7.7 Summary

The figures in this chapter indicate that the recommendations of the Cadbury Committee have had a significant impact on the governance structure of large listed corporations in the UK. The level of compliance with the recommendations of Cadbury and Hampel indicates that corporate boards have adjusted their structure and composition to new corporate governance standards. Although governance structures differ between corporations, the figures suggest a development towards more homogeneity in the composition and structure of corporate boards in large corporations in the UK. Non-executive directors take over positions from executive directors while the average size of corporate boards remains stable. More corporations are assigning non-executive directors to the chairman seat of the board. Also audit, remuneration and nomination committees with a majority of non-executive directors have become increasingly popular in the UK. As such, changes in the structure and the composition of corporate boards suggest a tendency of one-tier boards to transform towards a more independent board structure that formally separates decision management from decision control in the UK. Developments in the governance structure of boards of directors are summarized in box 7.3.

 

Box 7.3

Current Trends in Corporate Governance in the UK

 

 

Existing corporate governance framework:

  • the Company Act provides minimum requirements related to the structure and composition of corporate boards;
  • corporation laws do not rigidly determine board structure and composition;
  • boards are composed of executive and non-executive directors;
  • there is no demand for or encouragement of employee representation at board level (co-determination);
  • legislative changes may occur in the near future.

 

Boards in listed corporations are undergoing changes:

  • independent board leadership is receiving more attention - CEO and chairman roles are increasingly being separated;
  • total board size is not downsizing significantly;
  • number of executive directors is decreasing;
  • number of non-executives is increasing;
  • more work is being done in standing oversight board committees;
  • more non-executive directors take positions in standing oversight committees.

 

Current issues:

  • ongoing debate on self-regulation and implications of corporation laws;
  • whether the board should be entirely composed of non-executive directors;
  • length of directors’ service contracts;
  • listing requirements and the development of an universal code of best practices;
  • ongoing debate on roles and fiduciary duties of non-executive directors.

 

 

Sources: Spencer Stuart (1996g); ICMG (1995); Chapter 7.

 


Related news items:
Older news items:

 
You may also be interested in these articles:

PDF Download

Interested in the PDF version of the study? Click here to download.

Maassen, G.F. (2002). An International Comparison of Corporate Governance Models. A Study on the Formal Independence and Convergence of One-Tier and Two-Tier Corporate Boards of Directors in the United States of America, the United Kingdom and the Netherlands.

Maassen, G.F. (2002). An International Comparison of Corporate Governance Models. A Study on the Formal Independence and Convergence of One-Tier and Two-Tier Corporate Boards of Directors in the United States of America, the United Kingdom and the Netherlands. Amsterdam: Spencer Stuart Executive Search.