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Corporate Governance in Telecommunications


The world is changing faster than anyone could expect and people are struggling to keep up with the pace of this change. Shareholders are the ultimate owners of the companies and the management are just agents and work for a salary paid by the shareholders. However does management actually act as agents and work with integrity and responsibility is an unanswered question.

When management takes over the company they also work for their personal benefits, such as money and fame. This makes them take high risks and involve in fraud. Major corporate collapses all over the world reflected this and the corporate governance came in to existence since then. ‘Corporate Governance’ can be simply interpreted as ‘the way the companies are managed’.

This research study is based on an analysis of the different corporate governance systems followed by the Telecommunication Companies in United Kingdom (UK) and their overall performance is analysed against their financial performance and the corporate governance systems they follow. Three of the major Telecom companies in UK, British Telecom, Vodafone & Car phone Warehouse are selected for this analysis. The financial data for the past 5 years is analysed as the financial performance affects the performance of the firms more than any other factor.

The study also covers various theories of corporate governance. The type of corporate governance varies from country to country based on their legal & ownership structures In the recent years the importance of corporate governance has become a key feature in every organisation than in the past years. This is mainly because of the collapse of giant corporate in several parts of the world. Some of the most famous corporate governance failures occurred in companies such as Enron, World com and very recently in Satyam Computers in India. The study also covers briefly these scandals to compare how an efficient corporate system should be managed and performed. The analysis also compares the existing system with the empirical research to rate the best corporate governance system.

As the analysis is based on the corporate governance systems in UK, the research has also briefly discussed the Corporate Governance reports published in UK. These reports are the Cadbury report, the Greenbury report, the Hampel report and the combined code along with some of the international standards of corporate governance by Organisation of Economic and Cultural Development (OECD).


This dissertation is the result of my work at the London School of Commerce and University of Gloucestershire for Masters in Business Administration programme.

My special words of appreciation go to my supervisor Dr. V. K Shenai who provided me continuous support and guidance for completing this dissertation successfully and making each class more meaningful. I felt deeply honoured and excited to get

Dr. Shenai as my supervisor. He has always been a source of inspiration and encouragement.

I also would like to render my deepest appreciation to my parents and siblings who have given me tremendous motivation in life and in completing this research study and the Masters program. I believe the best award of my work is to make them proud of myself.

I would like to thank London School of Commerce for providing us the opportunity to learn about various systems in United Kingdom(UK) via this dissertation and also making the one year Masters a very valuable and interesting one.

Finally I would like to thank all my friends and my lecturers who supported directly and indirectly in completing this dissertation.

Chapter 1: Introduction

‘Corporate Governance’ has become one of the most spoken words all over the world in the business community. It has been now established, that a country’s economy depends on the drive and efficiency of its Corporate Governance, which is the way the companies are managed. Basically Corporate Governance is a set of rules and regulations set by the regulatory bodies to force the companies to follow the correct procedures to ensure the companies remain successful and the shareholder’s investments are safe. Competitions among the firms are high and almost all the businesses are competing for the same share in the market. The ego is high in the top management and the challenge the top management have is to strike a balance between money, fame and duty.

According to Collier (2005) corporate governance is defined as ‘The system which companies are directed and controlled. Board of directors are responsible for the governance of their companies. The shareholders’ role in governance is to appoint the directors and the auditors to satisfy themselves that an appropriate governance structure is in place. The responsibilities of the board include setting the company’s strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship. The board’s actions are subject to laws, regulations and the shareholders in general meeting.

This definition covers almost all the principles of the Corporate Governance. However the question stands as to whether all these principles are followed by the companies and how effective they are in managing the companies and how effective corporate governance changes the performance of those companies.

Aim of the research study

The aim of this research study is to find how the performance of the telecommunication firms is affected by the corporate governance systems followed by them. Corporate Governance scandal is becoming as a major issue as it is creating unstableness in the economy in many countries. Many companies around the world in both developed and developing markets are considering Corporate Governance as a vital factor because of the meltdown of famous organisations. The privatisation has changed the ownership structure of the organisation in the emerging markets. These organisations seek a proper governance structure to keep the internal finances & resources under control.

In the recent past there were few high profile failures in the business world. The prime examples would be Enron and WorldCom in United States & Satyam Computers in India. Most of these major corporate failures are not purely cyclical events, but also to systematic weaknesses. These corporate failures have been given wide media coverage and this has stressed the importance of Corporate Governance.

With the globalization more countries got interconnected and have started doing businesses involving capital financial resources “ The more the corporations finance themselves via global markets, the more questions of Corporate Governance become an issue of interest for those involved in Capital Markets”(Crane et al,2007). When we consider the countries in Emerging Economies, for example India there is a dynamic growth in the economy and recently there is a huge rise of the big players in the markets and lots of investments both local and overseas has been invested into the businesses. This has made the corporate governance a key.

Moreover the recent demise of one of the biggest IT Companies Satyam Computers and the fraud which has caused the fall of the multimillion dollar company has raised serious questions of the existence of the Corporate Governance and the effectiveness of it. The concern is whether Corporate Governance is being totally ignored or no strict rules are being imposed and monitored by the regulatory authorities. The above empirical research is used to critically analyse and fulfil the aim of the research study.

Objectives of the Research

The objective of this research is to analyse the existing Corporate Governance arrangement in the Telecommunication Industry in UK and how an effective Corporate Governance affects the performance. This analysis will provide an insight of the importance of Corporate Governance for the companies in general and Telecommunications companies in specific.

UK is considered as one of the countries which have the best Corporate Governance Systems. “The publication of the Cadbury report (1992) represented the first result of introspection by boards and shareholders following economic decline in the early 1990s” (Solomon et al,). Various reports have been produced by regulatory bodies at different Stages in UK to initiate & reform corporate governance in UK. Some of them were the Cadbury report 1992, Greenbury report 1995, Hampel Report 1998, the Turnbull Report 1999, the Higgs Report 2003 & The Smith Report 2003. One of the greatest frauds in United States (US) was the Robert Maxwell’s power of abuse in the 20th century. Following Major collapses of the biggest companies in US, UK and other countries brought the awareness & need for an effective Corporate Governance system. These scandals were mainly created because the power was not segregated and laid in one person’s hand or there were no independence within the management.

“The country’s economy depends on the drive and efficiency of its companies. Thus the effectiveness with which their boards discharge their responsibilities determines Britain’s competitive position” (Cadbury, 1992). According to McGregor (2000) the function of corporate governance is to rule, lead, create and maintain structure and systems and to monitor performance. How people govern depends on their beliefs, their ability to make decisions as well as their capacity to ensure effective implementation of decisions. The various Corporate Governance reports in UK are analysed and discussed to check whether the Telecommunication firms in UK are following them and having a good Corporate Governance system in place.


