Comprehensive Case Study: Corporate Governance Issues at HSBC Bank

This case study provides a comprehensive analysis of HSBC Bank, focusing on its corporate governance practices, ethical considerations, and corporate social responsibility (CSR) initiatives. It examines key events such as ethics, CSR efforts, money laundering incidents, the FIFA corruption scandal, and the bank's culture. The study delves into the structure of the case, the company profile, and the importance of the case within the banking industry. The analysis explores issues related to corporate governance, including the roles of senior financial officers, stakeholder involvement, and the impact of money laundering. Furthermore, the case study discusses agency theory, strategic and operational risks, and their effects on the bank's internal policies and rules. The conclusion summarizes the key findings and implications of the analysis. The study aims to provide a clear understanding of HSBC's activities, responsibilities, and its position within the global banking sector.

CASE STUDY ANALYSIS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Purpose of Study.........................................................................................................................1
Importance of Case.....................................................................................................................1
Structure of the Case...................................................................................................................1
COMPANY PROFILE....................................................................................................................2
Description of Key Events...............................................................................................................4
Ethics...........................................................................................................................................4
CSR.............................................................................................................................................4
Money Laundering......................................................................................................................5
FIFA corruption..........................................................................................................................6
Culture.........................................................................................................................................6
CASE STUDY ANALYSIS............................................................................................................6
1...................................................................................................................................................6
2...................................................................................................................................................8
3...................................................................................................................................................9
4.................................................................................................................................................10
5.................................................................................................................................................11
6.................................................................................................................................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Purpose of Study
The case study is about the corporate governance. Corporate governance aids in
regulating social and legal activities of business. In present study, efforts are laid on same and
hence HSBC is selected as an organisation. It is a global bank which provides financial products
and services. The purpose of the case study is to analyze the multinational bank in terms of
corporate social activities, legal activities, and other financial activities. The case study is
developed to gives a clear scenario about the bank's activities and responsibilities as well as
position of bank within industry.
Importance of Case
The present case study is analysis of the HSBC holding PLC which operates in banking
sector across the world. The importance of the case study is to analyse about the responsibilities
of the firm towards society along with employees and consumers as well. With the help of this
study, investors are able to know about returns on investment and securities which are given by
firm to customers. It also helps to know the position of firm within banking industry.
Structure of the Case
The case study will analyse about the issues of corporate governance, ethics of the bank,
corporate social activities, theoretical, academic, legal or professional regulations, future
scenario of banking industry of UK, and investment decisions in the firm from investors point of
view etc. In the study, the stakeholders are also addressed along with customers of HSBC bank.
COMPANY PROFILE
HSBC holding plc is a British based company and operating in banking industry. It is a
public limited company and stand for Hongkong and Shanghai Banking Corporation. The
company is a multinational company which provides its services in more than 87 countries. It is
also known as world's local bank. The bank provides high range of financial services to its
customers such as personal financial services, markets private banking and corporate investment
banking (Tricker, 2015). The bank lies at third position in the world in terms of assets ownership.
The vision of the firm is to become a leading bank in the world and meet with diverse
requirement and needs of customers across the world. Company aim to offer all financial and
banking services to its consumers. Through this service, the company aim to fulfill the
expectations, dreams and then realize their ambitions.
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Illustration 1: Total assets value of UK banks
§ The HSBC bank is on the top position within UK banking industry in terms of
asset's ownership . From the above mentioned illustration it can be assessed that in the year
2012, 2013 and 2014, the HSBC bank have the highest assets in comparison to its competitors.
Furthermore, the bank have an organisational structure by which the firm allocate
resources, coordinating activities and supervising that the work is done as per the structure or
not. Organizational structure chart of the HSBC bank is as follows:
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Illustration 2: Organizational structure of HSBC bank
From the organisation structure chart of HSBC bank it can be seen that bank follows the
functional organisational structure to run its business. The bank divides its business according to
the functions or services which are provided to consumers. In relevant bank the major functions
includes human resources, services, financial control, personnel banking, corporate banking and
marketing (Sapra, Subramanian and Subramanian, 2014). From this the business functions are
operated properly which lead to enhance productivity of the bank. All the functions are also
divided in various sub functions and tasks which are as above. The HSBC bank has a corporate
governance who regulate the social and legal activities which are done by the bank.
Description of Key Events
The key events of the present case are such as ethics, CSR, Money Laundering, FIFA
corruption and culture.
