The emergence of the concept of corporate governance can be attributed to certain events in the recent past which have shaken the business world. Accounting frauds such as Arthur Anderson, Enron, Satyam and World Com etc in the last decade resulted in loss of shareholder in the way the companies are governed. These disclosures along with the dot com bust which itself had its own share of corporate mis-governance made people loose confidence in the stock markets and the way that the companies are governed. The resulting market fall along with the tremendous impact on the society (loss of jobs, and damage to customers, and financiers) made it necessary to have a systemic framework which shall define the working of a public listed company.
More recently, the financial slowdown of 2008-09 has once again raised concern over the governance of such large organizations. The greed to make profits while ignoring risks involved and the eventual loss to the society has made it necessary to have a strong board of directors which has the complete knowledge of the companys operations, policies and business. In a nutshell, the following reasons can be listed for the growth in importance of Corporate Governance:
There have been many steps in setting out the standard for safeguarding the interests of the society and stop the occurrence of happenings like the Enron, Maxwell Communications and so on. Amongst the first one was the Cadbury report titled “Financial Aspects of Corporate Governance” published in the year 2002 (The Committee on the Financial Aspects of Corporate Governance, 1992). Subsequent standards were set up in the form of OECD Principles of Corporate Governance in the year 1999 and the Guidance on Good Practices in Corporate Governance Disclosure.
British Airways (BA) and British Petroleum (BP) are the two large UK plcs that we will be comparing for the purpose of this paper. British