The Cadbury Commission proposed that every public company should have an audit committee meeting at least twice a year.
Step-by-Step Explanation:
* Background of the Cadbury Commission:
* The Cadbury Commission, established in the UK in 1991, aimed to address issues of corporate governance in the wake of several high-profile corporate scandals.
* According to the CFA Institute, the commission's recommendations have had a lasting impact on corporate governance practices globally.
* Key Recommendations:
* One of the key recommendations of the Cadbury Commission was that every public company should establish an audit committee composed of independent non-executive directors. This committee should meet at least twice a year to review the company's financial reporting and internal controls.
* The CFA Institute highlights that this recommendation was intended to enhance the oversight and accountability of financial reporting processes, reducing the risk of financial misstatements and fraud.
* Importance of Audit Committees:
* Audit committees play a critical role in ensuring the integrity of a company's financial statements.
They provide an independent review of the financial reporting process, internal controls, and the external audit process.
* The MSCI ESG Ratings Methodology emphasizes the importance of robust audit committee practices in maintaining investor confidence and protecting shareholder value.
* Implementation and Global Influence:
* The recommendations of the Cadbury Commission have been widely adopted and incorporated into corporate governance codes around the world. The requirement for regular audit committee meetings has become a standard practice in many jurisdictions.
* The CFA Institute notes that effective audit committees are a cornerstone of good corporate governance, helping to ensure transparency, accountability, and the accuracy of financial reporting.
References:
* CFA Institute, "Environmental, Social, and Governance Issues in Investing: A Guide for Investment Professionals."
* Historical documents and reports on the Cadbury Commission's recommendations and their impact on corporate governance.