Company Law Corporate Governance Essay
“One of the key features of the Combined Code 1998 is the use of non-executive directors as custodians of the government process.However concerns about non executive directors’ inability to monitor the board and management led to the publication of two reports under the chairmanship respectively of Derek Higgs and Sir Robert Smith in 2003” .It was also given direction for providing non-audit services by the auditor of the company, it improved transparency and the incomes for the committee.As a result of the above Committees we have the Combined Code on Corporate Governance which was set up to prevent the creation of other scandals.In our essay we will be discussing whether the UK Corporate Governance Code and legislative framework deal effectively with the problems shown by the recent corporate scandals.The scandals and recession in the last two decades resulted to a loss of investor confidence and a fall in market value which led to a reform of the corporate governance for all listed companies in the UK.“The Higgs Report sets out guidance for non-executive directors and chairmen and made proposals for the Combined Code to require a greater proposition of independent, better informed individuals on the board ,greater transparency and accountability in the boardroom, formal performance appraisals , and closer relationship between non executive directors and shareholders” .
Enron was one of the top ten companies in the United States but it collapsed since it was declared insolvent and was involved in the collapse of Anderson which was one of the “big five” global accounting firms. Similarly, a large Italian public company, Parmalat, declared bankruptcy.
Despite the fact that Greenbury Committee was helpful to identify the problems for remuneration the solutions proposed with the use of non-executive directors were not successful.
The Greenbury report was taken forward by the Hampel report in 1998 which was established by the Hampel Committee.
Many companies which appeared to work properly, such as BCCI, Polly Peck and the Maxwell Group, collapsed and this raised questions about the accountability processes in the UK.
In general the public was suspicious towards actions by the large corporations.