Abstract
The structure of the board of directors has a lot to do with its purpose. The UK has traditionally had a unitary board, with executives and non-executive directors sharing power. Efforts from the European Commission, supported by peripheral actors in the UK, favoured a change to two-tier boards. This chapter analyses in detail how that debate played out during the three major versions of the UK, which arose in response to crises of confidence, when change was possible, when power might have shifted, and when incremental changes occurred.
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Notes
- 1.
Ironically, the failures of Herstatt Bank in the 1970s, the construction equipment maker IBH and the bank Schröder, Münchmeyer, Hengst in the 1980s, and the metals trading company Metallgesellschaft in the 1990s find surprising little resonance in discussions of corporate governance outside Germany. The first bank failures in the financial crisis of 2007–2009 were in Germany: Industrie-Kredit Bank and Sachsen LB. Both had invested heavily in US subprime mortgage securities. Even more recently, the financial services company Wirecard, after a spectacular rise into the top tier of listed company, underwent an even more spectacular collapse in the early months of 2020.
- 2.
In contrast, for example, to Dutch or Swiss practice, half the members of German supervisory boards are drawn from the workforce, a feature of German law since the time Bismarck (Fear, 1997). Roe (2003) links its persistence after World War II to acceptance by capital providers in West Germany of the need to shore up support of trade unions against the threat from the Soviet Union.
- 3.
The ‘City’ is a widely used nickname for the London financial district.
- 4.
The ‘Merrett-Sykes’ paper Charkham refers to is not recorded in the Cadbury Archive, although Alan Sykes, managing director of Consolidated Gold Fields, mentions it in a separate comment on the draft report (CAD-02141). Anthony Merrett, a London Business School professor, and Sykes made a second proposal concerning the accountability of auditors (CAD-02185).
- 5.
That 1994 review concluded that no changes were needed to the code itself, and nothing more was published.
- 6.
The PIRC submission itself is not recorded in the Cadbury Archive, but the firm provided a late draft of the document for this study, which is quoted here. The Cadbury Committee’s summary of investor reactions cites long passages from the PIRC submission on other matters but only notes that PIRC supported a unitary board. It does not quote this passage.
- 7.
The comment referred to the E&Y submission in general, which was also critical of the report in other matters.
- 8.
For a wry look at the use of euphemisms in British speech, including ‘incidentally’, see Economist (2011).
- 9.
Sheehy’s submission itself is not recorded in the Cadbury Archive; this excerpt comes from the committee’s summary CAD-02255.
- 10.
The respect Green achieved is made clear in a case study on his long career at BTR. See Kerr (2006).
- 11.
Arthur Andersen was at the time a highly respected voice in the accountancy profession. Its disintegration a decade later after the collapse of clients Enron, WorldCom and others may be traced in part to what we might term governance ‘experimentation’, but not perhaps experiments in enhanced supervision.
- 12.
Sir Adrian Cadbury’s notes to the committee considering the responses to the draft (CAD-01265) speak of recommendations needing to pass the ‘Maxwell test’, so called because Robert Maxwell would have signed off his companies as having complied with the code, and neither his directors nor auditors would have challenged that view.
- 13.
ned’s (lower case) is Sir Adrian’s personal short notation for non-executive directors.
- 14.
Owing to the circumstances concerning the source material, references to submissions to the post-Higgs consultation are given only to the respondent and the date of the response.
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Nordberg, D. (2020). Shape of the Board. In: The Cadbury Code and Recurrent Crisis. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-55222-0_6
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