How has corporate governance reform in UK able to address the agency problem? (Conflict between Chief Executives and the Shareholders)

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ACKNOWLEDGEMENT

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

DECLARATION

I, [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

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ABSTRACT

After this incidence much has been written about corporate governance. Report after report has been included in the Combined Code on Corporate Governance at length which makes the UK companies the most widely governed in the world. This research is founded on the secondary data. The research encompasses the publications, articles and similar studies accessible on the internet. The purpose of the audit committee is to ensure the independence and performance of the external auditors, oversee the work of the internal auditors, and review the financial statements. Although measures have been taken to address conflicts of interests and corporate scandals, much work still needs to be done. The study provided determined how corporate governance reforms helped to address the agency problem in UK. The findings of the study based on the internal external audit controls demonstrate that for good governance it is necessary that there should the corporate governance reforms should be properly analyzed. The study provides very useful information for investors, regulators, and researchers to improve firm values, investment return, and reduce corporate failures.

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

CHAPTER 1: INTRODUCTION1

Background of the Study1

Statement of the Problem2

Aims and objectives of the study3

Research Questions3

CHAPTER 2: LITERATURE REVIEW4

Corporate Governance4

Corporate Governance Reforms in UK;5

Theories affecting corporate governance7

Managerial Theory7

Agency Theory10

Organizational Theory13

Stewardship Theory14

Stakeholder Theory16

Causes of conflicts between managers and the shareholders17

Ways to Minimize Agency Problem19

Model and Attributes of Corporate Governance20

Major Themes in Corporate Governance Studies22

Board of Directors22

Audit Committee and Audit Oversight24

Compensation Committee25

Shareholder Rights27

Leverage28

CHAPTER 3: METHODOLOGY31

Data Collection Technique31

Secondary Research32

Search Technique34

Literature Search34

Limitations34

Advantages and disadvantages of Secondary Research35

Inclusion and exclusion criteria35

Research Design36

Method of Collecting Data36

Ethical consideration37

Research purpose37

Reliability38

Validity39

Research Plan40

CHAPTER 4: FINDINGS AND DISCUSSION42

Findings42

Internal and external audit corporate governance controls42

Board Size42

Board Independence43

CEO/Chair Duality43

Remuneration Structure44

Managerial Ownership45

Institutional shareholders45

External shareholders46

Effective Board for the long term success of the company47

Clear division of responsibilities48

Corporate governance reform in addressing Agency problem49

Integrating the Perspectives for Corporate Governance54

Contributors to Corporate Governance Theory and Practice56

Discussion58

Secondary Research Findings58

CHAPTER 5: CONCLUSION AND RECOMMENDATIONS66

Conclusion66

Recommendations68

REFERENCES71

CHAPTER 1: INTRODUCTION

Background of the Study

Following the financial scandal and accounting fraud that hit the corporate world in the 80s that brought companies such as Enron, WorldCom and the rest, which were mainly blamed on the top managers, the governments and the various stakeholders showed much concern about how to address the problem in the corporate governance. While the various deliberations were made to look at the solution to the problem, the 90s also had it share in the same scandal which saw the companies as Polly Peck, Coroll, Maxwell Communication ,BCCI and others had their ...