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Ethics
Ethics are moral principles which govern business' behaviour and helps to conduct
activities of company. All the firms incorporates ethics in business irrespective of industry it is
operating.. Ethics are also led to increase the goodwill of bank in the banking sector and same is
focused by HSBC bank. The bank's have various ethics and they have to follow them
(Armstrong and et.al., 2015). In this, the bank follow properly all the rules and regulations which
are set out and framed by the regulatory and authority body of the bank. Further, the bank meets
with the interest of varied parties properly and fulfill obligations on time and give better services
to the consumers by which goodwill increases. As per the ethics the bank is try to increase
goodwill in the industry and market. Hence, the ethics are followed by the HSBC bank.
CSR
CSR is stands for Corporate Social Responsibility which are adopted by every firm. More
corporate social activities of a firm lead to rise in goodwill of that firm in the market and
society. The cited bank is also focus towards corporate social activities. . In this activity the bank
doing work for social welfare by which the consumers are attracted towards that and hence the
goodwill or reputation gets increased. The HSBC bank also conducts charity program for social
activities in two core areas such as promotion of education and environmental sustainability. In
area of promoting education, the bank's social activity give the advantages to the people
particularly at the primary and secondary education level. The bank is even working for
empowering women and it increases employment through providing vocational courses (Bain
and Band, 2016). Under the environmental sustainability the bank focuses on freshwater
sustainability, decrease the pollution, access to safe water and give the better environment to the
society.
Money Laundering
Money laundering is a process under which the banking institutions are manipulated their
finance and with help of fraud they increase their income. It is a manipulation which decrease
reputation of the bank. The money laundering is a factor which influence the bank and influence
the national economy and ultimately world economy as well. The HSBC bank also had money
laundering cases by which reputation of the bank is decreased in the banking industry. A great
money laundering case of HSBC bank is it utilized as a course of the “drug kingpins and rouge
nations”. The case is highlighted in July 2012. Under this, the UK based bank paid huge fine .
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The report and the US authorities are found about this fraud and money laundering of the bank.
From this, the Mexican parties are too much affected because the drug case is done in Mexico.
After that, another case of money laundering case was highlighted within the context of
investigation of the bank. The mentioned UK based bank pay out a huge money i.e. £28m.
(Garside, 2015). The investigation authority found about the over money payment but the HSBC
bank settled the case due to which authority hadn’t disclosed about its fraud and manipulations
of finance. These are major two money laundering cases which lead to decrease in reputation of
the bank across the world.
FIFA corruption
FIFA corruption is a world famous case and it is related to the sports. The HSBC bank is
involved in the FIFA corruption and from this the reputation of relevant bank is decrease in the
banking industry. The UK bank has taken care of the exchange of monetary which is regarding
to the FIFA. In exchanging the money, bank did fraud which is related to the FIFA corruption.
Under this, the mentioned bank did suspicious transactions of worth £320000 and transferred
only £130000 to account in Cayman Islands. Due to involving in the FIFA corruption the bank's
reputation is declined in the industry and market. But with the help of social activities it
overcomes the goodwill.
Culture
Culture plays an important role in every firm of every industry. HSBC bank had the
culture in the business. The working environment of the bank is very effective and it emphasize
of free environment (Zattoni and Perrini, 2015). At the work place the bank is not doing any
discrimination among employees on the basis of age, gender etc. Also, the bank not hires fresher
at its workplace and only focused to hireexperienced, promoted and developed employees who
helps the bank in increasing productivity. The bank gets benefit with the experienced employees
as it gives more productivity with comparison to freshers. The bank provides a supportive,
freely, open and inclusive working environment to its employees which lead to motivate them.
CASE STUDY ANALYSIS
1.
Corporate governance is a regulatory body who regulate the rules and regulations and
internal policies of firm. All firms have a corporate governance in the business who regulate and
take care of all the rules, regulations and policies. It is a body by which the social activities and
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ethics are taken care. Corporate governance controls the internal policies of firm in case if policy
goes in inverse direction. It obliges to all the senior financial officers who plays a major role on
mentioned firm. The senior financial officers plays an important role in mentioned and selected
organisation because it operates in the banking and financial services. The main corporate
governance issue is that if senior financial officers are not working well and not responding to
work which is been allotted to them (Qian and Yeung, 2015). In the bank, financial fraud occur
and the financial manipulation is done from the financial officers who take care about the
financial data of bank. In the HSBC bank the another issue is related with the manipulation as
well. When the investigators were coming to investigate about the financial transactions and
company's rules regulations etc., then the bank not allowed them. Instead the bank paid ahuge
money to them to avoid and stop the investigation. For this it did some settlement with huge
amount so it is an issue related to corporate governance.
