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Corporate Governance and Risk Management

Introduction

The core purpose of this report is to highlight the corporate governance practices implied at one of the biggest retail brand named as Morrison. This report deals with the corporate governance structure at Morrison in accordance with the guidelines stated in the Corporate Governance Code UK. Moreover, the purpose of this report is to highlight the governance practices of Morrison in comparison to the other retail brands like Tesco and Sainsbury. The core strategies that have been established by the governing board are to give tough competition, to serve consumers in a best possible way, to find the authentic local solutions, to develop useful services for every group of customer, to simplify the retail process with strong teamwork and lastly to strengthen the supermarket culture again (PLC, 2019). In order to achieve these mentioned strategical goals Morrison has adopted a set of corporate governance practices. These practices ensure the proper functioning of corporate structure at every level.

Analysis

Issue

Morrison has been a competent retail brand in a market where retail brands like Tesco and Sainsbury are already ruling over a great market share. However, the recent upheavals in the managing structure and shareholder regime caused Morrison to revise its corporate governance practices and to root out the issue effectively that is causing instability in the growth of market shares of Morrison (Morrisons-corporate.com, 2019)

Relations with Shareholders

The governing board at Morrison found that there exist a loop hole in its corporate governance practices as soon as a group of shareholders and investors launched a revolt against the senior governing body of the Morrison.  The shareholders and investors had an utter concern to replace the chairman Sir Ken Morrison along with the finance director of the Morrison. They had deep concern about the executive heads who according to them lack the legit abilities to integrate another big venture of Morrison that is Safeway. In addition to that, a part of shareholders consisting of employees was unhappy with indecisive nature of the governing head Sir Ken. As he was unable to provide appropriate pension and other funds to the deserving employees.

Moreover, the other part of shareholders consisting of customers were driving increasingly towards Tesco due to its market competitive and innovative strategies. The consumers were unhappy with the recent increase of prices and the downmarket of Morrison’s share (Haleem & jehangir, 2017). Furthermore, consumers are utterly disappointed with the quality of products and services that Morrison is offering for raised prices. On the same note, the regular customers of Morrison also seem to be disturbed due to the unethical and delayed response of employees working at Morrison. It has also been witnessed that due to the external challenges Morrison is facing significant issues that need to be mitigated accordingly. Furthermore, the governing chamber is not showing necessary concern towards the training of its employees. This is continuously creating a communication gap between the higher authorities at Morrison and the employees working there. This communication gap is further creating problems in the provision of quality services that Morrison promises to its customers. Whereas, investors and shareholders want to have effective discussion related to current unfavourable market conditions of Morrison. As it was demanded by one of the group of investors that they need sessions of effective dialogues with the governing heads of Morrison. Where theses dialogue sessions were required to be healthy, effective and outcome based unlike the ones they had before. On an overall note, the shareholders were unhappy with the corporate structure and the governance strategies adopted in the corporate culture of Morrison. So in order to cope up with the market growth of retail brands like Tesco and Sainsbury, Morrison and its governing body need to work on implying appropriate governance practices that could help in reconciliation of Morrison’s management and its shareholders (Hawas, 2016).

Relevance

The rising issue of uncontended shareholders involving employees, customers and investors has been creating seismic waves through its management as it is affecting the market growth of Morrison largely as compared to Tesco and Sainsbury. It has now became widely important for Morrison to bring mandatory reforms in its corporate governance practices so that Morrison could evolve again as a reputable retail brand (Morrisons-corporate.com, 2019). The investor revolt has greatly affected the sales and market strategies of Morrison. This decline in the growth of Morrison enabled the rival retail brands (Tesco & Sainsbury) to attract greater consumer market. This was the reason that Morrison faced biggest dark period whereas stocks of Tesco and Sainsbury seemed reaching new heights in this season (Adewuyi, 2016).

