Dissertation: Corporate Governance, Risk, and Primark's Challenges

This dissertation delves into the corporate governance issues faced by Primark, an Irish clothing retailer, analyzing its response to scandals related to child labor, 'cry for help' notes, and poor working conditions within its supply chain. The study examines the company's risk management strategies, the roles of various committees (Human Resource, Remuneration), and the importance of the Chairman and CEO. The analysis includes a discussion of corporate governance principles, the application of a risk management model (Identify, Analyse, Treat, Monitor), and the lessons learned from the case. The dissertation investigates whether similar events could occur in the UK today and assesses the adequacy of the current corporate governance and accountability systems. Furthermore, it considers investment decisions based on Primark's ethical performance and governance practices, offering insights into the company's overall performance and brand image within the context of the fast fashion industry. The dissertation aims to highlight the complexities of corporate governance and the impact of ethical breaches on a company's reputation and financial performance.

DISSERTATION

Table of Contents
INTRODUCTION...........................................................................................................................1
Purpose of study..........................................................................................................................1
Importance of case......................................................................................................................1
Structure of case study................................................................................................................1
Background.................................................................................................................................2
Context........................................................................................................................................2
DESCRIPTION OF KEY EVENTS................................................................................................2
CASE STUDY ANALYSIS............................................................................................................3
1) Corporate Governance issues of Primark...............................................................................3
2. Literature review.....................................................................................................................6
3 Company has address the issues..............................................................................................9
4) Possibility of similar events happening UK.........................................................................10
5) General lessons learned from the case..................................................................................11
6. Investment decision...............................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
.......................................................................................................................................................15

INTRODUCTION
Purpose of study
Primark company set their aim to provide quality and best services to its customers at
affordable cost. By this, they easily invite larger number of customers towards its products and
services. In this there are number of incidents that occur in the company and also determine the
violations towards company goals and objectives. Some scandals are also there which put
negative impact on its brand image at market place. Along with this, scandals are relate with A
high street downfall, Cry for help and Child labour as well (Werner and et. al., 2014). Thus, it is
important to analyse as well as study about the company and its scandals to measure the overall
image of the firm. Mainly, the main purpose of this project is to focus on different type of
corporate governance and ways which help company to solve the issues arise within the
company. In addition of this, project will discussed about various ways which used by Primark
with the purpose of solving all the issues that arise within the company.
Importance of case
Primark is an Irish clothing and accessories retailer. Mainly company is subsidiary of AB
foods. The main purpose of this company is provide quality products and services to its
customers by considering their needs. With the help of this they easily provide better satisfaction
to their target customer. As per current scenario, number of incidents are occur that have pointed
the brand image of the company at market place (Werner and et. al., 2014). In this context,
company should make effective ways and areas to improve their performance and also
overcoming for all the issues. By carry out the study company can easily evaluate the ways to
overcome from issues and incidents and increase the chances of attaining higher success.
Structure of case study
1. Write corporate governance issue of Primark?
2. Theory of Corporate governance?
3. Has the company address the issues?
4. Could similar events happen again in the UK today? Why? Do you think the current
system of corporate governance and accountability in the UK is sufficient to deal with
these issues?
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5. What were the general lessons learnt from this case? What have you as a student learnt
about governance, risk and ethics from this case?
6. Would you invest in this firm? Give the reasons for your decision?
Background
Primark is one of the famous fashion clothing retailer in which they provide better
services to their customers. Company operate their business activities in various countries and
improve their performance level at market place (Watson, 2015). Mainly, the type of Primark is
Subsidiary and the headquarters in Dublin, Ireland. Along with this, company also operate their
activities in 325 locations. Area served by Primark are Austria, Belgium, France, Germany,
Ireland, Italy, Netherlands, Poland, Portugal, Slovenia, Spain, United Kingdom. In addition of
this, Primark also offer a diverse range of products such as Children's clothing, men's wear,
home ware, footwear, beauty products and many more. For attaining better response from
customers, company sells clothes at the low cost. Primark owns over 350 stores in over the
world. By which they easily serve their products and services to larger number of customers.
Context
Primark is a biggest fashion company which deal in retail sector. Company operate their
activities in various countries with the aim of attaining competitive place in market place. As per
current time, company face issues which negatively affect on its brand image. All the issues and
scandals are analysed by the company for improving their overall performance at market place
(Velinova, 2014). In this context, the corporate governance structure is one of the important
aspect which follow by the company to improver the chances of attaining success at market
place. By implementing corporate governance structure, Primark can easily make their
performance competitive.
DESCRIPTION OF KEY EVENTS
Scenario 1: In first case, it has been discussed that shopper has claimed that she found a note
that is "cry for help" hidden in trousers alleging the slave labour situations in Chinese prison .
