Chapter six indicates that one of the main issues in the corporate governance debate concerns the influence of management on the role of corporate boards (Rechner and Dalton, 1991). Based on the assumption that the structure and the composition of corporate boards should support the control roles of directors, numerous recommendations have been proposed to improve the formal independence of boards of directors in publicly held corporations. In a similar way to the corporate governance discussion in the US, the structure and the composition of corporate boards of directors are fiercely debated in the UK. High profile corporate failures of Maxwell and others have heightened the emphasis on the strengths and weaknesses of the one-tier board model in the UK (Charkham, 1994).
The Cadbury Code of Best Practice, the Greenbury Report on Directors’ Remuneration and Cadbury’s successor - the Hampel Committee on Corporate Governance - have strongly contributed to the discussion on the openness, the integrity and the accountability of boards of directors in publicly held corporations. It has been suggested that these initiatives have resulted to considerable changes in the composition and the structure of corporate boards of directors in listed corporations during the last five years. The 1992 Cadbury Code - for example - requests boards to have at least three non-executive directors. Compliance reports indicate that this practice has been widely adopted by listed corporations in the UK. Although not required by the Cadbury Code, corporations have also changed their board leadership structures by separating the CEO and chairman roles. In addition, the Cadbury Code stipulates that audit committees should have at least three independent non-executive directors. This recommendation has been realized by a strong majority of listed corporations in the UK as well (Spencer Stuart, 1996a).
The organization of this chapter is to a large extent similar to the organization of chapter six. First, to review the discussion on the composition, the leadership structure and the committees of one-tier (unitary) boards, relevant recommendations of Cadbury and its successors are briefly discussed in paragraph 7.2. Guided by the recommendations of the Cadbury, the Greenbury and the Hampel committees, paragraph 7.3 portrays the discussion on the composition of boards in publicly held corporations in the UK. Paragraph 7.4 concentrates on the board leadership structure of these corporations. Finally, paragraph 7.5 portrays the discussion on board committees. Developments and facts about changing board attributes are presented in paragraph 7.6. In this paragraph, empirical findings on changes in board size and composition, board leadership structures and standing oversight board committees are based on data collected by Spencer Stuart Board Services in the UK. The data is culled from 1993 - 1997 annual reports.
In addition, the London Spencer Stuart office has sent a questionnaire to chairmen of the top one hundred corporations - by stock market value – listed on the London Stock Exchange in June 1996. Questions of the survey related to the composition of the board, the leadership structure of boards and other related corporate governance issues. Additional information from ICMG, PRO NED, The Institute for Chartered Accountants, the 1995 report of the Monitoring Sub-Committee of the Cadbury Committee, The Hampel Committee on Corporate Governance and information from independent commentators is used to exemplify changes in the attributes of one-tier boards of publicly held corporations in the UK. This chapter ends with a summary in paragraph 7.7.
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