Critical Analysis of Reckitt Benckiser Corporate Governance Principles
Background
In 2001, newspaper publishing baron Robert Maxwell’s body was in the sea around Tenerife. The papers reported that apparently, he went overboard when cruising on his luxury yacht. BBC Home (Nov 1991)
It was subsequently revealed however that he had withdrawn millions of pound of the pension funds in his own company to stabilize his company, Mirror Group’s shares. This was all done without prior authorisation and it took the efforts of Shearson Lehman, Goldman Sachs and the British government to replenish the funds but only partly. Pensions World (Oct 2011).
Seven years later, it was the turn of one of the companies who helped clean up Maxwell’s mess. Lehman Brothers filed for bankruptcy and emergent details included malfeasance claims that apart from effects of the subprime mortgage crisis, they had been involved in shortselling and even practised accounting gimmicks to misrepresent the true state of their finances at the end of each quarter but especially in late 2007 & 2008 using a form of repurchase agreement (called a repo 105 deal) which altered their balance sheet by temporarily removing securities. Investors, employees and related dependent sectors lost. Trumbull (Mar 2010)
Well publicized instances of poor management, financial impropriety and other unsavoury norms such as these and worse abound throughout financial history which led to stakeholder interests not being appropriately addressed and which became embarrassingly apparent in various scandals over the years.
It was therefore imperative that a sustained ethical and holistic management regulation framework which possesses comprehensive checks and balances that safeguard the interest of all stakeholders be implemented, especially in quoted companies as the failings of the companies had far reaching consequences.
Definition and Principles
While there is no definition of corporate governance which is universally accepted, it was defined by OECD (2004) Principles of Corporate
In 2001, newspaper publishing baron Robert Maxwell’s body was in the sea around Tenerife. The papers reported that apparently, he went overboard when cruising on his luxury yacht. BBC Home (Nov 1991)
It was subsequently revealed however that he had withdrawn millions of pound of the pension funds in his own company to stabilize his company, Mirror Group’s shares. This was all done without prior authorisation and it took the efforts of Shearson Lehman, Goldman Sachs and the British government to replenish the funds but only partly. Pensions World (Oct 2011).
Seven years later, it was the turn of one of the companies who helped clean up Maxwell’s mess. Lehman Brothers filed for bankruptcy and emergent details included malfeasance claims that apart from effects of the subprime mortgage crisis, they had been involved in shortselling and even practised accounting gimmicks to misrepresent the true state of their finances at the end of each quarter but especially in late 2007 & 2008 using a form of repurchase agreement (called a repo 105 deal) which altered their balance sheet by temporarily removing securities. Investors, employees and related dependent sectors lost. Trumbull (Mar 2010)
Well publicized instances of poor management, financial impropriety and other unsavoury norms such as these and worse abound throughout financial history which led to stakeholder interests not being appropriately addressed and which became embarrassingly apparent in various scandals over the years.
It was therefore imperative that a sustained ethical and holistic management regulation framework which possesses comprehensive checks and balances that safeguard the interest of all stakeholders be implemented, especially in quoted companies as the failings of the companies had far reaching consequences.
Definition and Principles
While there is no definition of corporate governance which is universally accepted, it was defined by OECD (2004) Principles of Corporate
References: BBC Home ,5th Nov 1991. 1991: Publisher Robert Maxwell dies at sea. [ONLINE] Available at: http://news.bbc.co.uk/onthisday/hi/dates/stories/november/5/newsid_2514000/2514649.stm [Accessed 17 November 11] PensionsWorld, 31st Oct 2011 Graeme Weardene (29th Oct 2010) The Guardian; Bart Becht, Britain 's highest paid boss keeps a low profile. [ONLINE] Available at: http://www.guardian.co.uk/business/2010/oct/28/bart-becht-profile [Accessed 26 November 11] Fletcher (14th April 2011) Daily Telegraph: Has Reckitt Benckiser run out of steam? [ONLINE] Available at: http://www.telegraph.co.uk/finance/comment/richardfletcher/8450066/Has-Reckitt-Benckiser-run-out-of-steam.html [Accessed 27 November 11]