Following the Enron report, two review committees were commissioned by the UK Financial Reporting Council (FRC) to review UK corporate governance2. The two independent review reports - the Higgs Report on Non-Executive Directors and the Smith Report on Audit Committees, were published in January 2003 and form the bases for the revised Code [also see Higgs review (2003) and Smith review (2003)].
In this analysis the features of the revised combined code will be discussed along with studies to show and suggest whether the implementation of this code is likely to improve the effectiveness of corporate governance for listed companies.
The revised code contains 14 principles for companies supported by 48 code provisions. Many aspects of the revised code have remained unchanged from the original code although there have been many important changes. The code suggests that the board should comprise of independent non-executive directors along with executive directors and the code contains guidance on the meaning of independent directors emphasizing on independence as an important measure (Long et al, 2005). ...Show more