“Effective corporate governance reduces “control rights” stockholders and creditors confer on managers, increasing the probability that managers invest in positive net present value projects” (Shleifer and Vishny, 1997). The performance of an organisation an increase when it is better managed. To make a relevance to the analysis various corporate governance systems are studied and theories are discussed in this dissertation.

Policy makers, theorists and practitioners consider that it is worth pursuing & taking initiatives in Corporate Governance reform. But still some believe it is not.”They consider that the many initiatives aimed at ‘improving’ corporate governance in the UK have simply slowed down decision making and added an unnecessary bureaucracy and red tape” (Solomon et al.,2004).Nevertheless there is a growing perception in the business world that good corporate governance is associated with prosperous companies. This dissertation researches various telecommunication suppliers in UK and analyses how their corporate governance has affected the organisational performance. In measuring the performance of the organisations the corporate governance is rated against the share prices, Return on Equity, Turnover of the company and net profit are considered to be very good measures.

Structure of the dissertation

In the balance chapters the brief introduction will be further analysed to find a solution for the research problem.

Chapter 2 will be covering the corporate governance theories and the empirical research to compare the existing corporate governance systems and the failures. The chapter further discusses about the various reports followed in UK corporate Governance systems.

In Chapter 3 it is discussed about the various aspects of the Telecommunication Industry in UK and how the industry has evolved over time. A brief history of the Telecommunication Industry is also covered.

Chapter 4 explains the research methodology that is used in this study and how the research is planned.

In Chapter 5 the Corporate Governance structures followed by the selected Telecom companies and the financial facts related to their performance are analysed. The summary of the analysis is listed in this chapter.

In Chapter 6 the finding from the analysis is discussed and the implication in answering the research question is also discussed. A comparison study of the existing theory and previous empirical research is also discussed in this chapter.

The Chapter 7 concludes with the evaluation of the hypothesis and the limitations of the current research. The recommendations for further work are also discussed in this chapter.

Chapter 8 covers my point of view of the topic and how I decided to select this topic, my learning results from this research study, how useful I found the guidance etc.

Chapter 2: Literature Review

2.1 Corporate Governance Theories

Development of corporate governance is a global occurrence and as such is a complex area including as its legal, cultural, ownership, and other cultural differences” (Mallin, 2005). The theories vary from country to country based on their economic status, corporate structure & ownership of the groups. The selection process also depends on whether the company is mainly concerned on the shareholder value or on the stake holder values. “The purpose of corporate governance is to persuade, induce, compel and otherwise motivate corporate managers to keep them alert when they make invests” (Macey, 2008). The corporate Managers should decide what to do and what not to do. When governing a corporation if more governance is done by social norms there will be less heavy lifting by contracts and laws.

In the countries like United Kingdom (UK) & United States of America (USA) where there is common law the ownership of the organisation is separated from the control. This provides security for shareholders’ money and encourages them to buy more shares and creates a diversified shareholder base. In the countries that follow civil law such as India & France the protection for shareholders is not efficient so there isn’t a considerable shareholder base. According to Wessel (2001) in the common law countries the legal principles are supplemented by precedent –setting case law, and provide great flexibility (Mallin,2005). But in the civil law countries the judges – who are civil servants for lifelong set legal codes with specific rules. This creates less encouragement for the investors to invest as the protection for rights is less.

A number of different theoretical frameworks have been involved to explain and analyse corporate governance. Each of these frameworks uses different terminology and view corporate governance based on different disciplines. For example agency theory paradigm arises from the field of finance & economics and transaction cost theory arises from economics and organisational theory.

According to Mallin (2005) five types of theories are applied in the real world in regards to Corporate Governance.

Agency Theory

In the Agency theory the principal delegates work to an agent and the agent handles the work. Though the agent handles the work, the principal will be monitoring and controlling the organisation and the decisions related to the organisation will be taken by the principal. In some cases the agent also should be given some power but better institutional arrangements should be followed to avoid the abuse of power and resource. Improper monitoring has created major failures in some prominent organisations in many countries worldwide.

According to this theory there should be a series of contracts between the owners and agents. When the organisation grows it needs more capital and this has to be raised from the market, hence more owners will come into the organisation. When more owners come into the picture there will be more complication hence the necessity for Corporate Governance.

Though agency theoy is a widely used method of corporate governance it is a method which is criticised much. The critics believe that agency theory doesn’t carry contractual relationships most of the time and mutual arrangements.

In Agency theory the managers (the agents) will be more interested in short run profits. “The British Telecom Industry has been notorious for short termism” (Solomon et al, 2004). The higher agency cost problems and other problems arising can be eliminated or scan be reduced if shareholder monitor the company. The Shareholders should control the AGM voting. “Voting by shareholder constitutes shareholder activism” (Solomon et al, 2004) Shareholders also have the option for diversifying things. Another way to overcome the agency problems is to have face to face meeting occasionally between representatives from investment institutions and management. “One possible solution to the agency problem is to provide senior management with incentives to pursue wealth maximising policies.”(Weir, 2001). When number of shareholders increase the agency costs will incur if poor performance is in place. The monitoring costs also increases when the number of shareholder increases.

Transaction Cost Economics Theory

This is closely related to Agency Theory and the only difference is, the Transaction Cost Economics theory views a firm as a Governance structure, whereas Agency theory views it as a nexus of contracts. In transaction theory the company management internationalise transactions as much as possible. Transaction cost theory makes the assumption of “Opportunism”.

“Opportunism has been defines as ‘self – interest seeking with guide and as the active tendency of human agent to take advantage, in any circumstances of all available means to further his own privilege (Grozier,1964). This mainly is concerned on the individual investments that are made to a certain project and identifies the characteristics. Transaction cost Economics theory has a similarity to Agency theory where the shareholders will have the power to claim their status.

Stakeholder Theory

Stakeholder theory is more substantial than the agency theory and other Corporate Governance theories. Stake holder theory considers a wider group than just shareholders. The wider group involves the employees, customers, creditors, debtors, government and local communities. “Stakeholder theory has broadened the groups to whom the firm is held accountable” (Jose et al., 2008). The shareholder values are respected in this method by efficiently using the resources of the organisation and making shareholders’ aware of it. According to Clarke (2004) as the firm-specific skills become an important part of the firm’s valuable assets, and as corporate managers are increasing it is important to adapt to stakeholder perspectives.

But however the purpose of good governance is always to increase the shareholder value. The increasing number of the relationships between customers, investors, employees and suppliers are emphasising the corporate managers need, to concern more on stakeholder theory than shareholder theory. But still there are several issues with this theory too. The problem with this theory is that the theory doesn’t clearly explain what the trade off is made against the interest of each group of stakeholders.”Strengthening minority shareholders’ rights will improve corporate monitoring only if shareholder are already well aware of their rights and duties as corporate owners so that they will exercise their new rights”(Nikomborirak, 1999) The managers are not clear and are not willing to be accountable for their actions. As there is wide group of people involved in an organisation it’s apparent that the expectations differ from person to person, hence the necessity for Corporate Governance.

