Bob Tricker, Tolley, London (1978)
This book was the result of a research project sponsored in 1977 by Deloittes, the international accountancy firm, to examine the growing use of audit committees in the United States, and to explore the possibility of introducing them into British companies. Audit committees are standing committees of the main board of directors, made up of outside independent directors, acting as a bridge between the external audit firm and the board. The existence of an audit committee improved relations between auditor and client, and could be valuable should litigation arise.
Unfortunately, it quickly became clear that the concept of the audit committee would not work in British listed companies because there were not enough independent directors to staff them. Worse, while the concept of non-executive directors was understood in Britain in the 1970s, the notion of director independence was not.
Power in British boards at that time was the prerogative of executive directors. The conventional wisdom in the UK was that non-executives could be useful in board deliberations; about a third of the board was probably a good balance, but never as many as half. The notion that non-executive directors should be independent of the company was not then part of conventional wisdom in Britain. The Independent Director explained why audit committees without independent directors would be ineffective and advocated their appointment.
This book proved to be a stepping stone for me on the way to developing corporate governance.
1. Pressures for change
2. Legal duties and responsibilities of directors
3. The reality of the boardroom
4. Models of management
5. The independent director
6. Audit committees
7. The governance of the company
White paper – The Conduct of Company Directors (November 1977)
Some issues for board-level discussion
Companies included in the study
Research methodology and summary of questionnaires
Guidelines for audit committees