Corporare governance is a combination of rules, procedures, and practices, which helps a company to direct and control its operations (McCahery, Sautner and Starks, 2016). It involves the maintaining the interests of a company’s shareholders, customers, suppliers, community, management, and government. Where corporate governance also delivers the framework for achieving a firm’s objective, it also helps a company in every aspect of management to take forward, from action plans, internal controls, corporate disclosure, and measuring their performance (Armstrong et al., 2015). Altering these processes is essential for a company, and if it is not done by a company, it leads to serious disasters in the long run. However, many multinational firms tend to lack in this regard due to various reasons, which effect every aspect of their management and operations. One of these cases, were faced by the Lloyds bank of England which is a british retail and commercial bank. As of 2016, Lloyds Bank has a running income of £16.6 billion and total assets accounted at £436 billion. However, 43.4% of the bank’s stake in owned by the british government, the bank still has made ways to make secondary stakeholders (Mishra and Mohanty, 2014).
The reasons why Lloyds Bank has been selected for this action plan are:
- Companies tending to lack in their corporate governance, move towards a bad economy and results in filteration. Lloyds Bank has also affected their economy by making bad decisions and lack of managerial operations.
- Lloyds bank started to lose their online privacy, where they lost a large amount of money from an online fraud. It has affected the overall strength of the company, because every bank nowadays is offering online banking facility.
- Every banking facility should cater risk management, to overcome a lot of future problems, and to maintain the flow of business. Lloyds bank is moving towards the bad side of managing risk in the group.
- A lot of decisions for the bank are taken by the external bodies, which makes Lloyd look weak in the market. Market competency is a vital role, which evey company should try to maintain.
Summary and Case Issues
the details of Lloys bank has showed that the senior management Antonio Horta-Osorio who is the CEO of the company, was aware of the problems that might come. Still the company managed to make £17.5 billion as the operating income. It is however a point of interest that why the Osorio did not make any measures to overcome their corporate issues. The financial statements of Lloyds bank states that their inflation rate was fluctuating within the company, and it was the risk for them that was needed to overcome. The bank tend to involve the british government as well in their shareholding, which shows that the company had a stable ground and market growth.
In developing the case, following topics will be discussed regarding Lloyds bank corporate issues:
Lack of inflation control: The risk of decreasing inflation rate, tends to reduce the liquidity of the company. Lloyds needs to untie this knot, to unravel themselves from the risk of having floating inflation rate (Schenk, 2017). A stable inflation rate within a company, makes it profitable for the company. As per financial reports, Lloyds’ healty rate is 2% but they seem to toggle around 7-8% a year. This directly leads to bad business environment where the amount of earning is less and spending is more. It leads to a negative aspect of inflation within a company. Falling prices makes new buyers available and increase of profit is most likely to be happening. Moving towards the inflation, is making the shareholders and stakeholders also move away from Lloyds Bank. The british government is also making themselves away from the bank, due to higher share prices.
Fear of liquidity: Another problem face by Lloyd bank is the fear of becoming finished from the market. As of 2015, the higher demand for the government issued bonds from QE, increased the bond prices and brought the yields really down (Schenk, 2017). This made the investors to risk more of their investments, to control the yield imposed upon them. This type of risk might make Lloyds bank liquidified and erase them from the market. So, the main affect of the riskier investment is to distort the value of bonds, and make the rate of return less for the investors. From the year 2015, 43% of the shareholders have decreased from Lloyds bank, and more were going to reduce. The lack of liquidity between the purchase of bonds, has been even more worse than ever. But as of 2016, Lloyds bank was having low invests due to the Chinese banks who were slowing the global demand. Possible advisors also believe that Lloyds do not have a proper management functioning to maintain the company.
