Marks and Spencer's Compliance with the Cadbury Code
Marks and Spencer's Compliance with the Cadbury Code
Reasons for Cadbury Code
When the company is doing well, the investors usually do not spend much time thinking about corporate procedures. However, in the bad times everyone wonders how they could have ignored commonsense checks and balances. The Committee on the Financial Aspects of Corporate Governance, chaired by Sir Adrian Cadbury, carried out a code which will help to increase the efficiency of the companies with the proposals advising how to contribute positively to the promotion of good corporate governance (i.e., system by which companies are directed and controlled) as a whole. By adhering to the Code, listed companies will strengthen their control over their businesses, clarify responsibilities of directors and therefore their public accountability. The London Stock Exchange requires that all listed companies registered in UK to state whether they are complying with the Code and give reasons if not. This will enable the shareholders to know where the companies stand in relation to the Code.
The Committee's recommendations
All parties concerned with corporate governance should use their influence to encourage compliance with the Code
Role of directors
(i) Board of Directors
The board of directors should meet regularly, retain control over the company and monitor the executive management. The responsibilities should be divided, which will ensure a balance of power and authority, such that no one has unfettered power of decision. Where the chairman is also the chief executive, it is essential that there should be a strong and independent element on board, with a recognized senior member.
The board should include non-executive directors for their views, it should have a formal schedule of matters to ensure that the direction and control of the company is done.
There should be an agreed procedure for directors in the furtherance of their duties to take independent professional advice if necessary, at the company's expense. All directors should be able to get advice from the company secretary, who is responsible to the board for ensuring that board procedures are followed and rules and regulations are complied with. Removal of secretary should be a matter for the board as a whole.
(ii) Non-Executive Directors
Non-executive directors should bring independent judgment of strategy, performance, resources, etc. The majority should be independent of management and business or other relationship which could interfere with the judgment. Their fees should reflect the time which they commit to the...