Cadbury code rules are toned down for smaller companies

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THE CADBURY committee is to endorse a new corporate governance code to be published later this week by the City Group for Smaller Companies (Cisco).

The new code, aimed at listed companies with market capitalisations below pounds 250m, is to be a diluted version of the original Cadbury Code of Best Practice.

The Cisco code, The Financial Aspects of Corporate Governance: Guidance for Smaller Companies, is being published in response to complaints from small companies that the Cadbury code is too burdensome. The differences between the Cisco code and the Cadbury code include reducing the number of non-executives on a board from three to two and not requiring smaller companies to split the role of chief executive and chairman.

Cisco believes that if the Cadbury code requirements are not relaxed for smaller companies many will simply fail to comply with any of them.

The new code's author, Graham Cole, a partner in Coopers & Lybrand, said: 'It is our experience from dealing with middle market and growing companies that they have practical difficulties implementing the full Cadbury code. We want to ensure that such companies do not dismiss the idea of corporate governance altogether.'

Sir Adrian Cadbury, author of the original code, has written a forward to the Cisco code.

He says: 'It is essential to point out that this is not an alternative code. The aim is to get all companies up to scratch with the requirements of the Cadbury code.

'It is better to have something like this than have companies saying to hell with it. The people whose views are the most important are the institutions. The Cadbury committee does recognise that small companies might find the code burdensome, and that small companies with small boards may think Cisco's version makes sense.'

The new code follows criticism from Tim Melville-Ross, director-general-elect of the Institute of Directors, that the Cadbury code made it difficult for directors to look after the interests of shareholders.

Sir Adrian said in response: 'His comments are based on a misconception. We say what matters is the substance of compliance, not the form. The code is not a series of rules. We have put forward some principles and it is up to boards and their shareholders to implement the detail.'