The Cadbury Committee Report Of 1992 And The Higgs Report Essay

994 Words Sep 29th, 2016 4 Pages
QUESTION (3) –In principle, the governance and control of the company should be exercised by the board as a whole and not by individual directors. The Cadbury Committee Report of 1992 and the Higgs Report of 2003 support this concept of commonality of legal duty and collective responsibility. Explain what this is, and how it would be achieved. (20 marks)

An important aspect of good corporate governance and proper control of a company is the commonality of legal duty and collective responsibility of the Board of Directors as a whole.

The Board as a whole has a legal duty of ensuring proper governance and control. The responsibility of each director is combined into a collective responsibility as the entire Board. This means that the Board of Directors have to be cautious in their decision-making and seriously consider their policies in order to avoid stakeholders laying legal claims against the company, and thereby putting the entire Board in the line of fire. Every entity should have an effective board at its helm, which is collectively responsible for the company’s success. It is vital that no one individual director should have unlimited powers of decision as this could lead to improper governance. There should be appropriate division of the company’s responsibilities between the Board and the Directors. In addition, in order to have a system of proper control and governance of a company, no one person or even small group of people or directors should be able to…

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