Governance structures, director independence and corporate performance in the UK

ISSN： 0955-534X

Source： European Business Review, Vol.13, Iss.2, 2001-03, pp. : 86-95

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Abstract

A number of Committees have been set up in recent years to investigate the governance of UK quoted companies. The key one was the Cadbury Committee, which recommended a number of governance structures as examples of best practice. These included the separation of the posts of CEO and chairman, a significant representation of non-executive directors, the importance of non-executive director independence and the setting up of board subcommittees. This study finds that there has been widespread adoption of the recommended governance structures. However, there is no clear relationship between governance structures and corporate performance. This raises questions about the most effective type of governance mechanism and whether or not the prescriptive recommendations of Cadbury should be replaced with a more flexible approach.