Stock Exchange backs Cadbury proposals

THE STOCK Exchange has declared its strong support for the recommendations to improve corporate governance made by the Cadbury Committee, whose work it helped to initiate.

Sir Andrew Hugh Smith, the exchange's chairman, said in a written response: 'We believe that this report, by codifying best practice and ensuring that companies have to account publicly for their compliance, will prove a helpful means of maintaining and raising standards.'

Successful implementation would depend on 'the wholehearted commitment of all involved in any way in corporate governance'.

The Stock Exchange intends to require quoted companies to state in their accounts whether they comply with the code of best practice and to give reasons for any areas of non-compliance. This enforcement obligation is opposed by the Confederation of British Industry.

Despite the concern of the CBI and others that the enhanced policing role which the Cadbury code gives to non-executive directors will damage the concept of the unitary board, the Stock Exchange said it 'will continue to regard the board collectively and individually as wholly responsible for the conduct of a listed or quoted company's affairs'.

The exchange will not require compliance with the code, believing some areas could be of 'questionable benefit' for small companies which might be able to justify some non-compliance.

The exchange is talking to large investors to discover which code violations would prompt action.