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The Cadbury Report, Balance of Power: A situation in which power is shared…
The Cadbury Report
Board of directors
The Cadbury Committee agreed that the balance of power between directors and shareholders was appropriate but that there should be more accountability by directors to shareholders
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Some directors might not have the necessary experience or skills in a particular area to play an effective role in a particular discussion
Non-executive directors
At the time of the Cadbury Report, NEDs were not common
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The Cadbury Committee recommended that there should be sufficient NEDs for their views to carry weight and most of them should be independent
Independent NEDs should be able to bring judgement and experience to the deliberations of the board that th eexecutvie directors on their own might lack
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The Cadbury Report did not set maximum terms for NEDs, but did imply that they became less independent over time
Executive directors
The Cadbury Committee recommended that directors service contracts should not exceed three years without shareholder approval
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There was not the debate about directors remuneration and pay for failure that we see in may countries today
Recommended that directors remuneration should be decided by a remuneration committee consisting wholly or mainly of NEDs
The Audit Committee
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Should also review the interim and annual financial statements before their submission to the full board for approval
Going concern statement
A statement by the board of directors that in their view the company will remain as a going concern for the next financial year
The Committee recommended that companies should include a 'going concern' statement in their annual report and accounts
An implication of this recommendation is that before approving the report and accounts, each director is under a personal responsibility to reassure themselves that the company is a going concern ad is not on the brink of insolvency
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Balance of Power: A situation in which power is shared out evenly between a number of different individuals or groups so that no single individual or group is in a position to dominate