Stewardship Theory

In the stewardship theory the directors will be the stewards of company assets and will be disposing the acts according to the interest of the shareholders. In this case the managers have to handle the assets prudently. This has created the necessity for Corporate Governance. The model has proved to be adaptable to prevailing changing situations. “The great flexibility of stewardship theory has led to the huge proliferation, diversity and complexity of corporate types and structures today (McGregor, 2000).

In this theory the companies are incorporated as different companies. The shareholders will be selecting the directors to act as stewards. The directors need to identify the interests of the shareholders. Though the directors have to consider the interests of the employees, customers, suppliers and other legitimate stakeholders, shareholders are their first priority.

Stewardship theory follows the legal model and provides precise boundaries for the company. But sometimes the stewardship theory doesn’t look like a suitable one in the modern environment as the shareholders appoint the directors. Most of the shareholders are away from the company operations and lack of transparency between directors and shareholders create discrepancies in the corporate governance systems. This will result in the various issues the companies are facing nowadays.

Hegemony Theory

According to Mallin (2005) in Class Hegemony theory the directors consider themselves as the elite of the company and make new appointments for directors thinking how well the appointments fit into those elite.

In the Managerial Hegemony the management controls the functions of the directors and weaken their influence.

In the empirical research the countries which follow the above theories, the success of the application of the theories will be discussed. The analysis further covers how the efficiency can be improved using the same theories more effectively. A shareholder activist group can be an option on top of the corporate governance” For example, the specific focus of the People’s Solidarity of Participatory Democracy (PSPD), a leading shareholder activist organisation that began its activism activities in late 1990’ in Korea, is to target family owned firms for reform”(Kim et al. 2007)

2.2 Results of various empirical research

The cross – country empirical research is considered as an important factor when comparing the corporate governance system in many countries and finding the most efficient one. Transparency is an essential ingredient for a sound corporate governance system. Many failures in the Corporate Governance Systems occur because the unfettered power stays with one person, the Chief Executive. Filatotchev and Wright collected material looking at the evolution of corporate governance practices over the life cycle of enterprises and institutions. It resulted how important it is to learn the knowledge at board level and manage the transitional stages (Mc Gregor, 2006) the world’s biggest corporate failures like Enron & World com represent the terrible weakness in the heart of Corporate Governance. Political influence also influences the type of corporate governance systems in different countries. According to the research carried out by La Porta (1998) the analysis in 27 countries to identify the controlling of the company.

Corporate Governance in Common Law Countries

India, China & Japan are taken as examples for the Common Law and the failures and successes in this emerging market are analysed based on the theory that is applied in their businesses. Many Asian countries have succeeded in its economy and technology during the past two decades. India and Japan are very good examples for a rapid economic growth in a short period. Many companies from USA & UK have outsourced most of their Information Technology (IT) activities in India. The strong governance of the companies has tied the countries strong. Corporate governance helps to manage the resources in an effective way and lowers the cost of capital by decreasing risk. Good corporate governance reduces the risks. The common law countries have much of a concentrated share ownership structure .

The ownership of companies in India are mostly family based businesses but has succeeded over the years. According to La Porta (1998) India has been ranked as 5th among 6 in providing shareholder rights (Chakrabarti, 2005). In terms of creditor rights, the Indian legal system also seems to provide excellent protection for Lenders, according to the La Porta, et al (1998) (Chakrabarti, 2005).According to BBC, India had a growth rate of 8.9% last year. India is also a country which has a highest rate of Foreign Direct Investments (Source: From 1991 to 2008 India has got USD 99,005 million as Foreign Direct Investments.(Ref: “The small and medium-sized enterprises (SME) sector in India has played, and continues to play an important role in India’s growth story” (Chakrabarti et al, 2005)

Corporate Governance in Civil Law Countries

The Civil law countries for example Anglo – American countries the Corporate Governance is mostly focused on shareholders. “The Anglo – American system is enforced through professional pronouncements or stock market listing requirements, whereas the Continental – Asian system is enforceable through law (Friedman et al, 2006). Stakeholder view is only a limited perspective in Civil law countries. The combined codes that are implemented in these countries explain the corporate governance structure. Sometimes though the corporate governance codes now established in every aspect of the economy in the Civil law countries the role of it is still ambivalent to most parties.

“Good corporate governance can significantly reduce the risk of nation-wide financial crisis” (Chakrabarti, 2005). In most of the emerging countries in paper they have strong corporate governance arrangements. But in reality the system is not followed properly and in an efficient way which results biggest scandals.

Corporate Governance System in Different countries.

Every country represents a unique corporate governance system though the theories are common based on the type of their legal and ownership structure. Wide range of internal factors like the economy, legal systems, government policies, culture & history presides the corporate governance systems which each country follows.


According to (Adam, 2005) Australia follows an outsider system of corporate governance same as in UK. Still the differences in the ownership structure and the shareholder involvement in companies, differentiates the systems followed in both countries. There is a higher incidence of intercompany and family ownership in Australia which hardly prevails in UK. Most of the Australian companies have non – institutional shareholder base that is controlled by the company. Australia follows a corporate governance practice from the Bosch Report (1993).

The Bosch report is closely related to the Cadbury Report. Though the agency type of Corporate governance is followed in Australia there still exists a mixed governance system involving the stakeholders. But still “The extent to which management can act opportunistically in its relationships with suppliers and customers is limited by the relative power held by each party.”( Fleming, 2003)


The Canadian Corporate governance system was described by Daniels and Waitzer (1993) in detail emphasizing how important it is to attract foreign markets and bring confidentiality for competitive foreign investors. The research carried out by their system showed that most of the large companies were not managed by large investors. Corporate ownerships are widely concentrated in Canada and one large shareholder controls more than 20% of the voting shares. The Corporate governance is considered as an important component in Canada as it will enhance the public confidence and increases equity capital. This looks like a good argument to other countries around the world to reform corporate governance.

“Corporate Governance reform in Canada was encouraged by the publication of the Day Report(1994) and by the publication of a series of Corporate Governance standards by the institutional shareholder representative group, Pensions investment Association of Canada” (Ref: The Osler Hoskin’s report gives detailed guidelines of the Corporate Governance Systems in Canada ( Obal et al, 2005)


“The UK, as one of the countries in the world with the greatest degree of

Dispersion in stock ownership of listed corporations” (Armour, 2008). According to Blackwell (2001) UK is generally acknowledged as the world leader in Corporate Governance reform. The publication of the various reports reinforced the corporate governance structure in UK providing guidance in various aspects of corporate governance systems. “The publication of the Cadbury report (1992) represented the first attempt to formalize corporate governance best practice in a written document and to make explicit the system of corporate governance that was implicit in many UK companies (Solomon et al,2004).

