Discuss the system of Corporate Governance in the United Kingdom in the light of 'comply or explain' principle established by the Cadbury Committee in 1992.

The Corporate Governance Code in U.K is based on the 'comply or explain' approach first set out in the Cadbury Committee report in 1992. Listed companies are required under the Financial Conduct Authority Listing Rules either to comply with the provisions of the Code or explain to investors in their next annual report why they have not done so. The main principles of the U.K Corporate Governance Code, 2014 are as follows: A. Leadership The Role of the Board: Every company should be headed by an effective board which is collectively responsible for the long-term success of the company. Division of Responsibilities: There should be a clear division of responsibilities between the higher management of the company for running of the board and the executive's responsibility for the running of the company's business. It is to be noted that no one individual should have unfettered powers of decision. The Chairman: The chairman is responsible for leadership of the board and ensuring its effectiveness on all aspects falling under his purview. Non-Executive Directors: As part of their role as members of a unitary board, non-executive directors should constructively challenge and helping, developing proposals on strategy. B. Effectiveness The Composition of the Board: The board and its committees should have the appropriate balance of skills, experience, independence and knowledge of the company to enable them to discharge their respective duties and responsibilities effectively. Appointments to the Board: There should be a formal, rigorous and transparent procedure for the appointment of new directors to the board. Commitment: All directors should be able to allocate sufficient time to the company to discharge their responsibilities effectively. Development: All directors should receive induction on joining the board and should regularly update and refresh their skills and knowledge. Information and Support: The board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties. Evaluation: The board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors. Re-election: All directors should be submitted for re-election at regular intervals, subject to continued satisfactory performance. C. Accountability Financial and Business Reporting: The board should present a fair, balanced and understandable assessment of the company's position and prospects. Risk Management and Internal Control: The board should maintain sound risk management and internal control systems. Audit Committee and Auditors: The board should establish formal and transparent arrangements for considering how they should apply the corporate reporting, risk management and internal control principles and for maintaining an appropriate relationship with the company's auditors. D. Remuneration The Level and Components of Remuneration: Executive directors' remuneration should be designed to promote the long-term success of the company. Performance-related elements should be transparent, stretching and rigorously applied. Procedure: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his or her own remuneration. E. Relations with shareholders Dialogue with Shareholders: There should be a dialogue with shareholders based on the mutual understanding of objectives. The board as a whole has responsibility for ensuring that a satisfactory dialogue with shareholders takes place. Constructive Use of General Meetings: The board should use general meetings to communicate with investors and to encourage their participation.