Financial Governance And Corporate Governance

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Introduction This report provides an in depth analysis of RBS’s corporate governance failure, in order to provide the reader with the appreciation of the key role that corporate governance plays in successful businesses and in social welfare. The RBS scandal is a perfect illustration of weak corporate governance and failure of checks and balances by the required institutions which inflates from the UK government to Auditing companies. The main objective of such report is to directly address the RBS corporate governance scandal which affected a large portion of the UK economy in 2008. By doing so the writer applies relevant corporate governance theories, as he finds appropriate. In 2007, RBS stood as one of the ecosphere’s greatest…show more content…
In analysing such case study the main corporate governance theories discussed by the writer are the following. The principle agent theory. The governance perspective is perceived as a contract between Sir Fred Goodwin and the Shareholders. Such theory emphasis the fact that Sir Freed Goodwin seeks to maximize his personal benefit and doesn’t implement the assumed objective in finance which clearly states that the agent should take investment and economic judgments with the aim of long-term shareholder wealth maximization. RBS is a large company and as many big corporation has a pervasive impact on society, which obligates accountability to many more sectors of society and not only shareholders( Pearce, 1982; Freeman,1984 Hill and Jones,1992) and as the case study demonstrates, in many instances RBS experiences a conflict of interest between different stakeholders. Board Structure (RBS annual report 2008) Figura 1 Figure 1 illustrates RBS board structure as presented on its 2008 annual report, given the reader a demonstration of how the power was distributed within the organisation. Although at first appearance such structure seems
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