The UK Corporate Governance code should be codified and placed in the Companies Act - Essay Example

It was this Code that introduced the principle of ‘comply or explain’.The City and the Stock Exchange gradually adopted it and, in 1998 it evolved into the Combined Code on Corporate Governance. Since the Combined Code is self-regulatory, no legal sanctions are bound to arise due to non-compliance. However, before the Combined Code was adopted, the Greenbury Report 1995 was drafted and it focused on strengthening the accountability while also enhancing the directors’ performance. It made recommendations that a remuneration committee comprising independent non-executive directors should be set up.

The 1998 Hampel Report endorsed majority of the findings in both the Cadbury and the Greenbury Reports but it went further in regulating the relationship between the company and its stakeholders. The Hampel Report stated that- the directors are responsible for the relations with stakeholders; but they are accountable to the shareholders. The 1999 Turnbull Report was however concerned with the implementation of some of the requirements found in the Code mostly its internal control requirements.

The board is required to periodically assess the control measures and annually report on them. The 2001 Myners Report promoted shareholder activism and also encouraged institutional investors to be more proactive. The Higgs Report drafted in 2003 focused mostly on the non-executive director’s independence, whilst the 2003 Smith Report considered the functions of the audit committee. The Code was reviewed over time after shareholder disquiet over its perceived shortcomings in corporate structures and its ability to respond to poor performance.

Several sections were added to the Code- risk management, audit committees, remuneration and internal control. There was a banking crisis in 2008, and with many banks nationalised, this prompted the government to request Sir David Walker to focus specifically on corporate governance in the UK banks and