Corporate Governance: A Comparative Analysis of Cadbury's Practices

This report provides a comprehensive analysis of Cadbury's corporate governance structure and practices. It begins with an introduction to corporate governance and its significance, particularly in balancing stakeholder interests and enhancing transparency. The main body delves into Cadbur...Read More

Corporate
Governance
Table of Contents

INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
CONCLUSION................................................................................................................................7
REFRENCES...................................................................................................................................8

INTRODUCTION
Corporate governance is the system of rules, practices and processes through which a
firm will be able to direct and control. It fundamentally pertains to balance the interest of the
companies stakeholders. It also supplies framework for accomplishing business objectives. It
practically embraces every domain of management from plan of actions till internal control to
management of performance and corporate disclosure (Tricker, 2015). Along with this the main
aim of corporate governance is to enhance transparency as well as accountability of work in
effective and appropriate manner. Organisation undertaken in this report is Cad-bury which is a
confectionery industry, founded in 1824 in London, UK. It is operating its business in
confectionery industry and provide variety of products ranges such as chocolates, bars, beverages
and many more at world wide market. This report will explain the comparison and similarities
between the different level of efficiency and accountability which are essentially maintained
inside and outside of the organisations corporate governance system.
MAIN BODY
Corporate governance is concerned with different set of systems, principles and processes
by which a company is governed. It will render a clear-cut road map by which a company can be
directed and controlled so that the business goals and objectives of the organisation can be
fulfilled. This structure when followed by the companies, then it specifies the clear jobs and
responsibilities among different participants in the corporation (Nini, Smith and Sufi, 2012). It is
important for the Cad-bury to communicate the firms corporate governance as an important
component of community and investors relations. They are the idea to assure the proper
management of the companies through the institutions and mechanisms available to the
shareholders. Cad-bury corporate structure will assure clear responsibilities and functional
authorities, precise distinction between direction and management and complete transparency
compared to all the actions of management. This further deals with the situations through which
company fulfil its obligations to investors and shareholders.
Corporate governance is a scheme which abstracts possession and control. The idea is to
guarantee that clarity and responsibility is to be preserved in companies transactions, so that
investors and all stakeholders can get an actual and clean perspective of the company’s current
position and predictable future. The purpose of corporate governance is that, the company’s

directors effectively regulate the company and that the shareholders appoint efficient directors
and auditors to satisfy the need of long-term success. Therefore, to understand this in more
detail, the corporate governance of Cad-bury has two different models or system and they are
discussed below :
Insider model which refers to concentrated ownership structures, ownership and control
that are generally accumulated in hand of few amount of individual, families, managers directors,
holding companies, financial institutions, banks and many mores (Michelon and Parbonetti,
2012). Within a company insiders system or exercise are controlled through several ways such as
owning majority of shares of company, voting rights and many more. There are various other
factors of insider system such as it is based on concentrated ownership that refers to situation
when several amount of stock are owned by a person who can be investors as well as large block
shareholders. It also get dominant through institutional shareholders and in this there is
frequently trading of shares are done. Along with this in insider system participation of owners
are more active which leads to appropriate decision making process but there is lack of takeover
activities.
Outsider system refers to type of model, a priority or preference is given to the market
regulation. The owners of the firm tends to have a transitory interest in the firm. In this system
ownership of a small amount company shares belongs to large number of individual. According
to this few number of incentives are based on activities which are closely monitor and then try to
avoid process of management decision or policies. It is generally adopted by corporate
governance of United Kingdom as well as United State. There are also some other features of
outsider systems such as they are mainly based on dispersed ownership as well as it include
ownership which are dominant such as non bank financial institution and private individuals
(Jacoby, 2018). In this system shareholders play roles of investors which are passive. Along with
this their managers are more active which conduct its work in effective and appropriate manner
in order to attain goal as well as objective.
For an organization it is essential to develop as well as maintain effective transparency so
that it will leads to efficiency and accountability of an individual in effective manner. Through
this a company able to conduct their work in effective manner as well as they also able to
motivate their employees in proper way so that they accomplish their work or task effectively.
For this they can adopt various factors such as adopting corporate culture, develop proper rules

and regulation and many more. Within a Cad bury there are two type of stakeholders i.e. insider
and outsiders system and it is essential for them to maintain transparency by developing
accountably factors. It is necessary that insider systems or stakeholders that they must develop
effective rules, regulations, policies and strategies which leads to accountability as well as
efficiency. Along with this respective company is operating their business operations and
function in world wide market so it is necessary for them to maintain transparency in effective
way which leads to smooth working at a workplace (Larcker and Tayan, 2015). Their are also
external system at a workplace that also effect transparency and accountability. These external
systems also play role in decision making process of Cad bury. These owners generally conduct
analysis of situation and then develop strategies and policies accordingly which help them in
conducting work in effective manner in order to attain goal and objective. There are various
elements of corporate governance which are adopted by Cad bury in order to conduct their work
in effective manner such as accountability, transparency, responsive, equitable and inclusive,
effective and efficient, adopt legal practices, participatory and situation oriented.
To adopt corporate governance in effective and appropriate manner Cad bury develop a
committee with the name of Cad bury Community in year 1992 at United Kingdom. It is
developed after Sir Adrian Cad bury develop or create code of best practices basically for
companies listed on corporate governance (The Cadbury Committee recommendations on
corporate governance – a review of compliance and performance impacts, 2019). This
community impact not only on United kingdom but it is also impact at all over the world. Cad
bury committee developed in order to direct as well as controlled activities and functions of a
company which leads to effective as well as appropriate working. It mainly identified two
aspects i.e. provide direction to respective company and how they are controlled by shareholders
as well as society. United Kingdom develop main 4 committees through which they have able to
conduct management accountability in effective and appropriate manner i.e. Cad bury
Committee which is developed in year 1992 which develop voluntary code of practice (Kock,
Santaló and DiestreVelnampy, 2013). Next is Green bury report which is established for
remuneration committees in year 1995 and Hampel Report which review implementation of
above mentioned two communities and it is established in year 1998. Last is Turnbull
Committee which si established in year 1998 for developing framework for internal control
structures as well as for financial reporting procedures.