The labour forced to work 15 hours in a day to making the clothes. It had developed negative
impact on reputation of Primark Company. The Primark company has denied from allegation to
force the labour to work in the factories (Primark investigates claim of 'cry for help' note in
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trousers, 2018). To get over from issue, Primark provide the one day holiday to people and also
develop policy related to provide minimum 8 working hours to labours.
Scenario 2: In second scenario, Primark organisation epitomized the fast fashion where
individuals can go and also purchase quickly. Under this, people are not think twice about the
label when they purchase the products from any reputed company. Every level of Primark
company has been taken over the headlined when there were two women finding ‘cry for help’
from labours in form of the handmade labels ‘degrading sweatshop conditions’ and ‘forced to
work exhausting hours’ in dresses from store of Swansea branch. To over come from issue,
company seeks to be demonstrated the commitment to responsible for producing by its
characteristics (The Primark Scandal: A High Street Downfall, 2018).
Scenario 3: This scenario is related to Child Labour. It faces losing consumers in wake of BBC
documentary alleging use of the child labour in supply chain. On the basis of survey, above 1000
customers are carried pout through ICM investigation for the Drapers magazine, there are 42pc
of persons which shop at the Primark are less because of the allegations. Child labour develops
the negative impact on mind of people. After all the allegations, organisation free all the child
and provide them better education facilities (Primark faces inquiry over use of illegal labour,
2018).
Different Committees included
There are various committees are included in cases which play their specific role in
managing all the activities of the business. With the help of this company may increase the
chances of improving their overall performance level. In context of Primark, it is famous Irish
clothing and accessories retail company which serve quality services to its customers as per their
needs and wants. Mainly, company owns over 350 stores in over the world. Along with this,
Primark opened its current international headquarters in 2015 in Dublin building. In addition of
this, company offer diverse range of products such as newborn and children's clothing, Men's
wear, home ware, footwear, beauty products and many more. Furthermore, the main aim of this
company is to offer quality products and services to its customers at affordable cost so that
number of customers are consume its services. This will help in increasing profitability level of
the company at market place.
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In addition of this, various committees are are there which includes in every activities of
Primark. They also provide guidance to their staff members and manager as to make their
performance positive and competitive as well. All the committees are as follows:
Human resource: It is one of the important committee by which the manager provide
guidance to the human resource management with the aim of improving workers performance
level at workplace. In this the main responsibility of this committee is to monitoring, reviewing
and making recommendations for making better strategy and policies to human resource. With
the help of this the Primark can easily improve their performance and also reduce any kind of
issues and obstacles.
Remuneration: It is also a important for organization as it established with the purpose
of supporting the strategic aims and objectives. In this context, it also contribute in motivating
workers at workplace through which company can easily retain them for longer period of time.
With the help of this company is able to invite best talents in market which lead in maximising
the shareholders values.
Chairman is different from CEO: Both are playing an important role in business
organization to enhance as well as improve the overall performance. The chairman of a company
is the head of board of directors. As they are responsible for protecting investors interest within
the company which directly help in increasing profitability level. Mainly, the CEO is a top
management in which they keep the company moving in successful manner and also give right
direction in which company can easily run. On the other side, the chairman guides the broad in
which firm can easily attain set targets.
CASE STUDY ANALYSIS
1) Corporate Governance issues of Primark
Corporate governance refers to system of practices, processes and rules through which an
organisation is controlled as well as directed. It included balancing of interests of different
stakeholders of company for an instance management, government, shareholders, suppliers etc. It
also gives framework to company for achieving aims and objectives. It is set of principles,
processes and systems through which firm is to be governed.
Risk management
It refers to determination, evaluation and also prioritization of risks which are followed
through coordinated as well as economical resources application to reduce, control and monitor
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affect of the unfortunate events (Bingham and Druker, 2017). It can be come from the different
sources involving uncertainty in the financial markets, production, threats related to failure of
project etc.
Risk management issue
Risk is involved in every business and organisation. It develops negative affect on
activities as well as operations of company. There are many different standards developed in all
over the world to assess companies for execute the risk management in an effective or systematic
manner. There are various standards reflect different technical and motivations of developers
which are appropriate for the various firms and conditions (Campion, 2015). There are different
standards which company need to be used such as ISO 31000 2009 that is related with the risk
management principles. Primark is a Irish Fashion retail company owned through Associated
British Foods (ABF) that is one of the biggest fashion retail company. In spite to make business
success, Primark company had struggle to get over from the pre- fixed notion of customers. An
enterprise risk management refers to the procedure that is more impacted through an entity of the
board of directors, human resources, management etc. applied on the strategy in an organisation.
