CLASES DEL EQUIPO DE AULA Y ACTIVIDADES DE APRENDIZAJE
I. ANEXOS Encuesta:
3. A nivel administrativo, ¿Hay algún espacio físico destinado a trabajar colaborativamente entre docentes? ¿Dónde?
The UK corporate governance system is a result of what may be described as a rich history that has developed over many years. In fact, corporate governance is not something strange to the United Kingdom. Moreover, the ‘Joint Stock Companies Act 1844’ could be described as the root of Companies Law in essence. However, the 1990s witnessed the beginning of dealing with corporate governance as a specific issue with a series of committees, starting with the watershed Cadbury Committee.183 However, the motivation that started the reform of UK listed companies were the successive shocks of the late 1980’s scandals and the recession in the opinion of Dignam and Lowry.184 These reports mainly linked with the financial scandals at the Bank of Credit and Commerce International (BCCI) and closures of companies linked to Robert Maxwell as stated by Yeoh.185 Therefore, it is not a secret that the impetus
183 V Younghusband, 'Corporate Governance in the UK' (1998) 9 International Company and
Commercial Law Review 275.
184 A J. Dignam and John P. Lowry, Company Law (8th edition edn Oxford University Press, 2014)
Page: 426.
185 P Yeoh, 'Corporate Governance in the UK: A Time for Reflection' (2015) 36 Business Law Review
behind developing effective corporate governance was the collapse of corporations and financial scandals.186
Therefore, the development of corporate governance in the UK initially began just prior to the 1990s in the shadow of several corporate scandals, such as Maxwell and BCCI. Noticeably, the weaknesses in the UK’s corporate governance system were one of the main motivations for setting up corporate governance committees, including the Cadbury and Greenbury Committees.187 The need for increasing and restoring confidence in not only existing investors, but potential investors as well, alongside transparency and accountability, was the motivation behind introducing corporate governance codes in the opinion of Mallin.188 In fact, the work of committees is not the only factor that has contributed to the development of corporate governance in the UK. It must be mentioned in this respect the work of the UK scholars and researchers who have enriched the academic field concerning this important issue. Scholars and researchers’ efforts at raising the profile of corporate governance issues in the UK have accompanied the work of the committees, which has resulted in the current UK corporate governance regulations.189
186 C A. Mallin, Corporate Governance (3rd ed. edn Oxford University Press, 2010) Page: 26.
187 V Younghusband, 'Corporate Governance in the UK' (1998) 9 International Company and
Commercial Law Review 275.
188 C A. Mallin, Corporate Governance (4th edn Oxford University Press, 2013) Page: 26.
189 See for instance the work of John Parkinson who was a key figure in raising the profile of corporate
Generally speaking, the development of corporate governance in the UK has been influenced by four broad areas since 1998. First of all, the reports that have tackled issues of corporate governance, such as: internal controls by the Turnbull Report; institutional investment by Myners; and the role of non-executive directors in the Higgs Review. The second broad area that influenced the first UK Stewardship Code 2010 is the Institutional Shareholders’ Committee (ISC), through the institutional shareholders responsibilities statement. Thirdly, the Company Law Review, the Walker review for HM Treasury and the FSA review have influenced the corporate governance regulatory framework. Finally, external influences have come from the EU and the USA, for example, Sarbanes-Oxley Act, the EU Corporate Governance Framework and EU review of company law.190
Thus, there is a need for a brief introduction to the committees’ work in order to further understand the United Kingdom’s approach to corporate governance.191Therefore, the following paragraphs are an attempt to show the important historical chain of the key aspects of developments in the UK, which have contributed towards shaping current UK corporate governance.
