Uk and Us Corporate Governance Practices

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Category: Business and Industry

Date Submitted: 09/06/2011 03:56 AM

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Corporate governance had grown rapidly and continuously evolves and improves not only at the individual but also at a global level. Said to be the main cause of the recent global financial crisis, significant focus on corporate governance issues and recommendations for improvements has been introduced to prevent such problems occurring in the future. Despite having the same objectives (importance of independence, transparency and accountability) in ensuring the best corporate governance practices being adopted, each country has their own corporate governance approach that best suit the country‟s national business environment such as corporate ownership structure, domestic politics, culture, regulations as well as norms of business behaviour. As a result, corporate governance approaches around the world are diverse, ranging from traditional “hard law” – legally binding regulation with some form of delegation of enforcement to “soft law” – not legally binding (Karlsson-Vinkhuyzen and Vihma, 2009). In UK, arising from series of corporate and financial scandals, various revisions of corporate governance provisions had taken place to preserve the public or investors‟ confidence towards the effectiveness of corporate governance in UK companies as well as in the stock market as a whole. The best practices in corporate governance were first set out by The Cadbury Report in 1992, in the aspect of board of directors, auditing and shareholders. Although the Cadbury Report is not legally binding, following the establishment of the report, a key policy innovation was introduced. New concept known as “comply or explain” or using self-regulation as an underlying principle requires all listed companies to disclosed in their annual reports whether or not they have implemented all the recommendations outlined by the Cadbury Report. Should the companies do not fully comply with the

recommendations, the companies will need to make a clear and detail statement