The Cadbury legacy

Updated: Saturday August 24, 2013 MYT 9:54:30 AM

The Cadbury legacy


WHAT should you do if you’re hoping that a prestigious institution will one day honour your work by setting up an archive to preserve and organise your records? Here’s a suggestion: Get appointed the head of a committee that produces an influential and timely report on a hot-button topic, and from then on, become a widely recognised authority on that subject. That worked for Sir Adrian Cadbury, not that there’s any evidence that he had indeed nursed such an ambition. On Wednesday, Cambridge University’s Judge Business School issued a press release saying Cadbury had recently donated to the school copies of all his speeches on corporate governance. These go to the Cadbury Archive housed at the school. The rest of the archive’s papers are those accumulated by Cadbury when he was chairman of Britain’s Committee on the Financial Aspects of Corporate Governance. The committee was formed in May 1991 by the Financial Reporting Council, the London Stock Exchange and the accountancy profession.At the time, Cadbury was already a prominent business personality. He was a director of the Bank of England and IBM UK Ltd, and Chancellor of Aston University in Birmingham. He had previously served as managing director and chairman of Cadbury Schweppes plc. His family had founded the Cadbury chocolate empire.

The committee was asked to recommend best practices on financial reporting and accountability.

Among the issues it looked at were directors’ responsibilities for reviewing and reporting performance, and the frequency, clarity and form in which information should be provided; the case for audit committees; the principal responsibilities of auditors, and the extent and value of the audit; and the link between shareholders, boards and auditors.

The result is a 90-page report published in December 1992. It contained 20 recommendations and a Code of Best Practice.

As is often the case, the chairman became the face and voice of the committee. We don’t know how the other 11 members feel about this, but the committee is often called the Cadbury Committee, and the report is almost always referred to as the Cadbury Report. And no, the Cadbury Code is not a set of rules on how to consume a chocolate bar; it’s a more convenient label for the report’s Code of Best Practice.

In addition, Cadbury himself settled well into the role of corporate governance advocate, often giving talks at conferences and meeting people to increase awareness and to spur changes for the better.

Titles and credit aside, the work of the committee has had a significant impact on corporate governance reform all over the world.

Many countries have relied on the Cadbury Report and the Cadbury Code when formulating policies and rules on corporate governance. According to the Cambridge Judge Business School press release, the Cadbury Code has been adapted or adopted in over 100 countries, including Australia, India, Brazil, China and Germany.

The seminal Malaysian document on corporate governance, the February 1999Report on Corporate Governance, also known as the Green Book, mentions Cadbury (either the man, committee, report or code) more than 40 times.

Says the Green Book: “Greater awareness of corporate governance issues is a first step towards good corporate governance. The level of awareness and attention generated by the Cadbury report has been phenomenal. The report has struck a chord internationally, and it has provided a yardstick against which standards of corporate governance are being measured.”

Not surprisingly, the Cambridge Judge Business School has a similar view. “The Cadbury Report initiated a revolution in corporate governance thinking that has been adopted by countries and institutions across the world,” it says on its website.

The school points out that one big change brought about by the report was the widespread acceptance of the principle that a person shouldn’t be both the chief executive and chairman of a listed company.

Yet, the birth of the Cadbury Committee wasn’t accompanied by much fanfare. The impetus then was to address the lack of confidence in financial reporting and the work of auditors.

Among the catalysts were the financial collapses of wallpaper group Coloroll and conglomerate Polly Peck although their accounts before this had contained no red flags.

These were scandals, for sure, but not quite the type that would capture the Average Joe’s imagination. But soon other things happened that immediately raised the stakes for the committee.

“Even as the committee was getting down to business, two further scandals shook the financial world: the collapse of the Bank of Credit and Commerce International (BCCI) and exposure of its widespread criminal practices, and the posthumous discovery of Robert Maxwell’s appropriation of £440mil from his companies’ pension funds as the Maxwell Group filed for bankruptcy in 1992,” says the Cambridge Judge Business School.

“The shockwaves from these two incidents only heightened the sense of urgency behind the Committee’s work, and ensured that all eyes would be on its eventual report.”

In the preface to the committee’s report, Cadbury notes that neither the committee’s title nor its work programme “seemed framed to catch the headlines”.

“In the event, the committee has become the focus of far more attention than I ever envisaged when I accepted the invitation to become its chairman,” he says.

“The harsh economic climate is partly responsible, since it has exposed company reports and accounts to unusually close scrutiny. It is, however, the continuing concern about standards of financial reporting and accountability, heightened by BCCI, Maxwell and the controversy over directors’ pay, which has kept corporate governance in the public eye.

“Unexpected though this attention may have been, it reflects a climate of opinion which accepts that changes are needed and it presents an opportunity to raise standards of which we should take full advantage.”

Fortunately, it was an opportunity that has led to improvements in corporate governance around the globe.

The efforts to raise corporate standards have to go on, of course, but probably without Cadbury. After handing over the copies of his speeches to the Cambridge Judge Business School, the 84-year-old said the occasion “would mark the end of [his] involvement in corporate governance”.

If that’s so, we could do with a few more good men and women whose names are synonymous with corporate governance reform.

If ever executive editor ERROL OH gets his very own archive, it will mostly have pizza delivery receipts, comic books, doodles and stacks of mail from Reader’s Digest.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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