The Cadbury report (1992) defines the best practices & monitoring mechanism in implementing the corporate governance systems. The report recommends that the public firms also should follow an internal governance system that adheres to the Cadbury code. “It subsequently became a Condition of being quoted on the London Stock Exchange that companies should Include in their annual report and explanation of the ways in which the Code was being implemented (Weir et al, 2004). The institutional investors play a big part in the monitoring of the corporate governance systems in UK. The external audit and the Financial Services Authority (FSA) overseeing the accounts are making the corporate governance systems in the UK more methodical.

According to the Combined code of Corporate Governance, good governance should facilitate efficient, effective and entrepreneurial management that can deliver shareholder value over the longer term. (Ref: Along with the other reports the Combined Code is considered as the book of guidance for the Corporate Governance system in UK companies. The Combined code defines the methodologies in each sector such as financial, director remuneration, shareholder rights, disclosure & transparency etc. The Cadbury report (1992) defines the best practices & monitoring mechanism in implementing the corporate governance systems.

United States of America

United States is considered as one of the countries which have the control of a lot of countries in the world. The internal corporate governance in US is done by the board of directors who act according to the interest of the shareholders. “The board exists primarily to hire, fire, monitor, and compensate management, all with an eye towards maximizing shareholder value.”(Denis et al, 2003). The Chief Executive Officer (CEO) is considered as the head of the institution while the shareholder has the right to select the board of directors.

The management has a strong hand to select the other members in the board. The Corporate governance in US also concerns the director remuneration, the ownership structure, ownership control etc. The higher overlap between the ownership and control in the US Corporate governance systems greatly reduce the conflicts of interest and increase the firm value. According to Denis (2003) the problem with the widely – spread US corporate governance system is that as the shareholders own a very small fraction of the shares in the firms they have very little or no incentive to expend significant resources to monitor managers or seek to influence decision-making within the firm. Ownership Structure is considered as an important factor in US Corporate Governance systems as it directly affects the firm performance. Overall US private ownership structure has increased the performance value of the firm. The market valued corporate governance systems in US & UK encourages other countries to do business with them.


As one of the fastest developing countries in the world and the recent corporate governance scandal, India is most concerned in reforming the corporate governance in the country. “Despite the size of the stock market in India, ownership remains concentrated in families and an insider – dominated structure seems to persist (Solomon et al,2004). According to Sarkar et al (2008) still the Indian system is a ‘hybrid ‘of outsider and insider model as small shareholders participate in corporate governance. As the Indian economy underwent a number of reforms in the recent past and the globalization of the economy, the Corporate Governance systems need to have a firm structure.

As a former colony of UK India follows more or like a similar system of UK which provides considerable amount of protection to the minority shareholders. “Since the second half of the 19th century, Indian Industry followed an English common law framework of joint stock limited liability (Goswami,2000). The Corporate governance code was produced by the Confederation of Indian Industry in 1998, to have a standard Corporate Governance system in India.

As India is globalised and closely related to the European & American countries Good corporate governance has become a must to keep the Indian Economy in good condition. Each year the government and regulatory bodies are taking steps to straighten up the corporate governance systems in India, despite of the scandals that are making everybody to ask whether Indian Corporate Governance is efficient.


Being a communist country China showed a very slow move in adapting to the corporate governance. But in the current Business world, China shines as one of the best countries and many European and Asian countries intend to keep close business relationships with China. This has increased the need for and efficient corporate governance structure in China. From 1990 most companies of China were owned by the Central government. “Initially, at least, the Chinese government listed state owned enterprises (SOEs) with two primary objectives: firstly, to raise funds for restructuring and secondly, to introduce a more effective management system for SOEs.” (Hovey, 2009).

As the ownership structure determines the agency costs and other agency problems most of the SOE’s were privatised and the ownership structure moved to a shareholder based structure. But still separating the ownership structure was not an easy task as the Government owned most of the companies in China.”Company Law in China specifies three levels of laws in company activities; the shareholders’ general meeting; the board of directors and the supervisors; and company management (Solomon et al, 2004). Though the shareholder based corporate governance is reforming in China it doesn’t look like a very efficient system as the minority shareholder rights are ignored by the majority shareholders.

Though the different systems are followed in the civil law and common law countries, they are tending to create International harmonisation to bring common standards. “As a result of rising international trade and transnational business links the development of internationally comparable business practices and standards is becoming increasingly necessary” (An Introduction to CG systems worldwide). The increase in foreign direct investments in the countries has increased the need for international standards. Standardizing the corporate governance in global is a way to build confidence and encourage others to invest risk free.


Japan is considered to be a country competing with all the developed European and American countries though it underwent a long term economic slump. “Corporate ownership in Japan is characterized by “Stable Shareholders” with reciprocally held cross- shareholdings among corporations and banks”(Aoki et al., 2007). It prevails a stakeholder model of corporate governance in Japan. This idea is mainly followed by them as the community of people give a long time commitment to the firm as they are geared by their human resource management system. The board of directors are selected by an internal promotion system mostly from the employees and not from a representative or form a shareholder. It is very uncommon in Japan to appoint any external director or a outsider as board member. So there exists a low degree of formal separation between the strategy and the operations or management and monitoring. “Monitoring in a legal duty of the statutory auditor (kansayaku), who has the right to attend board meetings but no power to appoint or dismiss CEO (Aoki et al., 2007)

The changing international relationships in Japan are increasing the need for good governance systems in Japan. The increase in Foreign Direct Investments and the acquisitions of large stakes increased the need to good corporate governance systems.

Major scandals in Corporate Governance

Though Corporate Governance controls and encourages the firms to follow the rules to perform well, the loop holes in the systems has created major corporate governance failures in the past and recently in India . The failures in the big organisations made everybody realise how appealing good corporate governance is.


The failure of Enron shocked the whole world in 2001. Enron was one of the leading Energy companies in US in 90’s. Enron’s business was expanded not only in US but also in South America, Caribbean and some of the Asian Countries. Under the skilling guidance Enron expanded its business to weather derivates. The partnership structure of their new business of Special Purpose Vehicle (SPV) was the root for all the future failures Enron faced.

Also the improper auditing of the Directors’ remuneration was another reason for the failure of the world famous organisation.”Enron’s audit committee appeared to be ineffective in preventing Enron’s collapse. Out of the six people on the audit committee, the independence of two members was questionable (Wearing, 2005) .According to Clarke (2004) the following were considered the reasons for the corporate failure of Enron.

Systematic failures to disclose the proper accounting transactions which makes a greater impact in the balance sheet; the debt , net profits, share prices & market evaluation

Failure to be transparent to show the investors, the shareholder and other stakeholders the real financial situation of the company

The Chief Executive Officer and the directors failed to exercise their fiduciary responsibility to ensure the public and the stakeholders that the accounting and auditing system are properly done.

Conflict of interest between the Directors of the company

The failure of the auditing firm which had a conflict of Interest with the directors and tried to closely work with the management and the operations.

The customers were exploited. The markets conditions were ignored and morality and unethical decision making methods of the company made Enron fail in its corporate Governance systems.


