The dealings of the organization with all the stakeholders must be based on sound ethics, with a provision of adequate disclosure of its operations. This can be ensured only when strict internal control and internal check are introduced in the organizations. Also, every stakeholder should be given a proper opportunity to safeguard their interests in the organization. .
Although various practices for safeguarding the interest of the stakeholders in the British organizations were present in the past, the term corporate governance came into vogue only in the 1990s with the publication of the Cadbury report. This report though was on the governance aspects in the financial sector, a list for the code of best practices was also added to it. The recommendation of this report was later adopted by many companies as a model code for good governance. Then in 1995, the Greenbury report was introduced which contained the principles regarding the director’s remuneration, so as discourage them from the practice of declaring arbitrary salaries for themselves, which was quite common in those days. Another report published in 1998 called the Turnbull report, provided guidelines to deal with the risk management and development of the internal control system in the companies.
After the Enron and the Worldcom scandals in the US, the government of the UK appointed a committee under Derek Higgs to prepare a report on corporate governance. The government then established the Financial Reporting Council (FRC), a body consisting of eminent members from the commerce, industry and service fields to study the Higgs Report in 2003. FRC produced a much toned-down version of the same report as the new code on corporate governance in 2003. This code was first updated in 2006 and then again in 2008. Also added to this was a review of the workings of the audit committees and recommendations to improve the same, as mentioned in another seminal study conducted by Sir Robert Smith. (“A history of corporate governance” 2007)