The Evolution of Corporate Governance: A Comparative Study of the Cadbury Committee Report (1992), Sarbanes-Oxley Act (2002), and the Indian Corporate Governance Framework (International Journal of Law Management & Humanities)

Summary

• The Satyam scandal of 2009 in India revealed balance-sheet misstatements exceeding ₹7,000 crore, of which ₹5,040 crore represented non-existent cash and bank balances.p.7
• The Cadbury Committee was established in May 1991 by three main sponsors following failures such as Polly Peck International and Coloroll.p.8
• The Cadbury Code recommended that public boards include a minimum of three non-executive directors and create an audit committee with at least three non-executive members.p.10
• In the United States, WorldCom reported more than $9 billion in unsupported accounting entries before its bankruptcy in 2002.p.13
• Section 802 of the Sarbanes-Oxley Act makes document destruction to impede a federal investigation punishable by fines and imprisonment of up to 20 years.p.15
• Section 149 of the Indian Companies Act, 2013 limits independent directors to two consecutive terms of 5 years, followed by a 3-year cooling-off period.p.19

Key insights

1. Corporate governance regimes across major jurisdictions have evolved from voluntary, principle-based models toward prescriptive, statutory enforcement mechanisms.p.2
2. Agency costs under principal-agent theory consist of monitoring expenditures, bonding expenditures, and residual loss.p.5
3. The Cadbury Report introduced the comply-or-explain framework to preserve operational flexibility while enabling shareholder-driven discipline.p.11
4. Section 404 of the Sarbanes-Oxley Act mandates an annual internal-control assessment by management alongside an independent external auditor attestation.p.14
5. The Public Company Accounting Oversight Board was created under Title I of SOX to end self-regulation in the accounting profession by subjecting public auditors to independent oversight.p.15
6. The Kumar Mangalam Birla Committee recommended that independent directors make up at least one-third of the board if the chairman is non-executive, and at least one-half if the chairman is executive.p.18
7. Section 166 of India's Companies Act, 2013 broadens directorial duty to cover employee, community, and environmental protection alongside shareholder interests.p.20
8. The Indian corporate governance structure functions as a hybrid model combining statutory provisions with detailed listing regulations from SEBI.p.24
9. Current governance challenges lie primarily in implementation and substantive enforcement rather than in a lack of detailed rules.p.29