Theories applicable for Lloyds Bank
In this case study ans analysis, we are going to discuss the impact of Lloyds Bank performance, on their shareholders and stakeholders. We will also discuss in detail about the inflation and liquidity performances which the company was observing. The agency theory will help us illustrate the reasons Lloyds bank was facing the high level of inflation rate and the relation with their shareholders (Bessis, 2015). It will also be discussed that why the shareholders and stakeholders started to reduce in the company. Their dependency to hire employees and firing employees will also be discussed in detail, which was faced by the bank in the previous year. The director tried to fire almost 1000 employees from the parent company, in which the bank was also affected. We will discuss in detail when Osorio was moving towards the liquidity and tries to manipulate profits by desizing the organization. It has a huge turnover for the company, as it made the shareholders and stakeholders move away from the company (Zhang et al., 2016).
Key points pertinent to the case
Literature that we will use for the further study of Lloyds Bank are as follows:
- Lloyds Bank’s Financial statements from 2010-2016, which will tell us about the inflation prices, shareholders equity, financial condition of the bank, and share prices.
- Review reports submitted on the financial journals.
- World bank review of the financial conditions of UK and US banking sector.
- Corporate governance laws in the UK banking sector.
- Principles of Corporate governance for the banking sector and financial institutions.
- Cyber laws formulation (2014) by the UK legislative.
- Inflation and deflation theories.
Summary of completed tasks
So far, we have discussed about the Lloyds bank’s
- Shareholder and shareholder situation. How they have managed to control the situation and how will they cover it.
- We discussed about the cyber crime which turned into a loss for the bank.
- Finding data from the different websites like Lloyds official website and Busines Insider.
- Gathering background information about the Lloyd bank’s services and produts. The information was mostly taken from the business profile of the company.
- Financial statements, which helped in understanding the inflation rate and other data included in the plan.
Issues which we discovered in the case and should be addressed are:
- There was lack of data found on the primary search engines about the bank, and its corporate governance.
- Almost every news has told about the lack of corporate governance in the Lloyd holding group.
- Data gathered for the case provided in depth situation for the company.
In the table listed below, you can see the tasks which will further be accomplished to understand the study better with the given amount of time.
| Date and Time | Tasks to be completed |
| 20th March 2018 | Developing information about the topics discussed in the action plan. |
| 24th March 2018 | Providing detailed literature for the topics in the plan. |
| 30th March 2018 | From research, gathering data for the company from financial reports to corporate issues addressed. |
| 2nd April 2018 | Detailed write up for the problem solving for the company, supported with critical evaluation. |
| 7th April 2018 | Fix errors and proofread the document. |
References
Alhassan, A.L., Tetteh, M.L. and Brobbey, F.O., 2016. Market power, efficiency and bank profitability: evidence from Ghana. Economic Change and Restructuring, 49(1), pp.71-93.
Armstrong, C.S., Blouin, J.L., Jagolinzer, A.D. and Larcker, D.F., 2015. Corporate governance, incentives, and tax avoidance. Journal of Accounting and Economics, 60(1), pp.1-17.
Bessis, J., 2015. Risk management in banking. John Wiley & Sons.
Davidson, P., 2017. Can We Prevent Inflation and Still Achieve Full Employment?. In Who’s Afraid of John Maynard Keynes?(pp. 63-79). Palgrave Macmillan, Cham.
Lepper, J., Shabani, M., Toporowski, J. and Tyson, J., 2016. Monetary adjustment and inflation of financial claims in the UK after 1980. Financialization and the Financial and Economic Crises: Country Studies, pp.68-88.
McCahery, J.A., Sautner, Z. and Starks, L.T., 2016. Behind the scenes: The corporate governance preferences of institutional investors. The Journal of Finance, 71(6), pp.2905-2932.
Mishra, S. and Mohanty, P., 2014. Corporate governance as a value driver for firm performance: evidence from India. Corporate Governance, 14(2), pp.265-280.
Neupane, R., 2014. Relationship between Customer Satisfaction and Business Performance: A Case Study of Lloyds Bank UK. International Journal of Social Sciences and Management, 1(2), pp.74-85.
Schenk, C., 2017. Rogue Trading at Lloyds Bank International, 1974: Operational Risk in Volatile Markets. Business History Review, 91(1), pp.105-128.
Zhang, D., Cai, J., Dickinson, D.G. and Kutan, A.M., 2016. Non-performing loans, moral hazard and regulation of the Chinese commercial banking system. Journal of Banking & finance, 63, pp.48-60.
