Corporate Governance and Financial Regulation - Desklib

Corporate Governance and
Financial Regulation

Table of Contents
INTRODUCTION...........................................................................................................................2
MAIN BODY..................................................................................................................................2
Critically reviewing two relevant corporate governance theories...............................................2
Stakeholder Analysis of Tesco Plc..............................................................................................3
Evaluate the board structure of the company..............................................................................6
Institutional investors of the company.........................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES................................................................................................................................1

INTRODUCTION
Corporate governance refers to the process, practices and system of rule and regulation which
deliver assistance in managing, directing and controlling the function of the organization in
effective as well as efficient manner. In the corporate governance the board of the director are
answerable for the governance of the organization. The present report is in context of the Tesco
plc UK based organization. The report will determine the corporate governance theories,
stakeholder, board structure and investors of the organization.
MAIN BODY
Critically reviewing two relevant corporate governance theories
The two most significant and relevant corporate governance theories discussed in the unit are as
follows:
Agency Theory: This is one of the best theory of corporate governance with the help of
which the relationship between agent and principal are easily understandable. Under this theory,
the corporations act as an agent of its shareholders because shareholders invest in corporate
ownership and also entrust their savings to management and director of company. For example,
Tesco Plc executives is agent and its shareholders are principal as per the agency theory and
company executives that work for the purpose of enhancing shareholder’s wealth (Kyere and
Ausloos, 2021).
Advantages of Agency theory:
 It provides clear parameter to the corporate officers and board members on the basis of
which they can make strategic decision.
 This theory helps in enhancing the wealth of shareholders the impact of which
shareholders are further ready to reinvest its return for future growth of business.
 This theory also helps the companies to retain its executives or managers who have the
ability to risk their financial future for the better performance of company.
Disadvantages of Agency theory:
 The conflicts between agent and principal arises such as between manager and
shareholder as the shareholders unable to monitor the actions taken by manager for
principal interest (Kyere and Ausloos, 2021).
 Also, the self-interest of shareholder is a limitation of this theory.

Stewardship Theory: This is a theory in which stewards are the company executives and
managers that are working for the shareholders. This theory of corporate governance is basically
an alternative to agency theory where steward need to protect and maximize the shareholders'
wealth via maximizing firm performance. It is because shareholders transfer or delegate their
trust (Marashdeh and et.al., 2021).
Advantages of stewardship theory:
 This theory is helpful in understanding that the relation between manager and
shareholders are healthy or not.
 It is also best for increasing the speed of decision-making and manager’s autonomy.
 Further, it helps in minimizing the cost of monitoring and controlling of business
activities (Marashdeh and et.al., 2021).
Disadvantages of stewardship theory:
 This theory required broad accountability which further require more time. Thus, time-
consuming is a drawback of this theory (Klettner, 2021).
 Further, drawback or limitation of stewardship theory of corporate governance is such
that it requires more investment because of high cash outflow.
Stakeholder Analysis of Tesco Plc.
The four most significant external stakeholder of Tesco Plc are investors, customers,
government and communities. The analysis of stakeholders claims or expectations, interest,
perceived conflicts and how company manage the same is done by using the stakeholder analysis
framework which are as follows:
Stakeholder Interest Level Claims /
expectations
Perceived
problem or
conflicts
How manager of
Tesco Plc solve
its stakeholder
conflicts
Investors High The investors are
the external
stakeholder of
Tesco Plc whose
interest level is
The conflicts
among investors
and managers or
executives of
Tesco arises when
In order to
manage or solve
the conflicts of its
investors, the
manager of Tesco