Country Analyses, Second Edition
Edited by Christine A. Mallin
Chapter 1: Corporate governance developments in the UK
Christine A. Mallin INTRODUCTION Corporate governance has gained an increasingly high profile in the last two decades. The recent global financial crisis has further focused attention on how corporate governance might be improved and help to restore confidence in stock markets and firms generally. The interest in corporate governance spans countries and continents, and applies not only to large public corporations but also to a wider range of business forms including state-owned enterprises, family-owned firms, and not-for-profit organizations. Sir Adrian Cadbury, who chaired the UK’s Committee on the Financial Aspects of Corporate Governance which reported in 1992, stated that corporate governance is ‘the whole system of controls, both financial and otherwise, by which a company is directed and controlled’. This definition is succinct but clearly conveys the importance of controls in the company. A wider definition was given by the Organisation for Economic Co-operation and Development (OECD, 1999) which stated that corporate governance is ‘a set of relationships between a company’s board, its shareholders and other stakeholders. It also provides the structure through which the objectives of the company are set, and the means of attaining those objectives, and monitoring performance are determined’. As we can see, this definition views corporate governance from a much wider perspective and takes account of the various stakeholder groups, not just the shareholders. It also emphasizes the importance of corporate governance as an enabling device for setting, achieving and monitoring corporate objectives and performance. From just these two definitions, it is easy to understand...
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