The document summarizes several key UK corporate governance reports and codes including the Combined Code, Cadbury Report, Hampel Report, Turnbull Report, Greenbury Report, Higgs Report, and Smith Report. It provides an overview of the purpose and key recommendations of each report, which focused on improving practices around boards of directors, auditing, shareholder rights, executive compensation, and internal controls. Overall the reports aimed to establish best practices and strengthen accountability in response to corporate scandals.

1. CORPORATE GOVERNANCE IN THE UK GROUP 2 MICHAEL BENNISON MICHAEL KLEOPFER ZINIA MORENO MUSTAFA SHAH

2. THE COMBINED CODE A set of principles for corporate governance The Combined Code is a consolidation of several different reports Cadbury Report Greenbury Report Hampel Report Turnbull Report Higgs Report Smith Report

3. THE COMBINED CODE A response to the BCCI and Robert Maxwell corporate scandals in 1991 Fourteen governance principles with supporting principles and provisions Five sub-sections and three schedules Code of Best Practices for the Board New recommendations are added annually

4. THE CADBURY REPORT The Cadbury Report A. Code of Best Practices B. The Board C. Auditing D. Shareholders

5. Sir Adrian Cadbury said, “The effectiveness with which boards discharge their responsibilities determines Britain's competitive position. They must be free to drive their companies forward, but exercise that freedom within a framework of effective accountability. This is the essence of any system of good corporate governance."

6. HAMPEL REPORT Purpose – Give Updates / Opinions since the Cadbury and Greenbury Reports Recommendations : Corporate Governance is an ongoing process and should evolve based upon principles and argues against “box ticking” or a standard of yes / no questions. All directors should be up for election at least every three years and non- directors should make up at least a third of the board

7. HAMPEL REPORT Separation of chairman and chief executive posts preferred Promotes the Annual General Meeting as an opportunity for shareholders to ask questions to the board Proxy votes should be counted ahead of shareholder vote at the annual general meeting

8. TURNBULL REPORT Purpose – Expand on the Combined Code of 1998 Recommendations: internal control should be embedded in its business processes, remain relevant over time by continually changing, and enable each company to apply it in manner where it takes its own circumstances and operation in to account The board should continually evaluate a company’s internal control and seek continuous improvement

9. TURNBULL REPORT In the board’s statement of internal control, the board annually should describe that the board regular reviews the system of internal control and have identified, evaluated, and managed significant risks faced by the company up to the date of approval of the annual report. Listing Rules of the London Stock Exchange require the board to disclose if it has failed to conduct a review of the effectiveness of the company’s system of internal control Although having an internal audit function is not required, Turnbull suggests the need for companies to review the need if one is necessary

10. GREENBURY REPORT Purpose- Identify good practice in determining directors’ remuneration. Recommendations: Remuneration committee- determine remuneration package for directors, report to shareholders etc. Disclosure and approval provision- disclose terms of contract and explain every item of remuneration package.

11. GREENBURY REPORT Remuneration policy- remuneration package must be encouraging and motivating, include share options if appropriate. Service contracts and Compensation.- 1 year period, extension or termination can be done considering reasonable situation.

12. HIGGS REPORT Purpose- Study role and effectiveness of non executive directors. Recommendations: Role of Chairman- construct effective board, communication with members and shareholders. Role of non executive director (must be independent) - examine performance of management. Contribute to improvement of strategy of the company. Role of board- set up goal and standard, supervise associations of the company.

13. HIGGS REPORT Role of Senior Director- lead meeting of non executive director, communicate with shareholders. training and development- enhance skills of directors. Nomination committee- appoint non executive directors, review board structure, review time commitment required for NEDs.

14. THE SMITH REPORT Published under the auspices of Sir Robert Smith Issued after the Enron and Arthur Andersen corporate scandals Now known as the Guidance on Audit Committees Established the role of the Audit Committee Issued guidance on: Financial reporting Internal Audit Whistle blowing programs External Audit function

15. Sir Robert Smith said, “The effectiveness of internal audit is, to me, the basis and bedrock of the audit committee process.”

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