The Maxwell Scandal was related to the discovery of the fraud made by the owner of the publishing empire. Ian Robert Maxwell stole big sums of money from the pension funds of the Mirror Corporation. The scandal surrounding Maxwell occurred after his death when thousands of scheme members discovered they had been left without pensions. Though the funds were partially replenished, the Maxwell scandal revealed the significant drawback of the system of corporate governance of that time.
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This drawback was related to the opportunity to occupy both the position of the chairman and the position of the chief executive given to the owners of the companies. The disclosure of this problem was rather powerful in terms of enhancing the appropriate regulations that have changed the face of corporate governance in the UK.
Besides the Mirror Corporation owned by Maxwell, two other famous UK companies faced the disclosure of the disastrous frauds made by their executives around the same era – Polly Peck International (PPI) and Bank of Credit and Commerce International (BCCI). The scandal surrounding PPI was caused by the activities of its chief executive who had made numerous payments to the subsidiaries of the company in Turkey and Northern Cyprus. These activities led to the collapse of the company. The scandal surrounding BCCI was caused by the discovery of the massive money laundering and other financial crimes committed by its directors.
I think that corporate governance code was not the best course of actions at that time as it used the principles-based approach. In my opinion, the rules-based approach would have been more suitable, as it enables the legal bodies to define the exact rules that need to be followed instead of determining the general principles they should respect. It appears that the code lacked strictness and precision to prevent the abuse of power given to the directors of the companies.
The Greenbury Report attracted much attention of the wide public to the abuse of power given to the executives of the companies. Its proposals contributed to the improvements made to the system of control of director remuneration and served as the basis for certain principles listed in UK Corporate Governance Code. Therefore, the proposals of the Greenbury report can be considered quite successful in reducing the excessive executive pays.
The results of the consultations on the Higgs report revealed that numerous recommendations on the structure of the board, the role of the chair, the role of the non-executive director, etc. were not well-grounded enough and met much criticism from the corresponding organizations.
The reactions were rather positive though the bureaucratic aspect of the system proposed in the first version of the Cadbury Report was criticized by the business community and the attempt to make the compliance with the code a part of the listing requirements of the Stock Exchange.was criticised by the Confederation of British Industry (CBI). Such criticism from CBI was mostly caused by the unwillingness of the directors of the companies to be forced to follow the strict set of rules limiting their power. Such situation reflects the negative impact of the subjective interests of the directors on the development of corporate government codes.
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The main difference between the Cadbury Report and the Higgs Review investigations is related to the factor of external influence on the results. The Higgs Review investigation was largely affected by the non-government organisations that had their personal interests in acceptance of certain rules and standards. The Cadbury Report avoided such influence. The results of the investigations reflected this difference, as the Higgs report appeared to be favourable for the non-government organizations that influenced it. The Cadbury Report could be considered more objective. The main similarity between the Cadbury Report and the Higgs Review investigations was related to the fact that they explored similar concepts.