3.2.1.1 The Cadbury Committee192
Whilst the Cadbury Committee has been covered briefly in chapter one, mention should be made here as well, as the Cadbury Committee may be described as the cornerstone to current UK corporate governance. The corporate failures in May 1990,
190 C A. Mallin, Corporate Governance (4th edn Oxford University Press, 2013). Page: 28. 191 J Birds and others (eds), Boyle & Birds' Company Law (9th edn Jordans, Bristol 2014) P:357. 192 For more about Cadbury committee, see chapter two 2.4.5.
such as the Maxwell Empire, BCCI and Polly Peck in the United Kingdom, indicated the need for greater examination of corporate governance and improving the standards of corporate governance. May 1990 witnessed the establishment of the Committee on the Financial Aspects of Corporate Governance, which later became known as the Cadbury Committee, and this was set up by the Financial Reporting Council, the London Stock Exchange and the accountancy profession. For 18 months, the Committee on the Financial Aspects of Corporate Governance, led by Sir Adrian Cadbury, examined aspects of corporate governance.193 One of the findings of Cadbury Committee was the “massive incidences of lack of essential corporate disclosures in both as well as others in the corporate UK sector”.194
Listed companies incorporated in the UK are ordered to 'comply or explain' according to the Cadbury Code, so new Listing Rules were introduced by the London Stock Exchange.195 The outline of the Cadbury Committee was published in 1992, including important recommendations for the separation between the CEO and chairman; the board's balanced composition; non-executive directors selection processes; financial reports transparency, and internal controls.196 To sum up, the Code of Best Practice of the Cadbury Committee has introduced four important principles in order to
193 V Younghusband, 'Corporate Governance in the UK' (1998) 9 International Company and
Commercial Law Review 275 .
194 P Yeoh, 'Corporate Governance in the UK: A Time for Reflection' (2015) 36 Business Law Review
130.
195 V Younghusband, 'Corporate Governance in the UK' (1998) 9 International Company and
Commercial Law Review 275 .
improve corporate behaviour in the view of Shaw. First of all, to ensure the balance between authority and power, at the head of the company, there must be a clear division of responsibilities. Secondly, a sufficient number and calibre of non- executive directors should be included in the board in order to make important decisions. Thirdly, a positive interest in the composition of boards of directors should be taken by institutional investors. Lastly, clear recognition should be ensured by the board structure with help of an Audit Committee to secure the significance of the function of the finance.197 Briefly, the Cadbury Committee is all about the freedom of boards to work and compete in favour of their companies, while ensuring that the work is carried out within the accountability framework.198 It is fact that the influence of Cadbury Report has spread to cover many parts of the world.199
3.2.1.2 The Greenbury Committee
Despite the fact that the Cadbury Committee had dealt with the issue of executive directors’ remuneration, the establishment of the Greenbury Committee in January 1995 was because of this specific reason, according to the initiative of the Council for British Industry (CBI). Obviously, the excessive remuneration packages were still a concern, despite the fact that the Cadbury Committee had tackled this issue. The Greenbury Committee prepared a Code of Best Practice on directors’ remuneration, which was published in July 1995. Moreover, the Listing Rules’ requirement of
197 J C. Shaw, The Cadbury Report, Two Years Later (Comparative Corporate Governance : Essays and
Materials, Walter de Gruyter, 1997) Page: 24.
198 J Birds and others (eds), Boyle & Birds' Company Law (9th edn Jordans, Bristol 2014) Page: 357. 199 C A. Mallin, Corporate Governance (4th edn Oxford University Press, 2013) Page: 27.
confirming whether there has been compliance by the companies with section A of the Best Practice Provisions was introduced after the Greenbury Committee’s report. Indeed, corporate governance disclosures requirement was one of the main impacts of both the Cadbury and Greenbury committees.200
In short, the main recommendations of the Greenbury Committee include: Firstly, a independent remuneration committee consisting non-executive directors to determine the directors’ remuneration; secondly, information about the named directors’ salaries with full disclosure; thirdly, the requirement of disclosure and explanation if the period of the directors’ service contracts are more than one year; fourthly, directors are encouraged to hold onto shares, and shares should not be vested; fifthly, instead of capital gains on disposal, it recommends the taxation of executive share option gains as income.201 In fact, Greenbury Committee went further in comparison with Cadbury by advocating that “the three mentioned committees should be made up of independent directors”.202
3.2.1.3-The Hampel Committee
Following the Cadbury and Greenbury committees, and recommended by them, there was a need for a new Committee to review and revise the findings, and check the implementation of their recommendations, which was the reason for establishing the
200 V Younghusband, 'Corporate Governance in the UK' (1998) 9 International Company and
Commercial Law Review 275.
201 John Birds and others (eds), Boyle & Birds' Company Law (9th edn Jordans, Bristol 2014) Page:
358.
