Looking back over the last decades, this report comes forward as a milestone in governance. It is 1992. The Cadbury Report about “Financial Aspects of Corporate Governance” is published. It was a groundbreaking report – chaired by Sir Adrian Cadbury – leading to improvements of the standards of governance. It was a reaction on the scandal in 1991 at the Bank of Credit and Commerce International.
The report brought forward specific recommendations on good corporate governance described as ”best practice” or ”code of conduct”. It was highly influential for the development of codes within organisations in the light of accountability to external shareholders. It is the start of a new line of thinking about good governance, also in the public context.
This interview with Sir Adrian Cadbury gives the precise focus but also the intentions to look further into the essence of corporate governance.
The report stipulated “the continuing concern about standards of financial reporting and accountability, … which has kept corporate governance in the public eye.” Some findings and recommendations (a personal selection) tell the story of the search for codes, checks and balances [quote]:
- By adhering to the Code, listed companies will strengthen both their control over their businesses and their public accountability. In so doing they will be striking the right balance between meeting the standards of corporate governance now expected of them and retaining the essential spirit of enterprise.
- Every public company should be headed by an effective board which can both lead and control the business.
- The framework in which auditors operate, however, is not well designed in certain respects to provide the objectivity which shareholders and the public expect of auditors in carrying out their function.
- The new system has only recently been established and its full impact has yet to be felt. In the following paragraphs we endorse the steps that are being taken and recommend additional action to strengthen public confidence in the audit approach.
- We believe that there should be an extension of the audit which will add to users of accounts and bring it closer into line with public expectations.
- So far as reporting fraud is concerned, the present legal position is that confidentiality is an implied term of an auditor’s contract, and there is a public interest in maintaining confidential client relationships. Normally, therefore, it is the auditor’s duty to report fraud to senior management. However, there is also a public interest in fraud being dealt with expeditiously and this may entail disclosing matters to a proper authority. [unquote]