The UK’s comply-or-explain system of corporate governance, introduced in 1992, has been widely admired and imitated, but it’s not without its critics; there is room for improvement, while retaining the Code’s spirit of flexibility.
In 1992, the Cadbury Report introduced, for the first time to the UK, a corporate governance Code of Best Practice. The report required companies to state whether they comply with the Code and to give reasons for any areas of non-compliance.
Shortly afterwards, the Financial Times journalist, William Kay, labelled this system “comply-or-explain”. The UK’s comply-or-explain system has been widely admired and imitated internationally; more than 50 countries have copied and imitated the Code.
The comply-or-explain system is premised on the inflexibility of a “one-size-fits-all” approach and introduces some flexibility for compani
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