Analysis of Lloyds Banking Group's Corporate Governance Framework

This report provides an in-depth analysis of the corporate governance framework at Lloyds Banking Group, focusing on the challenges and issues faced by the bank. It examines the impact of the HBOs acquisition in 2008 and its implications on the bank's performance, highlighting the significance of ...Read More

Lloyds Banking Group: Corporate
Governance Regulation Framework

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
CONCLUSION................................................................................................................................2
REFERENCES................................................................................................................................4

INTRODUCTION
Corporate governance is considered as a procedure by which the organisations can be
managed and controlled. The problems associated with the corporate governance are considered
as the problems that are currently on a wider basis (Guinnane, Harris and Lamoreaux, 2017). It is
because of some factors such as increasing rate of corporate fraud, collapse, irresponsible of the
management power, etc. Along with these factors, various models and theories have been
initiated that can help in providing a sort of relaxation to these frauds and factors that are leading
some loss to the operations and functionality that are being involved in different factors of
corporate governance. The report is about discussing the fraud case of Lloyds bank and
analysing the issues because of which the bank had to face those problems. Also, the use of
various agency theory and the stakeholder theory in order to provide some preventive factors
have also been included.
MAIN BODY
Due of the acquisitions of HBOs occurred in the year 2008, it has been analysed that it
has impacted quite negative on the Lloyds bank. It has been analysed that the incident has been
disastrous enough for Lloyd bank as it put the bank in enormous number of losses. Also, after the
incident happened, it was observed that the proximity of HBOs was not true enough, but it made
various losses to the Lloyds bank. Also, it can be considered that the management of Lloyds
bank must be responsible for having an ineffective board because if it would be strong and
effective enough, it might not have turned out to be this much disastrous (Chiu and McKee,
2015). For preventing such issues, various initiatives have been developed and a very common
example of this can be considered as the theory of corporate emergence. There are various
theories that have been developed in order to resolve the issues associated with it. Lloyd's bank
can also make involvement of these theories and frameworks because these can actually help
them to maintain a balance between the functionality and operations of the bank.
Also, there are various theories and frameworks that can be analysed in order to
implement some preventive measures. Some very well known examples of this can classified as
the agency theory, stakeholder theory etc. Agency theory can help Lloyd's bank as it focuses on
the issues that are happening because of the controlling of the directors whereas the shareholders
are managing the functions of the company. So, the Lloyd bank can ensure to employ an agent
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that can continue the processing of the operations. It helps in easing the actions of different
people involved in the processing. The classification of various factors that are associated with
the agency theory and that can be applied by the Lloyd bank in order to maintain a balance is
represented as below :
Illustration 1: Relationship between
corporate governance and agency theory
(Source : Agency theory, 2012)
Along with this, the Lloyd bank can also make use of the stakeholder theory as it
involves various factors associated with the corporate activities on every single stakeholder of
the bank. It involves the fact that the managers at Lloyd bank should consider the interests of all
the stakeholders so that it can help in a better functioning of all the services and operations.
It helps in making an analysis at an efficient level so that all problems can be evaluated
and on the basis of that, specific preventive measures can be used. By the means of corporate
theory of emergence, it helps in making an understanding of various practices and processes of
the corporate governance. Although there are some limitations of the model as well, it has
proved successful enough in analysing the operations and functions of the corporate governance
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at a much wider level (Sikka and Stittle, 2017). Four basic factors of the corporate governance
includes stewardship, finance, stakeholders and political factors.
As in case of Lloyd’s group, the system also achieves the basic corporate roles and these
involve the board of directors, induction by them, committees and the shareholders. It is because;
these bodies are considered as the essential one that helps in maintaining the structure of the
whole group in an effective and an appropriate manner (Gullifer and Payne, 2015). It is
important to note that the actual focus of the corporate governance is to facilitate the prudent
and effective management of Lloyd’s bank. But a fact that is to be ensured here is that the role of
corporate governance somehow differs in case of financial and non financial sectors. As an
example of the Lloyd bank, organisations like this pose a higher rate of risk as compared to the
non financial firms to economy.
So, it should be ensured that it accomplishes all the important and required factors
required for maintaining a balance between different functions. As the acquisition of HBOs in
the year 2008 proved destructive enough for the Lloyd bank, it might not have happened if the
essential factors had been considered in an effective way. It is because in terms of the corporate
governance, committees along with board of directors play a major role (Ahmed, 2015). It is
because as in case of Lloyd’s bank, the board of directors become responsible for developing and
implementing the corporate principles in bank and that too in a way that it seems efficient
enough for the bank to achieve all the targets and goals at a much faster rate.
Another important factor that is to be managed by Lloyds bank is to manage the risk.
Because of the imbalanced or improper structure of the banks, they might have to overcome all
risks and barriers and that can also have an impact on the productivity and popularity of bank.
So, Lloyd bank can ensure to have a proper risk management system so that at the time of
occurrence of some barriers, the bank might be able to overcome that. Also, it will further help
the bank to sustain its productivity as well as popularity rate (Lewis, Lloyd-Jones and Matthews,
2016). There are five types of risks that can affect the financial sectors such as Lloyd bank and it
involves liquidity, operational, solvency, credit and interest. So, in order to prevent themselves
from any sort of factor that can act as a challenge or barrier to the bank, Lloyd bank can ensure
to involve the methods and strategies in an appropriate manner.
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CONCLUSION
It can be concluded from the report that corporate governance can provide various means
to Lloyd bank that can help them in a smooth and easy processing of all operations and
functions. The theory of corporate governance emergence has also been included in the report
that involves the effectiveness and evaluation of the factors that should be ensured by the Lloyds
bank in order to attain an efficient rate of popularity as well as productivity. Also, agency and the
stakeholder theory have been included because these have helped in analysing the factors better
and also in getting the preventive measures that Lloyd bank can involve for further situations.
Therefore, it helps in analysing the effectiveness of involving features of corporate governance in
an appropriate manner and its influence on Lloyds bank.
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REFERENCES
Books and Journals
Ahmed, A., 2015. Exploring the Corporate Governance in Lloyd’s and the Co-operative Bank:
the Role of the Board. Journal of Business and Management Sciences. 3(1). pp.6-19.
Chiu, I. H. and McKee, M., 2015. The Law on Corporate Governance in Banks. Edward Elgar
Publishing.
Guinnane, T.W., Harris, R. and Lamoreaux, N.R., 2017. Tag Archives: corporate
governance. Business History Review. 91. pp.105-128.
Gullifer, L. and Payne, J., 2015. Corporate finance law: principles and policy. Bloomsbury
Publishing.
Lewis, M. J., Lloyd-Jones, R. and Matthews, M. D., 2016. Personal capitalism and corporate
governance: British manufacturing in the first half of the twentieth century. Routledge.
Sikka, P. and Stittle, J., 2017. Debunking the myth of shareholder ownership of companies:
Some implications for corporate governance and financial reporting. Critical
Perspectives on Accounting.
Online
Agency theory., 2012. [Online]. Available through:
<http://kfknowledgebank.kaplan.co.uk/KFKB/Wiki%20Pages/Agency%20theory.aspx>.
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