Corporate Governance and Ethics

Assignment Brief

Unit Name: Corporate Governance and Ethics

1. Rationale This individual assignment acts as a bridge between theory and practice. The assignment is designed to assess the ability of the students to evaluate corporate governance practice in real practical situation from different theoretical perspectives. This assignment asks students to undertake a detailed critique of the corporate governance disclosures of a major company with a view to development a detailed understanding of both how the companies organise its governance and risk at board level.

2. The learning outcomes being assessed

   • A critical appreciation of the main theories of corporate governance and ethics;

   • A critical evaluation of the application of theories of corporate governance and ethics to practice;

3. Overview of assignment For the purpose of this assignment you will choose a major UK public company (FTSE100). The most recent annual report and accounts may be downloaded from its website. Although you may seek other background information on the company, the focus of your assignment is to be the annual report and accounts.

You are required to examine all the narrative sections of the report and accounts from a corporate governance perspective and report on the following areas:

Compliance and disclosure of principles of corporate governance (60% of this assignment)

1. If the company claims to comply with the provisions of the 2018 UK code of Corporate Governance, just confirm this fact. Discuss any areas where any non-compliance occurs and appraise whether this impacts on the integrity of the company. Or If the company claims to comply with the provisions of the 2016 UK code of Corporate Governance:

   1. Just confirm this fact. Discuss any areas where any non-compliance occurs and appraise whether this impacts on the integrity of the company.

   2. Discuss briefly how your chosen company would improve its compliance and disclosure, i.e. good practice, if the 2018 Corporate Governance Code to be applied.

2. Examine the disclosures on corporate governance and evaluate whether these demonstrate good principles of governance within the company. Appraise whether these disclosures demonstrate that the agency problem is reduced.

3. Assess whether the risk management disclosure implies that the company has a satisfactory structure in place to identify and manage risk.

Stakeholders and Ethics (40% of this assignment)

1. State, with your reasons, who you consider to be the significant stakeholders are, taking account of the company and its operating environment. State whether the company identifies or ignores important stakeholder groups and evaluate any strategy disclosed for engaging and managing stakeholders. If the company discloses little information, suggest general strategies for stakeholder engagement.

2. How corporate social responsibility and sustainability are applied within the company?

3. Does the company refer to values and ethics? Have there been any ethical challenges

Sample Answer

Corporate Governance and Ethics in Barclays PLC

Corporate governance in the United Kingdom has been shaped over decades by the Cadbury Report, the Combined Code, and most recently the UK Corporate Governance Code. The 2018 Code emphasises accountability, transparency, independence, and the balancing of shareholder and stakeholder interests. In this essay, the focus is on Barclays PLC, one of the largest banking institutions in the FTSE100, and its most recent annual report and accounts. By examining the disclosures related to governance, ethics, and risk management, the discussion critically evaluates whether Barclays demonstrates genuine commitment to good practice or whether gaps remain that could undermine stakeholder trust.

Compliance with the UK Corporate Governance Code

Barclays states in its annual report that it complies with the provisions of the 2018 UK Corporate Governance Code. This claim is supported by detailed sections on board leadership, division of responsibilities, composition, succession, evaluation, audit, risk, and remuneration. The board is chaired by an independent non-executive chair, and the composition includes a majority of independent directors, meeting the Code’s independence criteria. Committees for risk, audit, nomination, and remuneration operate under formal terms of reference.

However, there are areas where concerns remain. One issue relates to executive remuneration. Barclays has faced shareholder revolts over pay packages that appeared excessive relative to performance and shareholder returns. While technically in line with the Code’s principles of transparency and shareholder approval, this raises questions about the spirit of proportionality. Another concern is the relatively long tenure of certain board members, which can weaken perceptions of independence even if formal independence tests are satisfied. These practices do not constitute formal non-compliance but they risk undermining the integrity of governance in practice.

Looking ahead, if Barclays were to strengthen its alignment with the 2018 Code, greater emphasis on long-term culture and workforce engagement would be beneficial. Although employee engagement channels are disclosed, there is little evidence of these influencing board-level decisions. A more visible reporting structure linking workforce feedback to board deliberations would reflect best practice and improve transparency.

Corporate Governance Disclosures and Agency Problem

The annual report provides significant information about the board’s structure and oversight processes. The chair is responsible for governance, while the chief executive leads strategy and operations. This clear division of roles reduces risks of excessive concentration of power. The audit and risk committees are composed entirely of independent non-executive directors, which helps mitigate the agency problem by ensuring that management decisions are scrutinised.

Disclosures also emphasise accountability to shareholders, with detailed reporting on meetings, votes, and director attendance. These measures demonstrate adherence to the principle of transparency. Yet the agency problem in banking goes beyond shareholder-management conflict; it includes risk-taking behaviour that threatens depositors and the wider economy. The annual report addresses this by emphasising risk governance frameworks, internal controls, and stress-testing procedures. Such disclosures indicate that the company has at least formal structures to balance risk and reward, thereby reducing the agency problem to a degree.

Risk Management Disclosure

Risk management disclosures in Barclays are extensive, reflecting regulatory requirements in the banking sector. The report outlines principal risks such as credit, market, operational, conduct, and reputational risks. The board risk committee oversees frameworks that identify and monitor these exposures. Risk appetite statements and stress-testing exercises are included to demonstrate resilience.

The adequacy of these structures can be appraised in light of past scandals, such as the Libor rigging incident. While current disclosures show improvements in governance, questions remain about whether cultural change has been fully embedded. A structure may exist on paper, but its effectiveness depends on enforcement and ethical tone at the top. The current disclosures are comprehensive and suggest a satisfactory framework, but the effectiveness is best judged over time by the absence of repeated failures.

Continued...