WHY DO WE NEED CORPORATE GOVERNANCE CODE IN UK

Abstract

The Corporate Governance is the system by which companies are directed and controlled. The issues regarding the corporate governance was the black letter in the field of the company law in United Kingdom until the huge scandals that took place in the late 1980’s and early 1990’s which led to the reform of UK listed companies. The scandals made the public question about the corporate governance code and ultimately led to the fall of trust of public in the company’s accountability and also the scandals led to the massive downfall of the country’s economy and as it is the known fact that the economy of any country depends upon the drive and efficiency of their companies. It was after the collapse of 3 major companies that led to the formation of these committees, the London stock exchange required all the listed companies in United Kingdom to comply with the corporate governance code and to give the reasons for noncompliance, it was soon after the Cadbury committee was set. Cadbury committee was the first to deliver their response over the growing concern after the collapse of these major companies, it was followed by the Greenbury committee who also shared their response on issue with the directors pay and remuneration. Other committees like Hample, Turnbull and HIGGS also laid their suggestions which finally led to the formation of Combined Code later on, which will be discussed in the later part of the paper. The paper also discusses the struggle of UK towards achieving a good and most effective corporate governance code for its existing companies.