As it is evident from the downfall of Morrison’s market position and its stock conditions that healthy relations with shareholders should be essential part of corporate governance practices (Page & Spira, 2016). It is of practical importance to note that employees, customer and investors forms a prominent part of any company. If anyone from this segment feels unhappy or is not satisfied with the overall corporate governance practices of a company than it would definitely create hindrance in the company’s growth and development in the competitive market environment (Rose, 2016). So it is mandatory for the corporate authority to look considerately upon its corporate governance practices and should necessarily work upon implying the Governance Code that could resolve the issues among the Morrison’s corporate governing board and its shareholders. Morrison essentially need to root out this issue and should necessarily draw its importance towards the issue if it wants to sustain the competitive market environment provided by the superior retrial brands like Tesco and Sainsbury (Haleem, 2017).

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Response

In response to the overall market condition of the retail brand where Sainsbury is doing great with respect to customer and investor satisfaction. Additionally, the stock market trends are also great for Sainsbury. Not only Sainsbury but another remarkable retail brand Tesco is also doing great in sales as large fractions of customers are diverted from Morrison to the substitute and better retail brands (Haleem, 2017). Morrison is only facing declining trends because the customer, investor and overall shareholder segment of Sainsbury and Tesco is happy with the services of later two brands. Morrison essentially needs to initiate a response to cater the issues due to lack of healthy relations with its shareholders. These reforms are needed to be applied in accordance to the guidelines stated in the Governance Code UK (Hopt, 2017).

Furthermore, being an independent consultant, I also believe that Morrison’s governing board needs to hold a session of detailed meetings where the shareholders and the chairman could have peaceful dialogues. This meeting should be held in the presence of non-executive directors as mentioned in the code of provisions stated by the Corporate Governance Code UK (Hopt, 2017). The non-executive directors are advised to attend sufficient session of dialogues with the major shareholders and to listen considerately to the views and issues that the shareholders have regarding the governance practices of a company or regarding the policy structure (Serrat, 2017).

Moreover, I would also like to suggest regarding the constructive use of meetings that will eventually resolve the concern of shareholders regarding the dearth of dialogue sessions at Morrison. Not only conducting meetings but recording and maintaining the agenda of meetings is also essential to take necessary steps towards appropriate corporate governance practices (Kim & Kim, 2017). In the light of code of provisions stated in the Corporate Governance Code UK, it is further advised to the corporate management board of Morrison to propose a distinctive resolution for each substantially different issue raised by any segment of the shareholder (Hawas, 2016). Likewise, being an independent consultant, I also believe that the governing board at Morrison should initiate proper response to every concern based on the opinions of shareholders. The opinions of the shareholders should be recorded and maintained through opinion forms provided to them after every meeting. On the essential basis, the governing board of Morrison should consider conducting evidence based training for the employees. These trainings should form an important and integral part of the governance practices at Morrison. Moreover, the employees should be effectively trained to conduct consumer surveys at regular basis and draw out policies and offers based on the outcomes of those surveys.

Furthermore, to work for the healthy corporate relations with the shareholder, the corporate governance should work to provide the innovative products and offers. These products and offers should be devised with a goal to be pocket friendly for the consumers of Morrison (Haleem, 2017). In addition to that, the governing board at Morrison needs to devise a proper consultation and fund policy for the employees. Resolving the issues of employees, consumers and investors from the scratch would enable Morrison’s governance to establish an appropriate governance structure which help the management to achieve corporate goals in every aspect (Serrat, 2017).

Rationale

The detailed set of provisions provided by the Corporate Governance Code UK provides the essential responsive action for any company that aspires to establish a proper governance system in its corporate structure without any loophole (Honoré et al, 2016). Morrison if effectively incorporate the dialogue and scheduled meeting structure into its corporate governance practices, it will prove out to be significant for the growth of Morrison in the retail market. When the shareholders (consumers, employees, investors) would feel that their issues and concerns do hold importance for the upper management, it would urge them to work as a more loyal party towards the growth of Morrison (PLC, 2019). This would not only help the governing board of Morrison to formulate proper set of governance practice but would also enable the Morrison to hold reputable place among retail brands like Tesco and Sainsbury.

