Corporate Governance: A Literature Review

This assignment requires a comprehensive literature review on the topic of corporate governance. It necessitates an analysis of various theoretical frameworks, empirical studies, and contemporary discussions surrounding corporate governance practices and their impact on organizational performance and societal well-being. The provided list of references offers a starting point for this research, covering diverse aspects of corporate governance, including agency theory, stakeholder theory, board structure, executive compensation, and the role of institutions in shaping corporate governance norms.

Maxwell communication

Table of Contents
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................3
Theory of corporate governance.................................................................................................3
Task 2 .............................................................................................................................................6
Governance structure, risk management policies and organizational chart of maxwell.............6
communication ........................................................................................................................6
Task 3...............................................................................................................................................8
Task 4...............................................................................................................................................9
Conclusion.....................................................................................................................................10
References .....................................................................................................................................11

Introduction
Corporate governance is a blueprint of corporate policies itself, In short term it is the way
which corporates are using to govern their companies. Maxwell case is one of the most popular
case regarding corporate governance. Corporate governance is refer to maximize the
accountability of company and eliminate the chances of massive disaster before they occur. Well
executed corporate governance is helps in maintaining balance of an Maxwell communication to
achieve its end goals. Maxwell communication corporate governance totally fail at the time when
Robert Maxwell was found drowned at the back of his yacht and it resulted the collapsed of
maxwell other businesses also. Maxwell communication face these disaster because of their poor
handling of corporate governance. Corporate governance is a very important tool for a company
as important as company's primary business plan. It corporate government uses effectively it has
the ability to prevent or eliminate corporate scandals, fraud and the civil and the criminal
liability of the company.(Weingarten and et.al 2016)
Task 1
Theory of corporate governance
As corporate governance is a must practise for each and every organization and corporate
governance is indulge with all the economic and non-economic activities of an organization.
Literatures done on corporate governance create some understanding on the meaning of
governance but it is not enough to describes the precise meaning of governance. Some problems
which emerges are such as- regulate, manage, control, govern and governance. For reducing such
ambiguity there are number of fundamentals theories available which underlining the corporate
governance. Some of the most important corporate governance theories which an maxwell
communication needs to consider are agency theory, Transaction cost theory and stakeholder
theories.(Mooney, Kaplan and Lammers, 2016)
Agency theory
Agency theory consider as to define the relationship between owners such as principals,
shareholders and agents such as company managers and executives. As per according to this
theory shareholders of maxwell communication who are the owners and the principals of the
company hires the agents to perform and manage their work. The agency theory is a simple
concept of that reduces the organization into two participants which are shareholders and

managers. Agency theory defines that managers and employee in an Maxwell communication
should be self interested, Which seems missing there as the relationship between the managers
and stakeholder which are employee is not good as each and every decision were taken by the
owner of the company (Vu, Guo and McCombs, 2014)
In the agency theory shareholders have expectations to their agents to act upon situation s
and make decisions in the interest of principal and principal should protect the interest of the
executive and the managers . In the case of maxwell communication the principal did not fulfil
its responsibility as a owner which resulted disastrous situations for the employees and
managers. Agency theory defines that the goal of an agent is totally different from the principals,
here the assumption is that principals have to suffer from the agency loss which consist as less
return on the investment made by them because they are not the one who directly managing the
company. Some part of the return will go to the the agents if they were managing the company
directly. Moreover agency theory suggest the financial rewards system as it will motivate the
managers and executives to maximize the profit for owners.(Zuo and et.al, 2014)
Apart from stated advantages and specification of agency theory, many researcher
acclaim some limitations of agency theory as well. The methodology of agency theory is
dominating, based on individualism, narrow defined motivational model, not simple to manage,
disregarding towards other theories.
Transaction cost theory
Transaction cost theory surrounded by various factors such as economics, law and
organization. This theory tries to look upon the firm such as Maxwell communication which
comprises people with different objectives and views. The assumption lies in transaction theory
is that the organization has to became so large so that they have effect on the substitute for the
market so that they are in the position of evaluating, analysing and determining the allocation of
resources. The unit of analysis used in the transaction theory is the unit of transaction taken place
within the organization, because of that the consolidation of people with transaction defines that
transaction cost theory managers are the opportunists and they have work to arrange the firms
transactions according to their interests.
Transaction theory also indulge with some limitations and weaknesses as transaction
theory is only focus on the cost minimization factor, It also understates the cost of organizing, It
has no concentrate upon and totally neglect the social relationship in economic transactions.

