Fundamental Reports on Corporate Governance of the United Kingdom

Abstract

Establishing sound corporate governance standards are considered to be one of the prominent concept of the financial sector. Substantial corporate governance reforms first have begun in the United Kingdom in the early 1990s. As a result, number of analytical reports were submitted, which later became foundation of the modern corporate governance. The idea was to increase investor’s trust and confidence, improve financial market stability, and increase transparency and accountability amongst shareholders and executives of companies. The first attempt in this direction is believed to be the Cadbury Report, which pioneered the high standards of corporate governance into the financial market and established the progressive method of "comply or explain", obliging the companies listed on the London Stock Exchange to clearly provide in their annual reports how they complied with the requirements or explain the cause of deviation from them. After the Cadbury Report many tried to further enrich and perfect the principles of the corporate governance, namely: the Greenbury Report mainly concentrated on the remuneration of executives as well as on aligning the interests of executives and shareholders; the Hampel Report highligthed the importance of the protection of the interests of employees, consumers, creditors and stakeholders; the UK Combined Governance Code revisited standards of the composition of the board of directors, their remuneration, accountability and compliance with auditing requirements; the Turnbull Report focused on the internal financial and operational control and risk management; the Higgs Report challanged the composition of non-executive directors, their roles, duties and efficiency of their activities; the Walker Review addressed the problems existing in the banking and financial sectors; the Stewardship Code promoted enhanced involvement of institutional investors; the Corporate Governance Code set forth principles of sound governance and efficiency of the board of directors, accountability with and reporting to the shareholders; the Hampton-Alexander Review concentrated on improving gender balance and representation in the board of directors; and the last but not least, the Parker Review encouraged ethnocultural diversity in the board of directors. The purpose of this article is to provide a brief overview of each report, highlight their main principles and outline what was the foundation of modern corporate governance. Keywords: Shareholder, Director, Investor, Corporate Governance, Corporate Governance Code, Corporation, Management, Principle, Risk, Standard.