a remit to identiy good pra!ti!e in determining dire!tors remuneration and to
prepare a !ode o pra!ti!e or 0: P. +t 'as designed to be a re*ision o
the !orporate go*ernan!e system in the 0:. The remit o the !ommittee 'as to re*ie'
the Code laid do'n by the Cadbury Report. +t as,ed 'hether the !odes original purpose
'as being a!hie*ed. Hampel ound that there 'as no need or a re*olution in the 0:
!orporate go*ernan!e system. The Report aimed to !ombine1 harmonise and !lariy the
Cadbury and Greenbury re!ommendations. The Hampel Report relied more on broad
prin!iples and a !ommon sense approa!h 'hi!h 'as ne!essary to apply to dierent
situations rather than Cadbury and Greenburys bo58ti!,ing approa!h.
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+t 'as entitled Internal Control: Guidance for Directors on the Combined
Code #$%%%&. Turnbull report 'as dra'n up 'ith the
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Review of the role and effectiveness of non-eecutive directors #or the ?Higgs
re*ie'?& 'as a report !haired by -ere, Higgs on !orporate go*erna!e !ommissioned by
the 0: go*ernment1 published on ;anuary 2@1 2@@3. +t re*ie'ed the role and
ee!ti*eness o non8e5e!uti*e dire!tors and o the audit !ommittee1 aiming at impro*ing
and strengthening the e5isting Combined Code.
There 'as 'idespread unrest ater the s!andals in the 0S1 in*ol*ing /nron1
orldCom and Ty!o. The 0S opted or legislation under the Sarbanes8A5ley )!t. Higgs
strongly ba!,ed the e5isting non8pres!ripti*e approa!h to !orporate go*ernan!eB
?!omply or e5plain?. et he ad*o!ated more pro*isions 'ith more stringent !riteria or
the board !omposition and e*aluation o independent dire!tors. He 'anted to remo*e
some o the dis!retion that the Code allo'ed.
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S(-!($: on8e5e!uti*e dire!tors should !onstru!ti*ely !hallenge and !ontribute to thede*elopment o strategy.
P$-&%-!'5$: on8e5e!uti*e dire!tors should s!rutinise the perorman!e o
management in meeting agreed goals and ob7e!ti*es and monitor the reporting o
perorman!e.
R)7: on8e5e!uti*e dire!tors should satisy themsel*es that inan!ial inormation is
a!!urate and that inan!ial !ontrols and systems o ris, management are robust and
deensible.
P$%/#$: on8e5e!uti*e dire!tors are responsible or determining appropriate le*els o remuneration o e5e!uti*e dire!tors and ha*e a prime role in appointing1 and 'here
ne!essary remo*ing1 senior management and in su!!ession planning.
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The Smith Report #2@@3& 'as !on!erned 'ith the independen!e o auditors in the
'a,e o the !ollapse o )rthur )ndersen and the /nron s!andal in the 0S in 2@@2. +ts
re!ommendations no' orm part o the Combined Code on !orporate go*ernan!e1
appli!able through the
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