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, 2014

Table of Contents

The Cadbury Report...Page 2

The Rutteman Report.Page 2
The Greenbury ReportPage 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
ReferencesPage 5

The Cadbury Report

The Cadbury Report (1992) was entitled Financial Aspects of Corporate

Governance which was issued by The Committee on the Financial Aspects of Corporate
Governance chaired by Adrian Cadbury. It had a remit to review those aspects of
corporate governance relating to financial reporting and accountability. The report sets
out recommendations on the arrangement of company boards and accounting systems
to mitigate corporate governance risks and failures. Its revised and final version was
issued in December of the same year. The report's recommendations have been used
to varying degrees to establish other codes such as those of the European Union, the
United States, the World Bank, etc.
The report begins by reviewing the structure and responsibilities of boards of
directors. Next, they consider the role of auditors and address a number of
recommendations to the accountancy profession. They then deal with the rights and
responsibilities of shareholders.
Reporting and Controls

It is the boards duty to present a balanced and understandable assessment of

the companys position.
The board should ensure that an objective and professional relationship is
maintained with the auditors.
The board should establish an audit committee of at least three non-executive
directors with written terms of reference which deal clearly with its authority and
duties.
The directors should explain their responsibility for preparing the accounts next to
a statement by the auditors about their reporting responsibilities.
The directors should report on the effectiveness of the companys system of
internal control.
The directors should report that the business is a going concern, with supporting
assumptions or qualifications as necessary.

The Rutteman Report

The Internal Control Working Group was established to fulfill the requirements of
the Cadbury Committee for the profession to develop guidance on internal control. It
was chaired by Paul Rutteman and comprised individuals put forward by The Hundred
Group of Finance Directors, ICAEW and ICAS. The final report from the group, 'Internal
control and financial reporting- guidance for directors of listed companies registered in
the UK', was published in December 1994 and is usually referred to as the Rutteman
Report.

The Greenbury Report

2

In January 1995 the Confederation of British Industry (CBI) established the Study
Group on Directors' Remuneration under the chairmanship of Sir Richard Greenbury
with a remit to identify good practice in determining directors' remuneration and to
prepare a code of practice for UK PLCs. The final report of the group was published on
17 July 1995 and is usually referred to as the Greenbury report.

The Hampel Report

The Hampel Report was published in 1998. It was designed to be a revision of
the corporate governance system in the UK. The remit of the committee was to review
the Code laid down by the Cadbury Report. It asked whether the code's original purpose
was being achieved. Hampel found that there was no need for a revolution in the UK
corporate governance system. The Report aimed to combine, harmonise and clarify the
Cadbury and Greenbury recommendations. The Hampel Report relied more on broad
principles and a 'common sense' approach which was necessary to apply to different
situations rather than Cadbury and Greenbury's 'box-ticking' approach.

The Turnbull Report

It was entitled Internal Control: Guidance for Directors on the Combined
Code (1999). Turnbull report was drawn up with the London Stock Exchange for listed
companies. The committee which wrote the report was chaired by Nigel of The Rank
Group plc. The report informs directors of their obligations under the Combined
Code with regard to keeping good "internal controls" in their companies, or having good
audits and checks to ensure the quality of financial reporting and catch any fraud before
it becomes a problem.

The Myners Report

The Myners Report, entitled Institutional Investment in the UK: A Review was a
report to HM Treasury in March 2001 on institutional investors delivered by Paul
Myners. Government was concerned that institutional investors were giving insufficient
attention and resources to their holdings in non-listed companies. The report addressed
this, in particular concerning pension fund trustees and fund managers. Though some
anticipated creation of public interest duties, the Report took the approach of asking
whether institutional investors were acting in the best interests of their beneficiaries.

The Higgs Report

Review of the role and effectiveness of non-executive directors (or the "Higgs
review") was a report chaired by Derek Higgs on corporate governace commissioned by
the UK government, published on January 20, 2003. It reviewed the role and
effectiveness of non-executive directors and of the audit committee, aiming at improving
and strengthening the existing Combined Code.
There was widespread unrest after the scandals in the US, involving Enron,
WorldCom and Tyco. The US opted for legislation under the Sarbanes-Oxley Act. Higgs
strongly backed the existing non-prescriptive approach to corporate governance:
"comply or explain". Yet he advocated more provisions with more stringent criteria for
the board composition and evaluation of independent directors. He wanted to remove
some of the discretion that the Code allowed.
Role of the Non-Executive Director
Strategy: Non-executive directors should constructively challenge and contribute to the
development of strategy.
Performance: Non-executive directors should scrutinise the performance of
management in meeting agreed goals and objectives and monitor the reporting of
performance.
Risk: Non-executive directors should satisfy themselves that financial information is
accurate and that financial controls and systems of risk management are robust and
defensible.
People: Non-executive directors are responsible for determining appropriate levels of
remuneration of executive directors and have a prime role in appointing, and where
necessary removing, senior management and in succession planning.

The Smith Report

The Smith Report (2003) was concerned with the independence of auditors in the
wake of the collapse of Arthur Andersen and the Enron scandal in the US in 2002. Its
recommendations now form part of the Combined Code on corporate governance,
applicable through the Listing Rules for the London Stock Exchange. It was
substantially influenced by the views taken by the EU Commission. One important point
was that an auditor himself should look at whether a company's corporate governance
structure provides safeguards to preserve his own independence.

References:
4

http://en.wikipedia.org/wiki/Cadbury_Report
https://www.icaew.com/~/media/Files/Library/subjects/corporate
%20governance/financial%20aspects%20of%20corporate%20governance.pdf
http://www.icaew.com/en/library/subject-gateways/corporate-governance/codes-andreports/rutteman-report
http://www.icaew.com/en/library/subject-gateways/corporate-governance/codes-andreports/greenbury-report
http://en.wikipedia.org/wiki/Hampel_Report
http://en.wikipedia.org/wiki/Turnbull_Report
http://en.wikipedia.org/wiki/Myners_Report
http://www.icaew.com/en/library/subject-gateways/corporate-governance/codes-andreports/higgs-report
http://en.wikipedia.org/wiki/Higgs_Report
http://en.wikipedia.org/wiki/Smith_Report