World com which was believed as the giant in the telecommunication industry in US was one of the multimillion companies in 2000’s with close relationships with other world countries. The failure of WorldCom in 2005 was the biggest ever fraud in US history.

Several analyses were carried out in UK to investigate the reasons for failure of the world famous company. The accounts statements stated the money that didn’t exist in real. The root for the failures was the business strategy the company was following. The major acquisitions the company made without thinking in long term and due to investing funds for these acquisitions, this created a cash issue for the company and the management to created imaginary funds to keep them in market.

There were two other main factors that backed up this corporate failure

The Chief Executive Officer’s interest in increasing his personal finances

The lacking courage of the CEO to express the Wall Street the time period needed to consolidate the company and overcome the acquisitions.


Satyam Computers

Satyam computers which changed its brand name to “Mahindra Satyam” very recently was the 4th largest company in India with a worldwide recognition. Many US & European countries invested millions of money on their mass IT projects. The ownership of the company was a family based and the agency theory based corporate governance system was followed. “To ensure good corporate governance, historically there is strong legal framework existing in India. But due to globalization, cutthroat competition, IT & media invasion, increasing social expectation, liberalization and political, economical, financial & legal reforms; existing legal framework is at stake and new corporate governance norms are evolving. “(Sapovadia et al, 2009) the failure in the Corporate Governance in Satyam Computers made the whole world to think whether investing in India is secure in future.

The fraud of the chairman, and his breach in the accounting systems in the firm made the whole world to dig through the corporate governing system that Satyam Computers was following. “Mr. Raju said Wednesday that 50.4 billion rupees, or $1.04 billion, of the 53.6 billion rupees in cash and bank loans the company listed as assets for its second quarter, which ended in September, were nonexistent. “ (Ref: http: //www. nytimes. com). Satyam computers have been one of the biggest outsourcing companies serving many largest companies in the world including General motors, largest banks & Unites States Government. It is believed the main reason for this failure was the ownership structure which made the whole company to be controlled by one man when the systems were unclear and lack of transparency that Price water coopers, the auditors for them even were not able to rectify the scandal that was created by the CEO as the financial accounts provided by the company were unreal.

Rebirth of Corporate Governance

According to Monks et al (2003) where codes of best corporate governance practice exists, they should be applied pragmatically. Where it does not yet exist, investors and others should endeavour to develop them. Auditing has become a fundamental need to perform good governance. Wild (1994) found that the market reacted more favourably to earnings reports after an audit committee had been established.

Corporate governance has re born in the recent past after the failures in the economy of most countries. An introduction or revision of the corporate governance is made in many parts of the world from 1990 onwards. “ In 1999 the Organisation for Economic Cooperation and Development (OECD) developed a set of principles of Corporate Governance, and this Organisation and World Bank launched a series of roundtables in Asia, Latin America, and Russia to promote discussion of the topic”(Lawrence et al. 2005)Asian countries such as Thailand, Hong Kong ,India, Malaysia & Japan revised their Corporate Governance codes to enforce fairness, accountability, transparency and responsibility to shareholders & stakeholders. 29 countries all around the world have the membership in this body.

The International Corporate governance network (ICGN) is another organisation which is made up of groups interested in corporate governance reform.

Other significance corporate governance standards were kept forward by Californian Public Employees’ Retirement Systems, (CaIPERS) in the USA. The main aim of these standards was to allow markets across the world to function freely and equitably for all investors.

The European Union also has taken steps to provide corporate governance standards. “There are at present 42 corporate governance codes existing in European Union member countries.” The research study carried out by Gibson (1999) analysed that the CEO turnover is affected by the Corporate Governance Structure.

“The evolution of corporate governance is a particularly important area of finance research because the survival of firms depends on their ability to adapt governance structures to changes in external environments (Kole and Lehn, 1999; Morck and Steier, 2005).

According to Shleifer & Vishny (1997) Corporate Governance deals with the ways in which investors assure themselves in getting a return to their investment. (Mallin, 2005). The concept of Corporate Governance implies the relationship between the companies’ Board, shareholders and the stakeholders. It is very important for the companies to maintain good governance inside the organisation to compete with the competitors. Good governance is an essential mechanism for a company to achieve the objectives.

Corporate governance becomes fundamental for the following reasons

It ensures the proper system is followed to safeguard the assets

It prevents from a single individual have more influence in the organisation

It concerns the relationship between the company management, stakeholders and shareholders.

It ensures that the company is managed in a way that stakeholders and shareholders prefer.

It encourages the transparency & accountability in corporate management & corporate performance.

(Mallin, 2005)

During the past the Corporate Governance is an unidentified word in most of the emerging markets. However, the concept of corporate governance has developed and has become prominence after the failures of the companies without proper governance. Corporate governance is an exciting area as the people are trying to accommodate the needs of the investors as their expectations are changing than ever before.

Theoretically Corporate Governance is a concept that is common to all countries but some parts of it only will be appropriate to each country based on which stage the country is. This stage depends on the economy or the corporate structure of the country. The ownership of the companies in the countries has played an important role in deciding the rules for the Corporate Governance.

Corporate Governance Reports in UK

The Cadbury Report

“The country’s economy depends on the drive and efficiency of its companies. Thus the effectiveness with which their boards discharge their responsibilities determines Britain’s competitive position” (Cadbury Report, 1992).

After the scandal of Maxwell case the need for the corporate governance system became the subject for discussion. The Cadbury committee was formed to add more functionality and find out the loop holes in the prevailed systems in UK. The report mainly considered the financial aspects of the systems in the firms. This report expected the firms to mention in their annual report whether their systems followed the guidelines from the report.

The general areas covered by this report were the board of directors, auditing and the shareholders. The board of directors were concerned most important as it required more control and constant monitoring. The accounts & auditing required higher transparency to general public. The institutional investors are more important as they run the firm and have more influence in the company. “By the late 1990s there was a strong evidence to show a high level of compliance with the Cadbury Code’s recommendations (Conyon & Mallin, 1997)

The Greenbury Report 1995

The Greenbury report was created in response to the shareholder & public concerns and the director remunerations. The start for this was the “Fat Cat” problem that British Gas faced in 1990’s. This meant that the directors were more concerned about them and were having huge remunerations for them. The shareholders were helpless in the situation as the remunerations depended on the directors’ interest. The purpose of Greenbury Report was not to reduce the directors’ salaries but to establish a balance between director’s salaries and their performance “The report recognised the importance of companies of offering salaries that were high enough to attract directors of adequate calibre, capable of running large, multinational organisations” (Solomon et al,2004). The report explains how the board should delegate the responsibility to determine the remuneration.

The Hampel Report 1998

The Hampel report which was the successor of Greenbury and Cadbury reports sets rules in financial as well as in Corporate Governance aspects; The Combined code which followed the Hampel Report covered most of the Corporate Governance issues. “An important contribution made by the Hampel report was the emphasis attributed to avoiding prescriptive approach to corporate governance improvements and recommendations (Solomon et al,2004). The Hampel report explains how the corporate governance should be made as a voluntary approach than a more regulated one.

