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This research addresses quality of corporate governance in Marks & Spencer and also its impact on key stakeholders. Marks & Spencer is one of the UK's leading retailers with good business and performance. In this report we will discuss code of corporate governance, principles of good corporate governance and its implication within an organization. We will also incorporate shareholder and stakeholder's corporate governance model to analyse their impact on company's Stakeholder's. Identifying factor's effecting corporate governance and analyzing its impact on company's stakeholder and also on overall financial performance of the company. The world economy in 21st century is dependent upon the public limited companies where millions of shareholder's have invested. The ownership of public limited companies belongs to shareholders and debt holders who owns and finance the company. Owner's are responsible to appoint managers and board of director's. Thus we can state with the above discussion that managers are responsible to manage owner's money and board of directors evaluates the entire process. Therefore, it is extremely important to have a stringent guideline to define the responsibility of every stake holders to keep the investment secure.
Corporate governance is the system by which companies are directed and controlled for the benefit of its stakeholders. Cadbury committee emphasizes on better reporting, audit committees and non-executive directors (Cadbury Report, 1992).
According to Brian Coyle 2010, "Corporate Governance is a way in which companies are governed. It involves following practices and procedures to ensure that a company runs in such a way that it achieve its objectives." According to the global consensus good corporate governance is required for maximizing long term shareholder value.
Development Of Corporate Governance In the UK:
Cadbury committee in 1992 introduces first version of Corporate Governance code in UK. According to Cadbury report, 1992, the country's economy is dependent on efficiency of its companies. The effectiveness of boards in delegating their responsibilities determines UK's competitive position. Boards of director are free to drive their company forward but it should be within a framework of accountability. This shows good corporate governance.
Thus, to achieve the recommendations of Cadbury committee, the code of best practices were established in 1992 in the UK so that high standards of corporate behavior can be achieved. All listed companies in London Stock Exchange were advised to comply with the code. However, Cadbury Committee continues to remain responsible for the implementation of corporate governance in different companies in UK to ensure and to strengthen strong relationship between corporate and public accountability.
The Code of Best practice and It's Implication on Marks & Spencer:
The code of best practice followed Transparency, Accountability and Fairness and it's main objective was to suggest course of actions to all types of companies. The Cadbury committee recommended all the companies enlisted in LSE to comply with the code by 30th June, 1993. These code of best practice were revised and reviewed by Greenbury (1995) and Hampel (1998). In Hampel report, 1998 Caddbury and Greenbury report was combined known as combined code which is now changed to UK corporate governance code. In 1999 UK Corporate governance code guidelines were issued for directors to develop risk management and internal control systems. In 2003 Financial Reporting Council (FRC) was given independent responsibility for corporate governance and reporting. FRC has updated the code at regular intervals and the most recently reviewed and updated code after financial crises was in 2010, which emphasized on risk management. However, in order to generate best results in corporate governace, all limited companies should follow UK Companies Act of 2006, which ensure regulatory framework in which listed companies must work.
Fig 1.1 Source: http://www.iia.org.uk (Chartered iinstitute of Internal Auditors)
Fig 1.1 shows the timeline of corporate governance and updates suggested at every stage. Therefore, with the above discussion we can clearly state the importance of corporate governance in UK and it has been reviewed, revised and updated on regular intervals to safeguard the interest of the company's stakeholder and also company's overall performance in the economy.
The UK Corporate Governance Code , 2010 and It's Implication on Marks & Spencer:
In UK when financial Crisis came in 2008-2009, Sir David Walker was asked to review the Governance of Banks and other financial institutions and then FRC reviewed the combined code to form UK corporate governance code and made significant changes by suggesting importance of general principles which could guide board behaviors. The "comply or explain" approach the trademark of corporate governance in the UK. It is strongly supported by both companies and shareholders because these are not only codes or set of rules; it consists of principles and provisions.
Marks & Spencer approach towards UK corporate Governance code 2010 and the governance principles shows their rigid corporate governance framework by which they are governing their company listed in London Stock Exchange. Marks & Spencer's business performance defines good corporate governance however they faced few challenges. For example: Marks & Spencer performance was dipped drastically under the management of Chairman and CEO Sir Richard Greenbury because of risky decision, lack of Board development, lack of group think and strategic change in 1998-99. However, Marks and Spencer continued to remain UK's one of the most prominent retailer in UK.
Main Principles of the Code:
The chairman of the company is responsible for leadership of the board and ensuring it's effectiveness on aspects of it's role. There should be clear division of responsibilities at the head of the company to run company's business and Board.
Marks & Spencer leader evaluation:
Greenbury was strong on crisis leadership, passion and drive, and ability to keep most external and internal stakeholders 'on board' through a steady programme of change ('quiet revolution'). However, his leadership style grew increasingly autocratic, isolating him, causing risky decision making, and inhibiting the development and functioning of his executive team. He was focused on results with an insensitivity to people and culture, and this led him to push too far too fast for the capabilities and stability of his team.
Salsbury arguably lacked genuine vision (reacting against Greenbury's strategies and using too many consultants) and his leadership style alienated key external and internal stakeholders - although it should be remembered that he inherited a crisis situation.
Holmes arguably had potential as a visionary and steadying leader, but was undermined by the lack of confidence of others in the face of the takeover bid: he had failed to 'manage upwards' where the chairman and non-executive directors were concerned.
Rose is a portrait of an effective leader in many ways: securing stakeholder buy-in, articulating vision, being decisive when necessary and participatory when possible, clearly defining core messages, communicating widely and personally, bringing in and supporting new talent, being willing to initiate transformative change (with a focus on uniting stakeholders behind a compelling vision) and so on. It is important to note the seeds of risk, however, in relation to a possible willingness to hold too much power, or to push too far too fast - in other words, to risk history repeating itself.
1.5 Relations with Shareholders