Impact of Corporate Governance Failure on Investors and Stakeholders

Corporate Strategy and
Governance

Executive Summary
The current assignment is based on corporate-governance and its need and importance for an
organisation along with evaluating about the Impact of corporate governance failure on investors
and other stakeholder for which an investigation is made ion the accounting scandal of Tesco.
For that purpose both primary and secondary research is taken out which forms a part of this
assignment. The secondary research is based on evaluation of online articles and journal which is
evaluated in literature review where as primary research consists of use of survey method where
data is collected with the help of questionnaire.
Table of Contents
Research Topic: “Impact of corporate governance failure on investors and other stakeholders”. A
case study on accounting scandal of Tesco. ...................................................................................1
Chapter 1: Introduction ...................................................................................................................1
1.1) Background to the study......................................................................................................1
1.2) Problem faced .....................................................................................................................1
1.3) Aim and objectives .............................................................................................................1
1.4) Scope and limitation ...........................................................................................................2
Chapter 2: Literature Review ..........................................................................................................3
.....................................................................................................................................................4
Chapter 3: Discussion about primary and secondary research undertaken .....................................7
Chapter 4: Critical review of results of research ..........................................................................11
4.1) Analysis and interpretation of Primary findings ...............................................................11
4.2) Evaluation and discussion of secondary data ...................................................................19
Chapter 5: Recommendation and action plan................................................................................19
Conclusion................................................................................................................................24
REFERENCES..............................................................................................................................25