Risk Management Model
The main focus of risk management model is on different components like determine,
analyse, treat, monitor and also report. Every component of this model affect on relation of
stakeholders with management of company. Different element of risk management model
mention below:
Source: Risk Management model, 2018
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Illustration 1: Risk Management model

Identify- It is a first step and under this, it is a responsibility of company to determine
demands of stakeholders. In case of Primark, it has not determined needs and it has been failed to
satisfied them. On the basis of case study, company had alligation of child labour which develop
the negative impact on reputation.
Analyse- IN this, there is a requirement to firm to understand needs and priority of
stakeholders. Firm should be focus on their demands and also develop an effective plan to fulfil
them in significant manner (Ehrsam, 2016).
Treat- At this stage, it is necessary to Primark that it should assure about treating of
stakeholders in a positive manner. Firm needs to pay more attention on their demands and needs.
It will be helpful in develop the positive affect on their mind. At market place, stakeholder are
most necessary components and the main reason behind make the business successful.
Monitor- For company, stakeholders are act as the resource providers as well as
allocators hence firm should monitor its roles and responsibilities towards stakeholders. The bad
reputation of company impact on reduce the number of consumers (Corcos, 2016).
Report- It is last component in the risk management model and it explained as the two-
way communication among the stakeholders as well as company (Gera, 2014). In context to
determine and reduce the risk in future, it is necessary for company to consult all the risk related
factors with the stakeholders. Under this, firm requires to discuss its policies as well as plans
with them so that they can be confident.
The risk management model is effective for Primark company in order to reduce the risk
in systematic manner. It will help company to develop positive relationship among the company
and stakeholders.
Collapse of Rana Plaza issue
In Bangladesh, Collapse of the Rana Plaza, a commercial housing building Primark factor
led to death of 1129 persons. There are around 2500 people were injured rescued from building
alive. It is regarded as the deadliest structure that was failure accident in the human history and
also the accident of garment factory. Building contained the bank, shops, apartments and
factories. The reason behind the accident is safety related measures that resulted in destroy of
building and death of the many people (Hasnin, Tanim and Alam, 2017). Under this, Asma
Khatun pushed by crowed that has pliables around building of Rana Plaza, identified to see
destruction with her eyes. Less than the 90 seconds, Rana Plaza building destroyed, killing
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around 1,134 people. Plaza was designed as four-story building for the retail store but instead
occupied through the garment factories. With death of 1,129 individuals, it is most deadliest
accident in history. Under this, all initiatives are to be designed in well manner to encourage the
safe construction related practices as well as working situations, to empower sector and also need
more involvement from corporations which have contract to factories.
Poor Board Leadership
Leadership refers to an action of leading people and company to do the tasks and
activities. An effectiveness of the poor board of leadership at the Primark company is a vital
factor that aids in shape up on business in significant manner. Poor leadership develops the bad
impact on conduct the business operations. It has been determined that various investors of
Primark company were dissatisfied with the bad publicity of company. There are two different
types of stakeholders primary and secondary (Henninger and et. al., 2017). The leadership of
Primark company is not good and it is regarded as the ineffective as well as inefficient
leadership. It develops the negative affect on the sales along with the profit level of an
organisation. Under this, there is a requirement to the board of directors to pay an attention
towards the firm. Boards leaders should be focus on the activities and operations of company
which are going to be done and make company more successful. The various stakeholders
protect the company and work towards make it more successful (James and Montgomery, 2017).
In context to this, stakeholders added that they demand for improving the leadership of company
and they feel that if leadership will be improved then in this case it will develop the positive
affect on the process of business. Primary stakeholders pressure has to be led to an incident to be
taken place of Primark. The CEO of this organisation consider as one of the most necessary
board member. All the incidents clearly states that importance of stakeholders in the process of
decision making.
Ethical issue
Ethical corporate governance issue is process and policies that company has developed
in order to deal with the different matters concern administration of daily activities. Companies
exist to develop as well as innovate those services ans products which help in generate the more
profit. In addition to this, ethical corporate governance is helpful to prevent the occasions which
are seen from past where at market place, there are many business organisation which exploited
their positions at market place. The most arisen scandal of Primark company is child labour that
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is unethical as well as illegal. Child labour is a unfair treatment which is bad for the reputation of
company. This kind of scandal is concerned with the minimum managerial support affect on
profit level of business (Lueg, Pedersen and Clemmensen, 2015). It is in the contradiction with
codes and ethics of United Kingdom that states that employees must be dependable company and
also do not conduct any thing that is unlawful and also harm the image of company.
Over arisen of the ethical problems, role of the directors with in company is to be
guarantee success through arisen of the issues. It is necessary that company and board should
find the solutions to overcome from all the issues as well as barriers. In context to thus, there
should be harmonious and healthy corporate government for manage bioethical exercises as well
as issues.