Furthermore, in the corporate governance the stakeholders are also involved and they
have to follow the rules and regulations which are developed and set out by the corporate
governance. In the bank there are several stakeholders which plays important role in business.
The stakeholders are such as customers, suppliers, financial institutions etc. If any of the
stakeholder are not following proper rules and regulations than it will create issue in the
corporate governance and lead to negative impact on bank. The money laundering which took
place in Swiss bank has also influenced to corporate governance and created issues in the
regulatory body of the bank. Ethics and corporate social responsibilities are also taken care by
the corporate governance of the bank. If there is any mistake highlighted then will create issue.
In the corporate governance the cultural issues are also an issue of corporate governance (Eling
and Marek, 2014). From these issues of corporate governance the HSBC bank's internal policies
and rules are affected. There are various risks which also acts as an issue of corporate
governance. Various strategic risk which decrease the goal achievement duration and hamper the
strategies are also an issue. Apart from this, the operational issue is also one of a main concern
forcorporate governance.
2.
There are various issues which occurs in the cited bank. There are various literature
which signifies about the issues of HSBC bank. The company didfraud in transactions,
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manipulate the financial transactions, some ethical issues and corruption of monetary and
transactions.
As per the agency theory of Patrick McColgan there is relationship between the agents of
the company and principals of the company. The agency theory explain the relations between the
principals of the bank and agents or stakeholders of the bank. As per this, the principals are not
to be used by the firm for personal use and other than the business purpose. In the HSBC bank it
did fraud in transactions. The transaction fraud is done in the FIFA corruption where it uses
some money other than the personal use (McColgan, 2001). At the time of the FIFA corruption,
the bank involed in fraud of worth £190000. The suspicious transaction £320000 but the bank do
fraud in this and transfer only £130000 to the account of Cayman Islands. Hence, it can be said
in this that the bank is doing fraud in transaction. It affects the agents and stakeholder who
believe in the bank and give huge amount for transaction. From this, the whole bank is affected
in terms of reputation and also it has not followed the principles of the corporate governance.
The bank manipulate and fraud with principals of the bank and the agent or stakeholder of the
firm. So agency theory is applicable in this scenario.
Apart from this, another issue of corporate governance is with the various stakeholder of
the bank. In this, the stakeholders are sometimes used and follow properly all the rules and
regulation and the directors can be trust on them. In this context, the Stewardship theory is
considered. The theory is opposite of the above discussed theory i.e. agency theory. The
Stewardship theory says that the board of directors of business have to take care of the
shareholders and give them value in the business as well as increase the shareholders value
(Rahim and Alam, 2014). The bank is always tried to increase the shareholders value. The bank
is done fraud and manipulation so the cadbury theory is also a literature of the HSBC issues. The
cadbury theory says that there are not any firm or system which hadn’t undergone any of the
fraud activity. In the bank also corruption and fraud as well as settlement is done in case of
investigation.
3.
It is necessary to avoid the issues which are occurred in the bank as well as it is necessary
to come out with that situations which occurred in business. The bank was also used some
strategies and some steps are taken out by the firm to over come the issues and come out from
that situation. The transaction fraud is done by the two leading bank of UK banking industry that
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is Barclays bank and another is HSBC bank. To settle out and pay the fraud amount they both
together take a step. The step is taken with the help of document under which they mention all
the scenario and rules and regulations. The documents which is used by the both bank to solved
out the fraud is, London-based Standard Chartered Bank (Sharif and Rashid, 2014). From this
bank, the fraud amount is repaid to FIFA. The transaction is done and amount is transferred with
the help of London-based standard chartered bank. .
At the time of money laundering which is done by HSBC bank of UK, the responses are
given by the judicial. In this the bank is not accepted the investigation of bank. When the
investigators visited the bank for investigation, then they were given money in order to do the
settlement. For this the judicial response is that the bank have to pay fine worth £1.9 billion. The
bank had to agree to pay fine due to money laundering case. The bank agree to pay and enter into
agreement of fine. As per the agreement the bank have to pay £1.9 billion and five year deferred
prosecution. Due to this prosecution the UK based bank's performance is decreases at that time
and goodwill also decreases. The bank had to accept this responsibility due to its past mistake.
Due to this the firm have loss and the financial services which are providing to consumers are
decreases due to less number of amount (Schaper, 2016). Later, after two years, the bank pay all
fine amount and increase the services and try to become lead bank. Still, the company is try to
become a leading bank of the world and wants to provide the banking and financial services
worldwide consumers. At the time of Swiss banking money laundering fraud also the bank have
to pay huge amount regards to fine amount as per the judicial decision or judicial response.
