Banking Protest.

The author of the report which laid the basis for British and international corporate governance codes will be the guest speaker at a conference which asks what the future of such measures should be.

As we examine the mistakes of the past and look to the future we need to think carefully about how our companies and banks should be governed.

Paul Sanderson

Sir Adrian Cadbury is one of a number of distinguished experts who will be speaking at the 4th Cambridge International Regulation and Governance Conference on 6 September. Booking details can be found at

Under the banner, "More regulation, or better stewardship?" the conference will ask how far the global financial crisis has posed a challenge to existing systems of governance and regulation and where they should go from here.

Current reviews, both in the UK and Europe, have suggested that poor governance of major companies was one of the reasons behind the economic failure which began in 2008. Some reforms to the way in which these companies are controlled and regulated have already taken place, but as the Libor-fixing scandal suggests, big questions about governance remain.

The aim of the conference, which is being jointly hosted by the University of Cambridge and Anglia Ruskin University, is to encourage the exchange of ideas about these issues between practitioners specialising in governance and regulation, policy-makers and academics.

"As we examine the mistakes of the past and look to the future we need to think carefully about how our companies and banks should be governed," Dr Paul Sanderson, a specialist in regulation at the University of Cambridge and one of the conference organisers, said. "Essentially the question is do we want more rules, which could potentially stifle innovation and growth, or better stewarding of what are, after all, our assets?"

Sir Adrian Cadbury, who is also a University of Cambridge alumnus, will address the conference on the 20th anniversary of his landmark contribution to the field, the "Report of the Committee on the Financial Aspects of Corporate Governance." The publication of this report led to the first code of corporate governance being established as a requirement for a listing on the London Stock Exchange and ultimately to the current UK Corporate Governance Code and numerous such codes around the world.

These lay down basic principles on matters such as the separation of the roles of Chairmen and CEOs, the appointment of non-executive directors to boards, the responsibilities of board members and indeed shareholders, and how decisions should be made about senior executives' pay.

But, constructing a universal template - a set of rules that can be applied to all types and sizes of companies on all occasions - is almost impossible. Cadbury cleverly incorporated into the code the comply-or-explain principle to deal with this. It allows companies to explain to their stakeholders when they have not fully conformed to the rules. It is then a matter primarily for shareholders to consider whether such action is justified and react accordingly.

Some explanations may be considered unacceptable, where a powerful figure fails to convince shareholders of the need to combine the roles of Chairman and CEO. In other cases non-compliance may be unavoidable, such as the inability of a director to attend the requisite number of board or committee meetings through illness, or even death.

In addition, while in theory the rules reflect best practice, best practice is also something which evolves. So non-compliance by a company may simply mean, in some cases, that the company has followed best practice and the code itself needs revising.

The difficulties in determining the extent to which rules should be operated flexibly in codes of corporate governance is mirrored in the regulation of many other sectors, such as financial services, health and safety, hospitals, railways and so on. Failure inevitably and rightly leads to calls for better regulation, which often means that the rules become less flexible and enforcement measures become stronger.

Yet this action, while it may prevent some future failures, may also prevent innovation - the development of new products and services that would benefit us all. Getting the balance right is difficult - but clearly something has gone wrong, or we would not be suffering an economic downturn, with banks needing bailouts and GDP in many countries more or less stagnant.

This suggests that, as the Leveson Inquiry in the UK has hinted, we need to examine the culture of organisations. Most public companies are, as the name suggests, owned by the public one way or another, through pensions, insurance or savings plans. It is possible that greater emphasis is needed on protecting our assets, by implementing measures which ensure companies in whom we and large institutional shareholders invest adopt the practices and ethos of the very best.

These complex issues will be the subject of more than 40 papers which will be presented by experts from around the world at the conference on 6 September.

The 10 plenary and parallel sessions focus on topics such as corporate governance, regulation and ownership, board composition, executive pay and regulating the financial sector. In addition, the directors of two companies founded more than 400 years ago will speak on how to manage companies in the long run. To set the scene, Philip Augar, author of “The Death of Gentlemanly Capitalism” will speak at the pre-conference dinner at Queens College, on 5 September.

Further information about the conference can be found here

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