Maxwell communication organization fails in maintaining their cost minimization factor which
resulted as the bankruptcy of the company and it leads the owner to the point where he commit
suicide.
Stakeholders theory
Stakeholders assumption are based on the assumption that shareholders are not only
group of people with a stake in the company and in organization. Stakeholders theory explains
that the customer, client, suppliers and the other surrounding communities also have the stake in
the organization. They also affect and face the circumstances of success and failure of the
Maxwell communication. AS because of that managers have the main responsibility to ensure all
the stakeholders not only the shareholders that they will receive a fair or good return on their
stake in the organization. Stakeholder theory can also term as any individual or group who can
affect or affected by the fulfilment of the organizational goals.(Acharya and et.al, 2013)
Lobbying practises bring lot of management practises which are useful in controlling the
stakeholders practises as well as maintain the level of corporate governance within the
organization. Stakeholders have silent features in an organization, lobbyist has the
responsibilities to look at the activities which provide fair deal to their stakeholders. Lobbyist
needs to fulfil their duties in ethical ways , no matter if it even means to decreasing the long term
profit for an organization.(Iliev and et.al, 2015)
There are various limitations associated with stakeholders theories such as stakeholder
theory does not offer any decision making criteria that would effectively manage the corporate
governance, stakeholders theory describe an unrealistic view about how Maxwell
communication operates. In the case of Maxwell communication stakeholders are the employee
of the company which also face the harm so stake holder theory is also failed there as owner was
unable to maintain the stakeholders money and failed in keeping the promise about the good
return on investment.
The maxwell communication failure is considered as one of the biggest case of corporate
governance failure in and around UK. After that the need of establish a particular committee who
look after the corporate governance issue is started to feel and resulted Cadbury committee was
developed. After look at the case of maxwell communication it can be understand the corporate
governance theories are badly failed, as agency theory describes the relationship between owners
such as principals, shareholders and agents such as company managers and executives. Here in

the case of maxwell communication it was badly failed as the owner of maxwell found drowned
behind his yacht and after that it was announced that company is in a huge debt which resulted
collapsed of the organization. Agency theory and transaction theories are badly failed in the case
of maxwell communication.
Task 2
Governance structure, risk management policies and organizational chart of maxwell
communication
The board of the directors represent the membership of an organization. The board of
directors are one who sets policies, values, procedures, long term planning and so on. There are
various models are there for forming the structure of corporate governance. Which are Policy
board, Policy governance board, Working board and collective board. Before maxwell case there
is no balanced governance structure was there as, Maxwell communication has a very critical
and complex flaw in their governance structure which can be understand by below stated points:
 Dominating CEO
 Maxwell has the complete control over all the companies under their umbrella
 They personally controlled the movement of the fund around the big organization
 Ineffective board
 Excessive borrowings of the funds, pledging of shares for raising the funds
 Unbalanced and improper movements of the funds took place while it is in control of
the directors, as they were helpless because of the dominating behaviour of th eCEO
 Lack of transparency is the governance structure
 Improper segregation between the assets of the company and pension assets of the
employee
Risk management plays a very vital role in corporate governance sector. As risk
management seeks to identification, assessment and various other strategies that will help
Maxwell communication to mitigating the risk. Risk management policies use for describing the
framework of risk management technique which an Maxwell communication acquired.(Joseph,
Ocasio and McDonnell, 2014)
The risk management policy statement
 Recognition the need for risk management

 Focus on implementing the risk management effectively
 Training and knowledge development in the area of risk management
 Monitoring the performance and review progress in risk management
Objective of effective risk management
 Integrate the risk management into organization culture
 Implement the risk management across all the aspects of organization
 Monitor the risk management process
 Ensuring that staff and stakeholders have access to information, training and other
development opportunities
Organizational chart of Maxwell communication

AS the organization chart of Maxwell communication is depicting that it consist both
public listed and private companies. Public listed companies under the umbrella of maxwell are
Mirror group and Maxwell communication.
Task 3
Before discussing about whether Maxwell fulfil its legal requirements or not it is
important to look at the Turnbull report and the guidelines which are set there. Turnbull report
provide guidance to directors on the combined code. The report enlightens director about their
obligations under the combined code for enhancing internal control in the companies.(Khan,
Muttakin and Siddiqui, 2013)
Illustration 1: Organizational chart
(Source: Organizational chart, 2014)

