2. The Cadbury Committee was set-up in May 1991
by the Financial Reporting Council of the London
Stock Exchange.
The committee published its report in December
1992.
Adrian Cadbury the chairman of the Cadbury
committee.
3. Role of Board of Directors, duties of the board
and its compositions.
Role of Non-Executive Directors.
Dealing with their Remunerations.
Addressing questions of financial reporting and
financial controls.
4. The board should meet regularly, retain full and
effective control over the company and monitor the
executive management.
The board should include non-executive directors of
sufficient caliber and number for their views to carry
significant weight in the board’s decisions.
All directors should have access to the advice and
services of the company secretary, who is responsible to
the board for ensuring that board procedures are
followed and that applicable rules and regulations are
complied with. Any question of the removal of the
company secretary should be a matter for the board as
a whole.
5. Non-executive directors should bring an
independent judgment to bear on issues of
strategy, performance, resources, including key
appointments, and standards of conduct.
Non-executive directors should be appointed for
specified terms and reappointment should not be
automatic.
Non-executive directors should be selected through
a formal process and both this process and their
appointment should be a matter for the board as a
whole.
6. we recommend that future service contracts should
not exceed three years without shareholders’
approval and that the Companies Act should be
amended inline with this recommendation.
Shareholders require that the remuneration of
directors should be both fair and competitive.
The Annual General Meeting provides the
opportunity for shareholders to make their views on
such matters as director’s benefit known to their
boards.
7. It is the board’s duty to present a balanced and
understandable assessment of the company’s
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.
8. 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 company’s system of internal control.
The directors should report that the business is a
going concern, with supporting assumptions or
qualifications as necessary.
9. A single person should not be vested with the
decision making power. i.e., the role of chairman
and chief executive should be separated clearly.
The Non-executive directors should act
independently while giving their judgment on issue
of strategy, performance, allocation of
resources, and designing the code of conduct.
A majority of directors should be independent non-
executive directors, i.e., they should not have any
financial interests in the company.
10. The term of the Directors can be extended beyond
three years only after the prior approval of the
shareholders.
A remuneration committee with majority of non-
executive directors should decide on the pay of the
executive directors.
The interim company report should give the
balance sheet information and reviewed by the
auditor.
The information regarding the audit fee should be
made public and there should be regular rotation of
the auditors.
11. An objective and professional relationship with the
auditors must be ensured.
It must be reported that a business is a growing
concern.