Critical Analysis of Hampel Report

The Hampel Committee was formed in 1996 under the chairmanship of Sir Ronald Hampel. Committee was formed in 1996 and its final report was generated in 1998.The Hampel report reviewed the recommendations of the Cadbury report and Green bury report. The Hampel Committee also suggested that the recommendations of all three committees should be combined together and a single code should be generated from in the form of Combined Code. The Hampel report was the one of final report that gives importance to principles of good governance over explicit rules. And Hampel also admired the shareholder involvement in the company matters.

Main Recommendations of Hampel Report

  • Companies should include in their annual reports the extent to which they applied the board principles and how they applied it.
  • Complain should also explain their Corporate governance policies and they should also justify them.
  • Directors of the Companies should receive proper training.
  • The Majority of Non-executive directors should be independent and companies should disclose in their annual reports that how many executive are independent
  • In every company there should at least one senior non-executive director to whom reports should be transferred
  • In any company if there is duality they should justify it because the separation of the role of chairman of board of directors and chief executive is preferred.   
  • Companies that do not have before the internal audit committee should form an audit committee who should keep the review of the financial relationship between the company and its auditors.
  • For directors remuneration an remuneration committee should be formed that should be consisting of wholly non-executive directors and remuneration committee should advise and the directors should approve.
  • The Hampel report also recommended that the shareholder should also make a use of their voting right and give their votes in the important decisions of the company.
  • And the report also recommended that the directors should promote the dialogues between the company and the shareholders.

Responses to the Hampel Report

Hampel report was highly welcomed by the business organizations but at the same time it was highly criticized by the shareholder group because it did not recommended any extension in the rights of shareholder. Pirc, a leading corporate governance consultancy also criticized the report by saying that the report was a “Sideway shuffle” and also “a missed opportunity which failed to take the debate forward”.

financial reporting and analysis

November 18, 2018