Governance and Sustainability Assignment Reports

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Governance and Sustainability
Student’s Name
Institutional Affiliation

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Introduction
Thomas Cook Group plc was one of the global leaders in vacation travel industry, with its
headquarters located in London, UK. The organization was running a number of airlines sublets
that served destinations across Europe, North and South America, Africa and Asia. On 20th
September 2019, the company reported a number of discussions with various stakeholders and
lending institutions in order to establish recapitalization as well as reorganization. However, the
discussion failed to produce tangible solutions. As a result, the company boards of directors
concluded that they didn’t have any other option but to enter into mandatory insolvency
(Sharma, 2013). Thomas Cook confirmed on 30th September 2019, that all of the UK
subsidiaries have ceased trading, including Thomas Cook Airlines. However, the management
indicated that some of the sublets would continue operations. This included Thomas Cook
Airlines Balearics whose operations have been under the German carrier. However, Ving group,
another subsidiary of Thomas cook detached from the insolvent main company and its operations
have been normal up to date.
Question 2: Failure of corporate governance
A number of corporate governance failures can be attributed to the collapse of
Thomas cook. Unfitted authority of the management was a huge problem , and is one that
characterized Thomas Cook management. In addition , there were multiple illustrations of
unethical activities within the company that continued to reveal themselves after the
collapse . Overall, corporate governance at Thomas Cook was weak in numerous aspects .
This is due to the fact that the board of directors was comprised of several individuals who
lacked moral character (Council, 2010) . In addition , they were ready to engage themselves

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in fraudulent activities .This was the clearest basis of the corporation’s corporate governance
failure (Kumar, & Singh, 2013).
With the collapse of Thomas Cook , it is evident that its corporate governance
frameworks were ineffective . Between 2014 and 2018 , the stakeholders approved the payment
of its directors more than £ 20m. The company CEO received £8million . At the moment ,
Thomas cook had employed two CFOs who also received a combined £ 7 million while other
non-executive directors were given £4 million.
In addition , Thomas cook was operating in a highly competitive environment that
required close emphasis on its tight profit margins . This is due to the fact that the rise of online
travel companies were a great threat to the traditional street operators such as Thomas cook and
others . As a result, the huge payment to the company executive led to the company to operate at
a deficit . This revealed how weak the association between performance and pay led to the
company collapse (Haspeslagh, 2010).
Earlier in July 2019, the company had reported that it was in closed discussions for an
approximate of £800 million recapitalization effort financed by Fosun . However , it was noticed
that the amount necessary to bail out the company had been inflated .In addition much has been
made of the £ 20 million that the executive received over the past six years , indicating that the
unwarranted salaries resulted to the decline of the organization (Aduda, Chogii, & Magutu,
2013).
Research had indeed revealed that such huge pay packages can result into bad financial
report and possibly corporate failure. However , it’s the structure of the payments that really
matters and not necessarily the topline renumeration numbers . £20 million or the average of

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about £ 2 million for every manager per year was a very small percentage if the amount that the
company needed to keep it operating was put into consideration (Leepsa, & Mishra, 2012).
Therefore , it is important to scrutinize whether incompetent pay structure , rather than the levels
of payments denoted the collapse of the organization. In addition, there were other factors such
as bad managerial decisions , an ineffective board member failing of the stakeholders and lack of
engagement among the key members . Therefore , it is important that the investigations focused
on these causes and this does not begin from the pre-conception that one culprit was the only one
that was to blame (Agyei, & Owusu, 2014).
Question 2: Recommendations
Whatever the cause might have led to the demise , it is a reminder to all organization that
sticking to a singular model , failure of adapting to the technological changes in the consumer
habits might lead to financial distress and ultimately failing. Thomas Cook had the thought that
the bail out from the key shareholder Fosun would rescue the company from its fall .
Nevertheless, this never stopped the company’s liquidation . What is evident from these cases is
that , it is important to ensure that the customer behavior as well as market trend are aligned as
they would help the business adapt to all the new developments. Failure to consider and
responding to changes , resulted to the collapse and liquidation of the company (Norwani, Zam,
& Chek, 2011).
It is important to note that the goals of the executive is not just about avoidance of media
backlash , but actively creating positive value for the society . This can only be achieved through
risk taking while implementing innovative new products that change the lives of their customers
for the better while at the same time preserving the environment . If the organization failed to
take such necessary actions , substantial opportunity to grow the pie for both the key