There are various behind developing of Cad bury Committee in United Kingdom such as
lack of transparency at company's activities related to shareholders, companies are collapsing
whose annual reports shows that they are gaining profitability. Along with this payment or salary
of directors as well as senior managers are unrelated to their work performance and many more.
These factors are consider during developing Cad bury Committee because due to these reasons
respective company are facing various issues such as decrease in productivity, decrease in moral
as well as dedication of employees, production process get affected and so on (Bednar, 2012). So
to overcome respective issues United Kingdom companies develop committees which take care
as well as ensure effective working in proper time period.
There are external and internal constraints that are conducted in order to maintain
appropriate as well as effective level of corporate governance in respect of Cad bury committee.
Here external constraints refers to type of constraints which are focuses on a company who has
no or very limited control on constraints. Due to which respective company need to develop their
products as well as strategies on the basis of constraints so that they able to conduct their
business functions in effective and appropriate manner. Whereas internal constraints refers to
constraints which are within control of business units and these are generally restricting an
organization in achieving its goal as well as objectives in effective manner. There are various
type of internal constraints which are present within respective company such as finance,
marketing, peoples, production, policies, equipments and many more.
Along with this, both internal constraints as well as external constraints plays effective
role on managerial control which help in conducting work or activities in effective as well as
efficient manner. Internal constraints present in Cad bury company are non executive directors
which are member of board of directors but not consider as part of a executive team. Second is
shareholders who have interest on respective company or its working activities such as
employees, investors, suppliers, local communities and many more as well as they also
participate in voting of AGM (Annual General Meeting) (Kathy and et.al., 2012). These all
factors helps cad bury in conducting its business activities in effective as well as appropriate
manner in order to attain their goal and objective successfully. Moreover there are various
factors which are consider in external constraints which leads to managerial control in respect to
adopt goal in proper manner as well as also increase their profitability ratio and customers base.
These factors are not in control of respective company management such as a person holds a

large amount of shares use their power of voting in order to develop strategies accordingly.
Shares are acquired by existing shareholders for a long time as well as getting pressure from
bidders for taking over process (Tricker, 2015). Development of situation when investors are
protecting their interested towards the respective company. Along with this there are various
external regulators and auditors which a company need to follow so that they can gain its
effectiveness in order to attain goal as well as objective in effective manner.
CONCLUSION
From above discussed point it can be conclude as well as evaluate that there are various
factors which affect working as well as process due to which an organisation can go through
various issues as well as problems. Due to which a company need to adopt corporate governance
or they can develop committee, both will help a company in conducting their work in effective as
well as appropriate manner. Through corporate governance a company may develop guidelines
of rules, practices and process which help a firm in directing and controlling their process and
conduct it in effective manner. Along with this they can also develop committee within a
workplace who will take care as well as ensure effective working at workplace. These steps help
a company in conducting its business activities and functions in effective and appropriate manner
in order to attain goal and objective successfully. Moreover there are also various type of
shareholders who have interest in an organisation as well as their operations because they are
going profit through it such as suppliers, customers, employees and many more. As well as there
are two type of constraints i.e. internal as well as external constraints which affect business
activities of a company so it is necessary for an organisation to develop strategies by considering
these constraints in effective manner.

REFRENCES
Books and journals
Tricker, B., 2015. Corporate governance: Principles, policies, and practices. Oxford University
Press, USA.
Nini, G., Smith, D.C. and Sufi, A., 2012. Creditor control rights, corporate governance, and firm
value. The Review of Financial Studies. 25(6). pp.1713-1761.
Michelon, G. and Parbonetti, A., 2012. The effect of corporate governance on sustainability
disclosure. Journal of Management & Governance. 16(3). pp.477-509.
Jacoby, S.M., 2018. The embedded corporation: Corporate governance and employment
relations in Japan and the United States. Princeton University Press.
Larcker, D. and Tayan, B., 2015. Corporate governance matters: A closer look at organizational
choices and their consequences. Pearson Education.
Kathy Rao, and et.al., 2012. Corporate governance and environmental reporting: an Australian
study. Corporate Governance: The international journal of business in society. 12(2).
pp.143-163.
Kock, C.J., Santaló, J. and Diestre, L., 2012. Corporate governance and the environment: what
type of governance creates greener companies?. Journal of Management Studies. 49(3).
pp.492-514.
Velnampy, T., 2013. Corporate governance and firm performance: a study of Sri Lankan
manufacturing companies.
Bednar, M.K., 2012. Watchdog or lapdog? A behavioral view of the media as a corporate
governance mechanism. Academy of Management Journal. 55(1). pp.131-150.
Online
The Cadbury Committee recommendations on corporate governance – a review of compliance
and performance impacts. 2019. [Online]. Available
through:<https://onlinelibrary.wiley.com/doi/pdf/10.1111/1468-2370.00091>.