Much of the initially adverse reaction to the draft of the Cadbury Report published in May 1992 was mollified by the mellowing of the language in the final report that December. The Reports fits firmly into the Anglo-American corporate tradition of favouring checks and balances to the potentially heavy hand of regulation, and thus while its recommendations were widely welcomed, there was doubt as to how effective these provisions would prove when companies were under no obligation to enforce them.
Sir Adrian Cadbury had two responses to these concerns. Firstly he declared that it was up to shareholders, as the owners of these companies, to exert the necessary pressure toward compliance. Added to this was the recommendation for a follow-up committee to evaluate implementation of the Report's findings, with the suggestion that if companies were not found to be complying, "it is probable that legislation and external regulation will be sought".
This was not a strategy Sir Adrian relished, and he voiced worries that Adrian Higgs would be unable to resist pressures for legislative solutions in his 2003 report on the role and effectiveness of non-executive directors (worries that ultimately proved unfounded).
The major legacy of the report is the widespread acceptance of the division of the roles of Chief Executive and Chairman: almost 90 per cent of listed UK companies had separate individuals fulfilling these positions in 2007, while just over 50 per cent of US companies did so according to a 2008 survey by the National Association of Corporate Directors. This has diminished the cult of personality surrounding such figures, and avoided the domination of boards and companies by individuals whose agendas all too easily went unchecked. Sir Stuart Rose at Marks and Spencers is one of the few prominent people to have recently combined the two, and despite his stellar performance M&S shareholders voted against him continuing in both jobs by margin of almost 38 per cent at the 2009 AGM.
Another observation made about the Cadbury Report, and indeed many of its successors, was that it placed a lot of faith in the scrutinizing powers of non-executive directors. These individuals, who often only have very limited engagement with the boards on which they sit (the average UK board meets five-six times a year), are relied upon to prevent potentially damaging or self-interested activities by their executive counterparts. How vigilant, how independent, or how responsive to shareholders can they actually be with such limited time at their disposal?
Warren Buffett aired his own doubts about the calibre of non-executive directors he had worked with in 2002, when he observed that: "Over a span of 40 years I have been on 19 public-company boards (excluding Berkshire's) and have interacted with perhaps 250 directors. Most of them were 'independent' as defined by today's rules. But the great majority of these directors lacked at least one of the three qualities I value. As a result, their contribution to shareholder well-being was minimal at best and, too often, negative. These people, decent and intelligent though they were, simply did not know enough about business and/or care enough about shareholders to question foolish acquisitions or egregious compensation. My own behavior, I must ruefully add, frequently fell short as well: Too often I was silent when management made proposals that I judged to be counter to the interests of shareholders. In those cases, collegiality trumped independence." (Monks, R. & Minow, N. (2008) Corporate Governance. Chichester: Wiley, p.226)
Given the widespread aversion to regulatory intervention however, there is little that can be done save defining and promoting best practice by which companies must prosper or fail according to their strengths.
The Cadbury Report initiated a revolution in corporate governance thinking that has been adopted by countries and institutions across the world. "By their nature," The Times wrote on 3 December 1992, "such useful developments tend to go unnoticed, like a clandestinely arranged Bank of England rescue", but they have helped restore once battered reputations and investors' confidence in the management of their companies. They have not stopped companies failing, but nor have they been so prescriptive that they stopped them succeeding either, and in that the Cadbury Report laid the foundations for all the committees, investigations and reports that have followed in its wake.