The paper "Development of the UK Corporate Governance Code" is an outstanding example of a finance and accounting assignment. The UK has a highly liquid listed company sector with dispersed ownership and a system of corporate governance that has developed significantly over the last two decades. Prior to 1992, the corporate governance of UK companies was regulated by customs and practice. According to Mullerat and Brennan (2010, p. 51), company law together with some stock requirements laid down only basic rules concerning boards of directors, financial reporting and audit.
The Cadbury review was established in 1991 in response to a series of financial scandals. The Cadbury Report which was released in 1992 began the process of greater codification of corporate governance norms and as Mallin (2007, p. 22) points out, the report was the first to set out recommendations regarding the structure of boards of directors and companies’ accounting systems in the UK. Following on from the Cadbury Report, there have been a number of subsequent reviews to the corporate code made by committees led by Sir Richard Greenbury (1995), Sir Ronnie Hampel (1998), Nigel Turnbull (1999), Sir Derek Higgs and Sir Robert Smith (2003), and Sir David Walker (2009) (Bain & Barker, 2010, p.
267; Blowfield & Murray, 2008, p. 216; Brown & Snyder, 2012, p. 299). The reviews covered various aspects of corporate governance including executive remuneration, internal control, non-executive directors (NEDs) and audit committees. The recommendations made in all these reviews are incorporated in the UK Corporate Governance Code 2010. The standards laid out in this code are not legally enforceable and thus, it is a voluntary code for the directors of UK companies.
However, companies with a premium listing on the London Stock Exchange (LSE) are required to apply the code on a ‘ comply and explain’ basis. According to Mallin (2007, p. 22), the code has relevance to most companies and organisations irrespective of their size and whether they are quoted or not and in many instances, the code has been a source of deterrence to financial irregularities. This report reviews the development of the UK corporate development code from 1992, explaining its effectiveness as a source of deterrence to financial irregularities.
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