According to the Hampel Report Good Corporate Governance is not just a matter of prescribing particular corporate structure and complying with a number of hard and fast rules(Ref: http : // www. ecgi. org). This is a need for broad principles. All concerned should then apply this flexibly and when common sense to varying circumstances of individual companies. The Hampel Report also gave a big contribution to the pension funds who were the large group of investors. The combined code which was the follower of the Hampel Report contained included solution for all the drawbacks of the previous reports

The Turnbull Report 1999

The fall of the Barings bank in 1995 created the need for the Turnbull report explaining the need for the internal control of the systems. “It represented an attempt to formalise an explicit framework for internal controlling companies”( Turnbull Report,1999). The Turnbull Report defined how the companies and boards should model their individual systems of internal control. The main aim of this report was to provide the companies the guidance to develop internal control systems but not to specify the details of such a system.

The Higgs Report 2003

Although Hampel and Combined codes explained the steps for good corporate governance systems, the fall of Enron made the other countries to re – evaluate the corporate governance systems. The fall of Enron shows the failure in monitoring of the company directors. “The Higgs Reports specifically dealt with the role and effectiveness of non-executive directors making recommendations for changes to the combined code” (Solomon et al, 2004). The Higgs report enforces the strong relationship between the company directors and shareholders.

The Combined Code 2003

The recommendations from all the reports produced made the combined code to be redrafted in 2003 covering up the loop holes in it. “One of the main targets of the redrafted code was to readdress remuneration , as the new version of the code focused on forcing companies to avoid excessive remunerations which displayed less relation to the corporate governance”(Combined Code,2003). Though Combined code is thought to be one of the efficient corporate governance guidelines there still exists critics to it.

“The UK combined code on Corporate Governance is less forceful, simply requiring the annual report to state how independence is the safeguarded if the auditors provide non-audit services”(Wearing, 2005)

Results of various empirical researches

The empirical research covers the various corporate governance systems followed in different countries with a common law and civil law legal structures. Though the type of governance systems followed in these countries differ the problems arise are similar such as the agency problems and the one man ownership problems. Many organisations around the world are finding new ways to overcome these problems by encouraging all to follow an efficient corporate governance system. The above scandals discussed are only few and what were discussed worldwide still there are many more which shaking the whole world economy.

UK is considered to be having a very efficient corporate governance system with better monitoring and controlling, but still there are loop holes which have to be mended. The globalisation of the countries and the interdependency of the countries require more common standards in Corporate Governance. As a solution for the common standards organisation for economic co-operation and development (OECD) is updating the Corporate Governance standards and introducing the standards to more countries. According to OECD Corporate governance is one key element in improving economic efficiency and growth as well as enhancing investor confidence. So to have an efficient performance a country or firm should have proper corporate governance systems.

Chapter 3: UK Telecommunications Industry

“Telecommunications products and services are, by their very nature, commodity products, since they exhibit little or no customization. Telecom providers recognize the commodity nature of their product when they market horizontally—offering everything to everyone, everywhere” (Ref: http: // www . In the current fast moving world Telecommunication is considered as the biggest and one of the most important industries in all countries. By connecting to networks, mobile broad bands and mobile phones the telecommunication has brought the whole world into a small circle. The whole world is bound together with the developed telecommunication systems.

Day by day new and innovative mobile technology is introduced which is making the telecom industry more popular. Telecommunication is a very important sector in a country’s infrastructure and operations. “The telecommunication sector has enjoyed a high, continuous rate of productivity increase, benefitting from rapid innovation in electronics, computers, materials and processes” (Mitchell et al, 1991). The cost reduction has vastly increased the use of communication facilities and has created a sensitive demand. . Not only in UK but also around the world the need for Telecommunication services are increasing rapidly.The graph below shows the expected growth in telecommunication industry in the oncoming years.


UK is one of the countries which have a very developed technology in each sector.

UK Telecommunication industry is rapidly growing as there is a high demand for communication services. In addition to the UK based main telecommunication lines such as British Telecom (BT) and T-mobile many international and interconnecting lines are operating in UK currently. UK is becoming a congested country with various communities of people which has been pushed the need further. The Telecommunications Act 1984 explains the regulations for the telecommunications firms operating in UK. OFCOM (previously called OFTEL) is currently operating as the regulatory body for the telecommunication sector in UK. This is providing guidance to the companies for getting the license from the Department of Trade and Industry and about the regulatory obligations.

Currently many Global System for Mobile Communications (GSM) networks are operating in UK to supply the increasing demand. Though few of those lines are UK based all these are competing with each other in providing variety of offers to attract local and international customers. It is expected that the emergence in the Telecommunication technology will increase the demand further in the next decade. Not only in UK but also worldwide Telecommunication Industry is developing rapidly as the worldwide technology is growing very fast.

UK is becoming a congested country with different communities of people which has been pushed the need further. United Kingdom has become the leader of having the lowest prices for the telecommunications around the world. The open market economy has allowed a number of operators operate in UK for the customers to enjoy a wide range of broadly based choices and telecom operators more available than anywhere else.

British Telecom (BT) is the oldest Telecommunication Company in UK. BT was dominating the UK telecom industry had to face the lined up competitors in the past two decades.”In 1984 at the time of privatization, BT or British Telecom as it was then known, operated almost entirely in the United Kingdom, where it enjoyed a virtual monopoly” (Ryan, 1997). BT was supporting most part of the economy but from the recent past the demand for BT is slightly declined because of the introduction of variety of Mobile networks. BT had to fight fiercely with the competitors and had to move from traditional landline and introducing new services such as mobile network and Broadband and is still considered to be the leading world player in communications.

BT is one of the oldest networks in UK, started in 1981 as Post Office Communications. This was a state owned company which dominated UK in the 19th century. The name was changed to “British Telecom” But still its monopoly was broken by the introduction of Mercury communication which was the first competitor for British Telecom. According to Harvey et al.(1992)this was the 2nd major liberalization or privatization took place in the world with a chain of legislations .Currently not only in telecommunication but also providing broad band and wireless network services.

“Two cellular phone networks were licensed to start operations in 1985, providing users with an opportunity to make calls. The two networks are operated by Cellnet by British Telecom(60%) and Securicor(40%) and Vodafone owned by Racal

( Elixmann et al.,1990).UK now has a variety of Mobile networks which is widely spread. The amazing facilities of the networks allow users to use their mobiles even when they are out of the country. The impressive growths in the UK mobile phone market and its penetration into the other markets have increased the demand for UK telecommunication networks in all around the world.

Mobile communication adoption has grown rapidly from the time it was introduced in 1980’s. “In the OECD area at June 1999 the number of cellular mobile subscribers reached 300 million. (Madden , 2003). According to the BT Annual report 2008 UK had 1.5 million business customers registered with around 8 million exchange rates (http:// www. “Over the last two decades the Government has opened up the market to competition, moving away from the dominance of British Telecom (BT) to new fixed and mobile operators. 