202 P Yeoh, 'Corporate Governance in the UK: A Time for Reflection' (2015) 36 Business Law Review
Committee on Corporate Governance. The committee, known as the Hampel Committee, was established in November 1995, and was followed by the Hampel report two years later. The committee was chaired by Sir Ronald Hampel who was appointed by the Department of Trade and Industry.203 Unlike Cadbury and Greenbury, the establishment of the Hampel Committee contained several players in terms of initiative, which were the chairman of the Financial Reporting Council and six sponsors: the LSE, the CBI, the Institute of Directors, the Consultative Committee of Accountancy Bodies, the Association of British Insurers, and the National Association of Pension Funds. There was an obvious difference between Hampel and the previous Committees, as the Hampel Committee shifted from the restricted remits of ‘Cadbury and Greenbury’ to cover the whole field of corporate governance.204
The Hampel Committee published its report with a large endorsement of the Cadbury and Greenbury committees’ conclusions. Moreover, the Hampel Committee’s endorsement of the previous committees’ conclusions about the remuneration of the directors to be put to a shareholder vote at the annual general meeting, could be described as controversial at the time.205 Moulton and Higgs contend that there are two very significant conclusions from the Hampel Committee. First of all, instead of explicit rules, good corporate governance is a matter of behaviour and an issue of
203 R Moulton and N Higgs, 'Corporate Governance in Financial Institutions' (2013) 109 Compliance
Officer Bulletin 1.
204 V Younghusband, 'Corporate Governance in the UK' (1998) 9 International Company and
Commercial Law Review 275.
205 R Moulton and N Higgs, 'Corporate Governance in Financial Institutions' (2013) 109 Compliance
principles that aim to ease the regulatory burden on companies with flexibility that should meet the company's specific needs. Secondly, there was a concern that, in the work of the previous committees, the emphasis on accountability had neglected, to some extent, the major responsibility of the board regarding the issue of acting in the best interests of the shareholders. Moreover, the Hampel Report promotes the involvement of the shareholder in issues of governance. Remarkably, the principle of stakeholders who have an interest in the company's success, such as governments, local communities, customers, suppliers and employees, was later put into a statutory footing in the Companies Act 2006.206
Unlike Cadbury and Greenbury, Hampel goes beyond being entirely focused on the UK to be distinguished by having experts’ advice in corporate governance practice from the United States and Germany as well. However, it may be important in the context of the adaptation of a new system, in comparison with the ‘adopted Saudi Arabian corporate governance’, to note that the Hampel Committee does “not recommend the adoption of a whole system developed elsewhere”.207 The importance of the previous three Committees, Cadbury, Greenbury and Hampel, is due to the fact that the Combined Code is based on their reports and the Cadbury Committee's Code of Best Practice.208
206 Ibid.
207 V Younghusband, 'Corporate Governance in the UK' (1998) 9 International Company and
Commercial Law Review 275.
208 A Keay, 'Assessing Accountability of Boards under the UK Corporate Governance Code' [2015]
3.2.1.4 The Turnbull Report
One of the requirements of the Combined Codes of 1998 and 2003 from companies is to provide a statement on their application process for the Code Principles and Code Provisions in regard to internal control in their annual reports; therefore, there is the need for companies to know the approach that should be taken. Thus, the Institute of Chartered Accountants in England and Wales established the Turnbull Committee in 1998, chaired by Nigel Turnbull. In September 1999, the Guidance for Directors on the Combined Code was published, and then the FRC updated this to a new version in 2005 and then again in 2014.209
3.2.1.5 The Higgs Report
Chaired by Derek Higgs, the review of the role and effectiveness of non-executive directors was published in 2003. The conclusions of the Higgs Report have been incorporated into the 2003 Code’s revised version. These recommendations cover several issues, such as the composition of the board, remuneration policy matters, the evaluation of performance, accountability, and the issue of responsibilities of directors. One of the recommendations of the Higgs Report has been to tackle the issue of establishing a nomination committee, as Higgs recommended the establishment of a nomination committee in all listed companies that are chaired by an independent non-executive director, with an independent non-executive directors' majority. 210
209 R Moulton and N Higgs, 'Corporate Governance in Financial Institutions' (2013) 109 Compliance
Officer Bulletin 1.