Project on Corporate Governance Essay - HSBC and Barclays Bank
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Added on 2020-07-22
Project on Corporate Governance Essay - HSBC and Barclays Bank
Added on 2020-07-22
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Project on Corporate Governance1
TABLE OF CONTENTSMAIN BODY..................................................................................................................................11. Critically evaluating theories related to corporate governance and presenting mechanismthat is employed by such two selected companies.......................................................................12. Comparing andcontrasting the corporate governance structure of Barclays and HSBC.........33. Discussing whether both the companies have complied with the legal requirements or not..64. Evaluating director’s remuneration strategies that are followed by HSBC and Barclays bank.....................................................................................................................................................7CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................102
NTRODUCTIONCorporate governance implies for the system of rules, practices on and processes thebasis of which business unit is directed as well as controlled. In the modern era, practices ofcorporate governance are highly significant which in turn assists in ensuring proper balance inthe interest of company’s stakeholders such as management, suppliers, employees, communityetc. Hence, corporate governance may be served as an explicit and implicit contract that takesplace between company and its stakeholders for the distribution rights, responsibilities as well asreward. For this report, leading banking institutions of UK namely,HSBC and Barclays has beenselected. In this, report will shed light on corporate governance theories and structure undertakenby HSBC and Barclays bank. Further, report will present the extent to which both the selectedcompanies have complied with the legal requirements. It also depicts remuneration strategy (fornon-executive directors) and structure (pertaining to non-executive directors) that is followed bysuch two concerned units. MAIN BODY1. Critically evaluating theories related to corporate governance and presenting mechanism thatis employed by such two selected companiesAgency theory According to the views of Shi, Connelly and Hoskisson (2017) agency theory describesrelationship that takes place between shareholders (principals) and company’s managers (agent).On the basis of such relationship, principals / managers are appointed or hired for acting andtaking decisions on the behalf of shareholders or investors. This theoretical framework focuseson dealing with two specific problems. One refers to alignment or integration of the goals ofprincipal and agents so there is no conflicting situation. Further, managers and shareholdersreconcile different tolerances for risk. In accordance with Aguilera, Judge and Terjesen (2018),as per agency theory, principal or investors select directors or managers for taking decisions forthem. In this, cost is incurred by the investors for monitoring the agency behaviour due to thelack of trust. Agency theory of corporate governance has following strengths and weaknesses: StrengthsWeaknesses1
Facilitates effective decision makingContributes in meeting the goals ofshareholders to a great extentCreates ethical issues and concerns Imposes anti-social implications Transaction theoryLee, Park and Folta (2017) defined transaction cost theory as an alternative variant ofagency framework. Hence, such theory exhibits corporate governance aspects considering theeffects of both internal and external transactions. On the other side, Williamson (2017) claimedthat transaction cost theory of corporate governance lays focus on cost enforcement and balancemechanismsuch as audit, information disclosure etc.StrengthsWeaknessesDevelops faith among the stakeholders Strengthen relationship betweencompany and its stakeholdersHigh cost associated with thecontrolling and monitoring aspects It reflects risk averse nature of managers Opportunist behaviour of directorsdiscourage potential investors Enlightened stakeholder theory Andriof and et.al., (2017) stated that as per stakeholder’s theory, shareholders appointdirectors as steward for their interest.Such theoretical framework presents that business unitowes accountabilities towards the wide group of stakeholders. It presents that rather than placingemphasis on shareholders motives, company should develop strategies that place positive impacton all the stakeholders such as employees, customers, supplies, community etc. Further, Pigé,(2017)depicted in their study that stakeholder theory implies for the aspects of organisationalmanagement and business that helps in addressing morals and values. Hence, such theoreticalframework emphasises on meeting the goals of both internal and external stakeholders. StrengthsWeaknessesHelps in enhancing brand image byIn this, assessment orevaluation is2
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