Moreover, the evidence based training provided to employees on regular basis would make them more efficiently cooperative towards the changing circumstances around Morrison. These trainings would help effectively to remove the communication gap between the upper management and the employees. This will in turn help the Morrison’s governing management to strengthen its relationship with the key body of its business structure that is employees. On another note, the part of training devoted to conduct the consumer surveys would help the employees and management to work in accordance to the needs and preferences of the consumers. This would not only be significant to stand firm in competition with the innovative strategies of Tesco and Sainsbury but would also help the Morrison management to interact with the consumer and remove the hindrance in establishing strengthened relationships with them.

Tesco and Sainsbury are leading retail market due to their consistent innovative strategies to attract consumer and due to the healthy set of governance practices that keep their shareholders contended (Guo & Wang, 2017). So the responsive steps of the team Morrison to devise cost effective strategies for its consumers and proper funding provision for its employees will strengthen the relations of corporate management of Morrison with its shareholders (Page & Spira, 2016). The contended shareholders will in turn, enable the management to establish the set of corporate practices that comply with the provisions stated in the Corporate Governance Act UK.

Conclusion

The critical analysis of corporate governance practices at Morrison has made it evident that the governance practices at every company needs to comply with each set of provisions stated in the Corporate Governance Code UK. At the instant where corporate team of Morrison lacks the essential governance practice of ‘relations with shareholders’, it started to face downfall. The lack of competency in case of its relationship with shareholders enabled the other highly competitive brands that are mainly Tesco and Sainsbury to replace the market position of Morrison. In a highly competitive market every company is needs to comply with the Governance Code if it is aiming to withstand the rivalry competition and market trends (Page & Spira, 2016).

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References

(2019) Morrisons-corporate.com. Available at: https://www.morrisons-corporate.com/globalassets/corporatesite/investor-centre/corporategovernance/v2/0-corporate-governance-compliance-statement.pdf

Adewuyi, A.W., 2016. Ratio Analysis of Tesco Plc Financial Performance between 2010 and 2014 in Comparison to Both Sainsbury and Morrisons. Open Journal of Accounting, 5(03), p.45.

Guo, L. and Wang, Z., 2019. Ratio Analysis of J Sainsbury plc Financial Performance between 2015 and 2018 in Comparison with Tesco and Morrisons. American Journal of Industrial and Business Management, 9, pp.325-341.

Haleem, F. and Jehangir, M., 2017. Strategic Management Practices by Morrison PLC, UK. Analysis, Lessons and Implications. Middle East Journal of Business, 12(3).

Hawas, A. and Tse, C.B., 2016. How corporate governance affects investment decisions of major shareholders in UK listed companies: has the recent credit crunch changed the game?. Journal of Accounting, Auditing & Finance, 31(1), pp.100-133.

Honoré, F., Munari, F. and de La Potterie, B.V.P., 2015. Corporate governance practices and companies’ R&D intensity: Evidence from European countries. Research policy, 44(2), pp.533-543.

Hopt, K.J., 2017. The Dialogue between the Chairman of the Board and Investors: The Practice in the UK, the Netherlands and Germany and the Future of the German Corporate Governance Code Under the New Chairman.

Kim, S. and Kim, J.N., 2016. Bridge or buffer: two ideas of effective corporate governance and public engagement. Journal of Public Affairs, 16(2), pp.118-127.

Page, M. and Spira, L.F., 2016. Corporate governance as custodianship of the business model. Journal of Management & Governance, 20(2), pp.213-228.

PLC, M. (2019) Strategy | Morrisons Corporate, Morrisons. Available at: https://www.morrisons-corporate.com/about-us/strategy/ (Accessed: 28 December 2019).

Rose, C., 2016. Firm performance and comply or explain disclosure in corporate governance. European Management Journal, 34(3), pp.202-222.

Serrat, O., 2017. A primer on Corporate Governance. In Knowledge Solutions (pp. 463-472). Springer, Singapore.

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