In order to resolve the issue of stakeholders the mentioned UK based bank should give
proper instructions regarding to the services. Due to some misunderstanding problems also
stakeholders issues are creates. The bank should enhance them to connect with the bank strongly
which lead to decrease the issues of corporate governance. The shareholders issue are decreases
from the help of profit. The bank should give dividend and more interest amount by which
consumers and shareholders will increase. From this the sales increases and fund for the business
will also increases in the bank.
4.
It is not necessary that same issues of corporate governance happen in the future and on
the other hand it is also not necessary that same issues of corporate governance will not occur in
the future. The issues are often arise in the firms whether it is in banking industry or in other
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industry. The issues can occur because every company want to become rich and want to grow
frequently. For this, the companies are using legal and illegal ways. The fraud, financial
transaction manipulation etc. are illegal ways to become rich (Chang, Chou and Huang, 2014).
Due to the reason of richness and increase profit etc. the banks may use this type of illegal ways
which create issues in corporate governance of bank. On the other side it may be possible that
similar issues of corporate governance will not happen again in the future in UK banking
industry. The situation for future is moderate that similar issues may happen and may not be in
the UK banking industry.
The economy of UK country is a strong economy in the world. It has very strong and
strict rules and regulations for business and for other scenarios. The current system of corporate
governance is very strong of UK country. With this the accountability and its policies are also
very strong to run the business properly as well as to come out from critical issues as well. The
issue of FIFA corruption is overcome within two years and after that the HSBC bank is start to
generate sales and profit and asset level is also increases. Behind solved out the main issues of
corporate governance of HSBC, there is UK's corporate governance system and Uk's
accountability system both are with the bank (Fratianni, and Savona, 2016). From this analysis
and solution the current system of corporate governance and accountability system of UK
economy is really sufficient to deal with above mentioned corporate governance issues. Hence,
be a part of world's strong economy it is sufficient and capable to deal with the corporate
governance issues of the banks and businesses in UK economy.
5.
From the above case study analysis of corporate governance of the HSBC bank, it can be
learnt that corporate governance is very important for all organisations. The corporate
governance is important because it regulates the business very properly and according to the
structure. With the help of this the business is easily able to know the situation and position of
the firm in the industry. General lesson from the case study is that corporate governance helps to
business in controlling the senior financial officers, helps in arrange the board committees and
helps to make strong relations between business and stakeholders. From the corporate
governance it learnt that it is regulatory body who take care of the ethics and corporate social
responsibilities of the business. All the ethics and CSR activities are to be done properly and
effectively through the corporate governance of the organisation or the bank.
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Apart from corporate governance, risk and ethics both are the elements which plays an
important role in the business. Various risk are associated with the firm such as strategic risk,
operational risk, financial risk etc. and the organisation have to decrease the risk for increase
profitability (Cormier, Lapointe and McConomy, 2014). Risk is always there with the business
and the firms need to try to reduce them in enterprise. The ethics are the moral principles which
helps to govern a business and conduct the activity. Ethics also very important for bank and other
organisations which helps to prepare business activities according to the rules and regulations of
the industry. Hence, it can be learnt from the case study analysis that corporate governance, risk
and ethics are very important and helpful for business. Without this business can not run
properly.
6.
The bank had the highest assets value in UK banking industry. The HSBC bank is
performing well in terms of assets value in comparison to UK based banks which are operates
worldwide in banking and financial services (Loistl and Petrag, 2016). In the financial year 2014,
assets are increases and then next year asset value is decreases. So the company is little better but
not perfect for investment making. The company will not give better return to the investors. On
the other side looking upon the profitability and financial position of HSBC bank is not
performing well. From last three to four years the bank is not able to generate sales and revenue
in comparison to past years. Performance of the bank is consistently decreases from last years
which indicate downward trend of the bank. Hence, the bank is not better for investment. It will
not give better return on investment. It can be concluded to the investors that they should not
invest in HSBC bank, because it will not give better return to investors.
CONCLUSION
From the above case study analysis of corporate governance it can be summarized that
corporate governance is very important part of the organisation. It is a regulatory body who
regulates business activities, ethics, CSR activities etc. of the business. It can be concluded that
the HSBC bank had issues of corporate governance in its business. The main issues of corporate
governance in the bank is FIFA corruption, financial transactions and money laundering by
which the bank as well as UK economy affected. The current system of corporate governance
and accountability of UK economy is sufficient to deal with the above issues of corporate
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governance. It can be concluded that the HSBC plc is not better for investment, so it can be
recommended to investors that they should not invest in the bank.
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