Corporate governance in the uk Coursework Example | Topics and Well Written Essays - 2000 words

Corporate governance in the uk - Coursework Example Economists have pointed out that banking sector failure in the UK was triggered by a chain of actions; for example, corporate governance malpractices like above average remuneration package for directors, lack of shareholders’ engagement, increase in transient ownership, absence of risk measurement mechanisms and misrepresentation of financial performance of the firm have contributed significantly to sub-prime mortgage crisis in the USA which was followed by a global financial crisis in 2008. The global financial crisis caused systematic risks for the UK banks which were linked with the USA and other global financial market. Northern Rock bank was the first victim of banking crisis in the UK, overreliance on wholesale funding and lack of regulatory control were the reasons behind the failure of Northern Rock bank. Industry analysts have pointed out that, the UK banking sector crisis was triggered by four types of corporate governance failures, such as inefficient risk management, above average remuneration for top level executives, lack of shareholder engagement and lack of board qualification. Next section will discuss the contribution of these four issues to the financial crisis in the UK. Managing risk is an essential part of corporate governance policy of banks in the UK. Investors and shareholders decide on the investment strategy on the basis of the level of risk associated with a particular investment decision. Research scholars have proposed recommendations, in the form of Cadbury report, Greenbury report and Turnbul report, in order to address the risk management issues related to corporate governance policy of companies in the UK. Combined code and Basel II agreements were the guiding criteria for banks to formulate risk management strategies but these guidelines were not sufficient for them to avoid financial crisis which resulted from sovereign debt crisis. Although