The result is that the UK now has one of the most open and competitive telecoms markets in the world.”(Ref: According to the Department of Business Innovation and skills in July 2003 the UK government introduced deregulations and changed the Telecommunication a license based system to reduce the unauthorized entry of telecommunication companies (

Many mobile networks are competing in UK with British Telecom in providing the Telecommunication services in UK. Virgin Mobile, TalkTalk, O2, Orange, Vodafone, Three Mobile, T- mobile are some of them. The various services they provide with sophisticated mobile equipments and attractive packages make many people select mobile networks than BT. Most of these mobile networks operate internationally and in today’s world, communication has become one of the lowest cost services. In addition to these basic lines there are immense amount of interconnecting lines providing cheaper calling rates.

T- Mobile, a Netherlands based Telecommunication firm started its operations in UK in 1993 is currently a very successful telecommunication firm. From 1993 to now

T-Mobile has enhanced its business in various telecommunication sectors and has gained a lot of customers all over UK. T Mobile operates not only in UK but also in United States and in many European Countries. In January 2009 T Mobile had 33 million customers in their network using various services (Ref: http://www. boygeniusreport. com). Including T- Mobile most of the Telecom firms are more concerned on attracting the customers using other techniques than the reduced charges. For example T Mobile is engaging itself in activities on Corporate Social Responsibility. According to the Financial Times Deutsche Telekom is planning to sell T Mobile UK to one of the Telecom firms in UK. O2 and Vodafone which are in the leading positions in the UK telecommunication market are competing in this purchasing.

Another leading mobile network which is in the mobile phone market is O2. “O2 UK is part of the Telefónica O2 Europe group which comprises integrated fixed/mobile businesses in the UK, Ireland, Germany, the Czech Republic and Slovakia - all of which use 'O2' as their consumer brand”. (Ref: O2 has spread its business all over Europe and has introduced the most prominent phone which is used by more than half of the population in UK. “O2 is the largest mobile operator with a 27 per cent share of revenue paid by British mobile phone users”( Ref: http://www.

According to the statistics the following pie chart shows the percentage of the users of each Network

Source for the vales: &

Amidst the higher competitions BT still is used by most of the inhabitants of UK.

BT’s main aim is the business customers.

Takeover’s in the Telecom Industry

Within the last few years almost all the major telecommunications companies have been taken over by some major companies. If we consider the Telecom companies currently in UK, only a few are owned by UK companies or traded in the London Stock exchange. Few of the major takeovers are,

O2 was taken over by Telefonica, T-Mobile was taken over by Deutsche Telecom and Orange was taken over by Mannesman. Considering the takeover history in the recent past it has become a trend in the telecommunication industry. The following table reflects the telecom deals that have taken place recently.


Chapter 4: Research Methodology

4.1 Introduction

This study analyses the impact of corporate governance in the performance of the companies in the Telecom Industry in UK; company as a whole and the various performance indicators of the company such as ROE (Return on Equity), Net Profit and Share Price. In the previous chapters I have discussed the theories that are applied in the Corporate Governance systems and the various corporate governance systems in different countries. In this chapter I will discuss the data collection and analysis methods used in this study.

A research is normally a cyclic method as follows:


General methods used in research studies also covered under this chapter.

This chapter is presented as follows,

Objectives of the Research

Types of Research used

Analysing the Research problem

Discussing the Research Style chosen

Hypothesis of the problem

Finding out the Research question

Methods of Analysis used

Data sources used

Objective of the research

The main objective of this research is to understand the corporate governance systems followed in the telecommunication industries in UK and analyzing how their performance is affected by the financial sector and corporate governance systems they follow.

Various theories related to Corporate Governance are discussed and the theories followed by the companies are identified, to check which of these theories bring in more advantage to the firm and gives a fruitful performance. In order to understand the behaviour, different systems followed in specific countries that follow common law and civil law are discussed. To achieve the objective of the of this research the empirical research was very important covering not only the telecom industry but also other firms which has a good corporate governance system in place.

Types of Research used

There are many research methods used normally for data collection and analysis. Research methods can be either qualitative research methods or quantitative research methods. “In quantitative research, the emphasis is on collecting data that lead to dependable answers to important questions, reported in sufficient detail that it has meaning to the reader. The proto-typical qualitative study is the ethnography which helps the reader understands the definitions of the situation of those studies.” (Firestone W. A. 1987).

Research is normally done based on the research problem and to find data to analyse that problem and justifying it. In this research study the performance of the firms had to be evaluated based on the financial data. Primary and secondary data including both qualitative and quantitative data, and they can be used in both descriptive and explanatory research. Qualitative data captures non numerical data. In other words, data which is concerned is with describing meaning, rather than withdrawing statistical inferences. On the other hand quantitative data are anything that can be expressed as a number, or quantified.

In other words, data which are measured or identified on a numerical scale. It can range from simple counts such as the frequency of occurrences to more complex data such as test scores or prices. These data can be analyzed using statistical methods, and results can be displayed using tables, charts, histograms and graphs. Therefore in order to answer the research questions and objectives, quantitative secondary data have been used in this study. This study is done based on mainly two types of quantitative data toward understanding their CG compliance level, performance and strategies. In this research basically corporate governance systems in the selected companies are compared. Based on the rating from these companies a Corporate Governance rating is created and compared against the co-relation of share price change and Return on Equity(ROE).

Analysing the Research problem

The research problem in this study is “Does Corporate Governance affect the performance of the Firms? Corporate Governance is a wide issue and very qualitative, for this reason it’s hard to link it directly to the performance of a company. Looking at just one financial data it is not easy to categorise a firm has good or bad performance. Analysing various financial aspects of the organisation is very important to check whether the firm’s corporate governance changes the performance.

The research problem is analysed here using the quantitative secondary data as the primary data is not available and not easy to obtain. This research problem is a common problem in most organisations. For this reason this research has narrowed down it to UK Telecommunications industry and various aspects of the financial data from the selected companies in the Telecommunications companies are used.

Discussing the Research Style chosen

This research is based on the existing financial data from the company annual reports and websites. The research style used here is doing the research study with the secondary data and using financial data to find solution for the research problem. The acquired data is explained in graphical form to present the results in a clear method. Presenting the problem and the answer to that problem in a graphical format will always makes the result clear to the reader. The firms selected in this research are UK based Telecommunication firms as the analysis is based on the UK telecommunication industry. But the empirical research covers firms worldwide and firms which had great corporate failures. The corporate governance in UK and the corporate failures in other countries are compared with each other to make conclusions how the corporate governance can be a success in UK telecommunication sector.

Hypothesis of the problem

The hypothesis of this study is “Companies in the UK Telecom Industries which follow good Corporate Governance procedures perform better”. It is not easy to tell which corporate governance is better without analysing various aspects of the system. Any system is a good system as far it is followed in a proper way. The telecommunication Industry in UK is very broad as the technology is very much developed and the business is expanding rapidly. A financial based analysis and ownership structure based analysis, is followed in this study as it is easy for analysis and data collection is easy.