There are various guidelines given by the Turnbull report. Turnbull report strictly
recommend the best practises in the internal control of an Maxwell communication this is where
Maxwell communication face utter failure as their control level were poor as well as badly
managed. Turnbull recommend a statement of internal controls should be a part of annual report
of an Maxwell communication which seems absent in the case of Maxwell communication, this
statement provides an opportunity for boards to help shareholders in understanding the condition
of an organization where as maxwell communication did not use such kind of statements and
borrow a huge amount of fund from the market.(Michael and Goo, 2015)
Internal control framework was really in very bad condition in case of Maxwell
communication where they are in a position where they did not fulfil the legal requirements.
Task 4
The director remuneration strategy for Maxwell communication is set by their
shareholders as per the rules and the regulations. AS it is shareholders interest to remunerate a
person capabilities to serve on the board. The director remuneration strategy used for motivating
the directors of Maxwell communication. There are various elements use in the director
remuneration strategy such as base salary, benefits and retirement, annual bonuses, long-term
incentives plan/awards, Share incentives plans, fees and life assurance benefits.(Westphal and
Zajac, 2013)
Each factor of remuneration should be designed and framed as per according to ensuring
that director would be focused to the company and motivate to improving the performance.
There was a need to prepare a remuneration strategy which links rewards to performance
is one of the greatest challenge face by any remuneration committee. As there is a direct
relationship between the performance and pay so committee should adjust the pay as per the
performance and also taken care of the some factors such as-
 Directors are motivated to increase their performance
 Directors should be adequately rewarded with increase in pay scale at the time
performance improvements are achieved
 Directors should be paid accordingly their efforts and success
 Directors should not be criticized for their excessive pay
 Director pay can be set according to market based pay levels
 The pay strategy should be link through process which increase the performance

Conclusion
From the above case ample of conclusion can be made, the theories of corporate
governance such as agency, transaction, stakeholders theories are adequate enough to establish a
balanced environment for corporate governance if these use legally and as per the ethical
framework. Maxwell communication never establish there governance structure in a manner
where they can use various risk management policies which resulted as bankruptcy of
organization. Maxwell communication board of directors was dominated by the CEO because of
that company never fulfil its legal requirement and internal control of organization also seems
absent. Pay and performance are interlinked which resulted as the director efforts and focus on
the organization long term plan.

References
Books and journals
Weingarten and et.al 2016. From primed concepts to action: A meta-analysis of the behavioral
effects of incidentally presented words. Psychological bulletin. 142(5). p.472.
Mooney, T.A., Kaplan, M.B. and Lammers, M.O., 2016. Singing whales generate high levels of
particle motion: implications for acoustic communication and hearing?. Biology
Letters. 12(11). p.20160381.
Vu, H. T., Guo, L. and McCombs, M. E., 2014. Exploring “the world outside and the pictures in
our heads” A network agenda-setting study. Journalism & Mass Communication
Quarterly. 91(4). pp.669-686.
Zuo and et.al, 2014. Rogue-wave interaction for a higher-order nonlinear Schrödinger–Maxwell–
Bloch system in the optical-fiber communication. Nonlinear Dynamics. 78(4). pp.2309-
2318.\
Acharya and et.al, 2013. Corporate governance and value creation: Evidence from private
equity. Review of Financial Studies. 26(2). pp.368-402.
Iliev and et.al, 2015. Shareholder voting and corporate governance around the world. Review of
Financial Studies. 28(8). pp.2167-2202.
Joseph, J., Ocasio, W. and McDonnell, M.H., 2014. The structural elaboration of board
independence: Executive power, institutional logics, and the adoption of CEO-only board
structures in US corporate governance.Academy of Management Journal. 57(6). pp.1834-
1858.
Michael, B. and Goo, S.H., 2015. Corporate governance and its reform in Hong Kong: a study in
comparative corporate governance. Corporate Governance. 15(4). pp.444-475.
Westphal, J.D. and Zajac, E.J., 2013. A behavioral theory of corporate governance: Explicating
the mechanisms of socially situated and socially constituted agency. Academy of
Management Annals. 7(1). pp.607-661.
Khan, A., Muttakin, M.B. and Siddiqui, J., 2013. Corporate governance and corporate social
responsibility disclosures: Evidence from an emerging economy. Journal of business
ethics. 114(2). pp.207-223.
Online

Organizational chart. 2014. [Online]. Available through:
<https://www.slideshare.net/riya_thakkar/corporate-governance-project-64244878>.
[Accessed on 10th May 2017].