An investigation into the determinants of UK board structure before and after Cadbury

This paper investigates the determinants of the board structure of non-financial firms prior to, and post, the implementation of the recommendations of the Cadbury Committee. It provides evidence that managerial entrenchment is reduced following Cadbury, with the power afforded to CEOs with high levels of stock ownership being significantly diminished following the imposition of new standards of 'best practice' regarding board structure. However, in spite of considerable pressure for institutional investors to play an active role in encouraging best practice regarding board structure in their investee companies, we find no evidence of such behaviour in either time period, even in the presence of poor firm performance.