Research Topic: “Impact of corporate governance failure on investors and
other stakeholders”. A case study on accounting scandal of Tesco.
Chapter 1: Introduction
1.1) Background to the study
Corporate governance is a vital concept the associated wit the way and system through
which a business organisation is operated and governed by its top authority, brad of directors and
other stakeholders (Bain and Band, 2016). Thus, corporate-governance consist of set of rules and
principles to lead better evaluation and performance of an organisation through meeting viable
needs and expectation of all stakeholders. Therefore current investigation is lead out on Tesco
plc to understand the need and importance of Corporate-governance along with evaluating the
impact of corporate governance failure on investors and other stakeholders.
1.2) Problem faced
The current investigation is based on problem faced by Tesco that is basically associated
with the failure in its corporate strategy that lead to accounting scandal where its financial
statements are misrepresented to boost its profit (Boddy, 2016). Thus, the issues faced by Tesco
is mainly associated with the violation of accounting principles and many other ethical
challenges that lead to failure in corporate-governance of Tesco.
1.3) Aim and objectives
Research Aim
The main aim of current investigation is, “To evaluate about the factors and reasons that
lead to failure in Corporate Governance along with its impact on Investors and other
stakeholders”. An investigation conducted on Accounting Scandal of Tesco.
Research Objectives
 To review about the concept of corporate governance along with evaluating its needs and
importance for an organisation.
 To determine the main challenges and factors associated with the failure of corporate
governance and strategy in a business environment.
 To determine the impact of accounting scandal of Tesco on its investors and other
stakeholders.
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 To recommend the possible ways and strategy that lead improvement in corporate
governance of Tesco in order to perception of its investors and other stakeholders.
Research questions
 Explanation of the concept of corporate governance along with evaluating its needs and
importance for an organisation?
 What are the main challenges and factors associated with the failure of corporate
governance and strategy in a business environment?
 What impact is lead by accounting scandal of Tesco on its investors and other
stakeholders?
 What are the possible ways and strategy that lead improvement in corporate governance
of Tesco in order to perception of its investors and other stakeholders?
1.4) Scope and limitation
The scope of current investigation is based on corporate-governance that is having a wide
scope associated with the needs and importance of this concept for an organisation to have better
decision making and strategy formulation. Furthers, it also consists of main challenges and other
factors that lead to failure of a corporate-governance while operating in the dynamic
environment along with evaluating the impact of accounting scandal and other frauds on the
mind set and attitude of investors and other stakeholders. Thus, the scope of current investigation
is quite wide which also lead information about the possible ways and strategies that lead to
improvement and betterment of corporate governance.
The limitation that could be encountered during this research project and investigation
conducted on accounting Scandal of Tesco is associated with the lack of time and resources that
cloud hamper its efficiency and performance. The another limitation that could be faced is
related with maintaining the authenticity and reliability of collected data to accomplish
objectives of current investigation. Use of Gantt chart and other research methodology is made
for current project to overcome the issues of time and resources management. Further,
implication of effective research method and strategy along with meeting the associated ethic
consideration ensures proper maintenance of authenticity and relatability of collected data.
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Chapter 2: Literature Review
This is the part of research project that consists of information and evaluation of various
scholarly article and other available resources to get better understanding about a research topic
and its associated concepts and objective (Canedo, 2016). Following literature review is based
online journals and other authentic articles on the topic of failure in corporate governance am
evaluation of which is provided below:
To review about the concept of corporate governance along with evaluating its needs and
importance for an organisation.
As per the information provided by Prachi Juneja, 2020, the corporate governance can be
defined as set of rules and procedure that are adopted and applied by the top authority and other
directors and managers to operate or govern business of an organisation. Thus, with respect to
Tesco it means conducting and leading out a business as per the desires and viable expectations
of all stakeholders. Corporate governance thus represent the system, structure and ways by which
all activities and business operations of Tesco are directed and controlled thus it is vital and
important for Tesco to bring a check on efficiency of boards of directors and also keep control on
financial scam and other sandal (Chilisa, 2017).
Further, the corporate governance structure is basically consist of the arrangements and
specifies the distribution of rights and responsibilities among various stakeholders and directors
of a company consists of role and responsibility of both executive and non-executive directors
(Dieleman, 2017). With respect to Tesco Plc, it is having a much effective corporate governance
framework that supports Board of directors to deliver effective Group’s strategy and also support
long-term sustainable growth.
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Illustration 1: Corporate Governance structure of Tesco, 2020
Source: Corporate Governance structure of Tesco, 2020.
Thus, the corporate governance structure of Tesco consists of a board of director along
with a audit committee, Corporate Responsibility Committee, Nomination and Governance
Committee and Remuneration committee to ensure a right level of attention and consideration
for all vital and specific matters (Fink, 2019). Further, the strategic approach and planning of
Corporate governance at Tesco consists of identifying the need and purpose of an initiative to
acheive the gaols along with leading and building action plan to create and implement all
corporate strategy through promoting effective communication between Executive and Non-
executive Directors.
The mission of Statement of Tesco is to create value for its customers and other
stakeholders to earn their life time loyalty. Beside this, The vision of Tesco plc is to become
most highly valued business through serving its customers, communities and leading out loyalty
and commitment in colleagues and shareholder. Thus, implication of Corporate governance
become more vital and crucial for Tesco to lead more transparency and accountability in its
operation to bring higher value and loyalty in its stakeholders (Fearn-Banks, 2016). The main
objectives set out by Tesco Plc consists of Following main points:
 To enhance creativity and innovation level of its employees and corporate governance to
ensure higher productivity in coming 6 months.
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 To bring transparency in corporate governance structure to lead enhanced loyalty and
commitment in its shareholders to lead increase in profits in coming 4 months. To lead better training programmes for its directors to enhance there efficiency and
performance level to build trust in investors in coming 5 months.
The main challenges and factors associated with the failure of corporate governance and
strategy in a business environment
As per the view point of Hopkin. P., 2012, the corporate governance is consider to be one
of the most essential practice that each larger scale organisation must operates in order to remain
sustainable within marketplace. There are several reason due to which an organisation usually
fail in maintaining appropriate corporate governance. Some of the common factor that leads to
failure of corporate governance are mentioned below:
 Lack of board effectiveness: The ineffective board of an organisation is consider to be
main limitation within the skills and competence factor. Additionally it also affect the
ability of non executive director to monitor and control the senior executive. This in turn
influence the efficiency of work as there is not appropriate direction toward the
organisational objectives (Fulford and Hodgson, 2016).
 Boards' risk blindness: - The another factor due to which the corporate governance get
failed is due to lack of vision and estimation of potential risk that may affect the business.
This in turn leads in the failure of organisation to get link the operations with reward and
opportunity.
 Poor leadership on ethos and culture: When the leadership of an organisation is not
operates as per the culture and ethos then this in turn bring negative influence on the
manner in which the employees linked their work with that of objectives. This is so
because leader are one who provide employees with the appropriate direction to work
along with understanding and intrinsic motivation which employees require to perform
well (Grennan, 2019). Defective communication: This is also one of the main reason due to which corporate
governance get failed, as when the senior executes doesn't get right information to work
on then several issues get arises within management as well as execution of operations.
The impact of accounting scandal of Tesco on its investors and other stakeholders
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