Codifying best practices in corporate governance is a subject that has occupied the attention of boards of directors on both sides of the Atlantic. For U.S. companies, the GM Board Guidelines on Significant Corporate Governance Issues, made public in 1994, has been a model that interested boards have embraced in whole or with some adaptation. In the U.K., boardroom debate was stirred by the release in 1992 of the Code of Best Practice, a report formulated by a business group chaired by Sir Adrian Cadbury (formally called the Committee on Financial Aspects of Corporate Governance).
How the Cadbury Committee Report has stimulated the examination and evolution of corporate governance is a subject of the following conversation between Robert H. Rock, Chairman of Directors & Boards, and David Kimbell, Chairman of Spencer Stuart. Kimbell joined Spencer Stuart in London in 1979, and has been serving as Chairman of the U.K Practice since 1993 and as the firm's Worldwide Chairman since 1987 Accompanying the interview is an excerpt from the Cadbury Report that details its recommended Code of Best Practice.
Robert Rock: How would you characterize the thrust of the Cadbury Report?
David Kimbell: What the Cadbury Report was attempting to do was to take the most important element of a company, its board of directors, and try to put the board within a framework which enabled people to understand not so much what the directors' legal responsibilities are but how the directors should interrelate with one another. It examined how the board should think about its role, how the board should be structured, how it should see its responsibilities to the various constituencies of the company, what the board should do about ensuring that its powerful elements don't become too powerful and overweening, and how the board should ensure that its reporting is open and honest.
Rock: The Report generated a fair amount of debate, did it not?
Kimbell: The Report wasn't all that dramatic or radical. It was part of an evolution. But it was criticized by a number of people for being idealistic and unrealistic in some respects. There are people who believe that nonexecutive directors, as we call outside directors, have no relevance whatsoever -- that running a business is a professional activity and that a board should be run by people who know how to run a business, and that you don't need a lot of independent directors to spy on the managers.
Rock: How would you assess the Report's impact?
Kimbell: I think that the impact so far...