2. Literature review
According to the case study, Primark is a fashion company which has its corporate
governance to make their process appropriate and valuable as well. As per the point of view
(James and Montgomery, 2017) corporate governance is a theoretical framework in which
company evaluate that what they offer their customers in the market place and attain their
positive response as well. In addition of this, organization also ensure that they will take care of
their stakeholder as per priority basis (Lundblad and Davies, 2016). As per the statement,
corporate governance is refer the ethical statement and agreement among organization and its
stakeholders also. Furthermore, Primark not met all the ethical norms of the corporate
governance. With the help of this, organization can easily response towards the negative aspect
from stakeholders. In addition of this, corporate governance may support to the business
organization to make their performance appropriate.
The stakeholder theory
This type of theory is one of the important for business organization to determine the
applications within the given case. Mainly stakeholders refer to the party who have interest in the
company and its activities as well. Different stakeholders who are define their interst with the
organizational process such as employees, customers, suppliers, government and another groups
which relate with business organization. The analysis of stakeholders includes the ideas which
needs to manage by different stakeholder in appropriate way. With the help of this, company
may improve their overall performance. In this, it also determine the purpose of ascertaining the
success of business and stakeholders also. Main stakeholders of Primark is its customers,
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workers, board of directors, managers and various regulatory agencies which provide them
support to met their positive performance. Apart from this, Primark also use appropriate
strategies with the aim of making as well as developing better relationship with their
stakeholders in order to enhance their performance level as compare to its competitors. For
satisfy their customers, Primark also use appropriate steps in which they can make their brand
image competitive. In this, stakeholders theory is more important which give support to the
business organization through which firm may established their positive image. In this context,
stakeholder classified in two types such as primary and secondary stakeholders. Primary
stakeholders refer to those who are are responsible for contributing towards capital generations.
This can be customers, workers and managers of Primark. All these stakeholders are consider as
an important which help in enhancing the overall performance of the company. If company
easily satisfy their number of customers than firm easily develop their brand image towards the
customers and market place as well (Rutter, Armstrong and Cano, 2017) Thus, it is vital for
Primark to analysis their customers demand and provide the same to attain success in market.
On the other side, secondary stakeholders are consider as the society, government, competitors,
community and many more. Both primary and secondary stakeholders play vital role in
developing positive brand image.
Furthermore, the Primark has better support from the government and also tries to stop
any kind of strike towards the company. In which company tries to stop the labour child within
the business and provide them better education to improve their living standard. In this context,
the Cry for help incident directly affect the entire activities of Primark and also negatively
impact on its brand image.
In addition of this, employees are also important part for the business organization as it
help in improving the brand image of the company by performing their activities. Thus, it is
important responsibility to maintain better relationship with them. This will contribute in
attaining success at market place.
The stewardship theory
This theory define that if all managers will be independent then they can easily perform
all the task in effective manner and also improve the chances of attaining positive outcomes.
Mainly, this theory define alternatives to explain the effectiveness of the manager by allowing
them to work alone. With the help of this, manager can easily find out the ways to resolve issues
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in effective manner. Along with this, Stewardship theory is important which is widely used by
the company to determine the current issues and also set the alternative solution to resolve it
effectively (Scamardella, 2015). Along with this, some time Primark also told lies to their
customers towards its products and services with the purpose of making strong customers base.
This will negatively affect the overall performance of the company and also increase the
dissatisfied customers within the organization. In this context, manager of Primark also take
decision towards the business activities which may lead in improving the chances of attaining
customers satisfaction. This will also contribute in increasing profitability level of the firm at
market place. In addition of this, Primark needs to use suitable strategies to increase benefits of
the stakeholders which may aid in determining their interest towards the company. Mainly, this
theory is relate with various assumptions. Thus, it is important for company to satisfy their
primary stakeholders in order to attain success.
Agency theory
Agency theory is also important for company to evaluate the relationship between
principles and business agents as well. As, it widely used by the firm for effectively evaluate and
understand the impact of stakeholders. It also defines the better relationship of stakeholder in
organisation. Along with this, Agency theory is completely opposition to the stewardship theory.
It refer to the aspect through which all the issues are easily addressed which arises due to
differences (Scamardella, 2015). With the help of this, company can easily evaluate the cause
and the problems in order to effectively addressed them. This will contribute in attaining set
goals and objectives in stipulate time frame. Mainly, this type of theory is used to firm with the
purpose of explaining relationship with shareholders and different business organization also. In
this context, board of director of Primark also implement this theory for evaluating the issues
with scandal and at the same time also understood the theory in limited time. As all the scandals
point out the business organization in negative way and also determine the ineffective of the
company performance towards its goals and objectives. In this context, the stakeholder and
manager of Primark also tries to make working environment healthy so that all the workers are
easily perform their task and also improve their productivity level. For attaining the same,
manager of the company also provide job responsibilities to their workforce with the aim of
making overall performance appropriate. By implementing this theory company can share good
relation with workers this will directly contribute in enhancing brand image of the company
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