Finding out the Research question

The research Question in this research is “Does good corporate governance effect the performance of a firm?” As mentioned earlier to analyse this question one sector in UK is taken into consideration as otherwise the topic will be covering a wide area if many sectors are concerned. The research question cannot be directly connected with the financial data as it is not the only category that affects the performance the organisation. So the corporate governance structure of each selected telecom industry is compared with the theories of Corporate Governance. Various theories are discussed and the empirical research covers what type of system is followed in each country and the success of those systems.

Methods of Analysis used

A comparative kind of method is used to compare the Corporate Governance systems in the selected firms. The analysis covers a comparative study on the Corporate Governance systems followed by each organisation and what is said in the theory. The financial analysis of the performance is based on the Turnover, net profit each year, the Earnings per share, Return on Equity (ROE) and the average share price. 5 years data is collected from various sources to analyse the performance and the data is presented in a tabular and a graphical format. These data is analyzed using statistical methods, and results can be displayed using tables, charts, histograms and graphs.

Then the findings from the financial data and the corporate governance structure are combined to produce the result in the discussion part to provide the reply for the research problem. The discussion part describes the nature of the analysis and the findings from the analysis. In order to assess the strength of relationship between pair of variables statistical analysis should be conducted. Correlation coefficient is used in this study in order to analyse the strength between the Share Price and the Return on Equity.

This coefficient (represented by the letter r) can take any value between -1 and +1 (refer figure 3-1). A value of +1 represents a perfect positive correlation. This means that the two variables are precisely related and that, as values of one variable increases, value of the other variable will increase. By contrast a value of -1 represents a perfect negative correlation. Again this means that the two variables are precisely related; however, as the value of one variable increases those of other decreases. Correlation coefficient between +1 and -1 represent weaker positive and negative correlations, a value of 0 meaning the variables are perfectly independent. Within business research it is extremely unusual to obtain perfect correlations. Correlation was calculated using excel spreadsheet in this study.

Data sources used & data Collection Methods Used

Data collection is an important component in analyzing and answering the research question. When researches are done, generally two types of data that are gathered: primary data and secondary data. Researchers collect either or both of these data to answer the research question (s) and objectives. As financial sector is a much secured sector it was not possible to collect primary data at all times. So in this research secondary data collection from various sources is used. The Corporate governance system of the selected Telecom firms was studied and the financial data was collected from their Annual reports and company websites. This study concentrates on secondary data, mainly because of the nature of the topic and because of easy accessibility when collecting data comparing to primary data as well as time and budget constraints in completing this study.

Most commonly used method will be the ‘Internet’. Data on the internet can be accessed through search engines, official web sites hosted by companies, and professional organizations and information gateways such as the University of Michigan’s document centre etc.

In this research, mainly the library resources from City Library, London School of Economics, London School of Commerce, Online journals and the Internet were used to gather literature on the research subject. Many journals and publications were downloaded at the library. These data were mainly used in the Analysis part of the study. Mainly the internet was used to get the most updated financial data for analysis . Especially the official web sites of the selected Telecom firms were studied along with the financial data from Yahoo Finance, London Stock Exchange, Reports from the research firms (eg Price Waterhouse Coopers – PWC) and International Monetary Fund (IMF) etc.

There were advantages and disadvantages in using secondary data for this study. Main advantage was enormous saving in resources, in particular time and money when collecting data comparing to primary data collection. As mentioned above collecting data from Internet is less time consuming and less expensive. Even though more time was consumed in finding the correct and relevant data it was possible to get the most up to date data from internet resources. The quality of data gathered was high, comparing to primary research, as data sources were more reliable.

In general, there are other advantages such as, secondary data provide the only possibility of undertaking longitudinal studies for many research projects, reanalyzing secondary data can also lead to unforeseen or unexpected new discoveries and secondary data generally provide a source of data that is both permanent and available in a form that may be checked relatively easily by others.

There were disadvantages also using secondary data for this study; such as, more data was collected than sufficient for this study. Hence, it was quite difficult to keep the initial purpose of the study alive. In addition, most of the data gathered appeared to be relevant at first and when examined closely was not appropriate to the research objectives and question(s). Hence filtering data was quite time-consuming compared to other activities in the research. Keeping the research question(s) and objectives in mind has paved the way to overcome these difficulties.


As mentioned previously, the data for this study was collected from internet especially from the trustworthy official web sites of the selected organizations, International Monetary Fund (IMF) and journals. The data from these are reliable as it is believed that the organizations will not release false data in their websites because of the strict regulatory controls in UK and IMF is the Government body of Controlling and a trustworthy site. Therefore the data used in this study can be addressed as reliable and valid.

This chapter presented the Objective of this study thoroughly. Data collection methods such as Internet and data analyzing tools such as Excel spreadsheet are also addressed in this chapter. Methods used to Share price history, Earnings per share, net profit of the organizations and ownership structures are discussed. The chapter summarizes the overall methods used in this research. The following chapter will give a detailed description of the study that is carried out.

Chapter 5: Analysis and Findings

The purpose of this research is to analyse to which extent the telecommunication industry in UK is adhered to the Corporate Governance principles. Also this research tried to analyse any relationship exist between the Corporate Governance and Share Price in the market.

In order to establish this relationship, data from various sources has been collected. For this purpose three big players in the telecommunication industry in United Kingdom have been taken into consideration. First part of the analysis is to collect the information from these selected companies. The information consists of the corporate governance policies adopted by these companies, performance of the company, ie profit made by the company from their regular trading and the earning per share and how the market has valued the company based on the performance and the confidence in the market.

The key resources to obtain this data were the company annual reports, the press reports and the internet. The annual reports have clearly mentioned the corporate governance policies adopted by the organisations and the profits made by them over a period of time and the average share prices in the market.

With this information few charts and graphs have been drawn to have a clear understanding of the trend of the performance and the behaviour of the market.

To come to a conclusion the corporate governance principles followed by the companies have been summarised and analysed to which extent they follow the principles. Based on the extent and accuracy these principles are followed we will try to rank them.

Correlation is key method to study the behaviour and links between two variables. As corporate governance is a qualitative method and it’s not possible to calculate the correlation between the corporate governance and other quantitative methods. In this instance the correlation between the Share Price and the Return on Equity is calculated. This correlation is used to establish the type of relationship exist between Return on Equity and Share Price and this will be linked with the corporate Governance polices adopted by these companies.

Stock Market Performance By Industry – 2008

The following graph explains the stock market performance by industry. This is used to study how the share prices have moved in general in the whole industry and the facts will be used to compare the share price performance in the Telecommunication Industry.


Considering the Stock price history we can’t ignore the impact of the Credit crunch in the market as a whole. In general the crunch has hit all the industries despite of how well they are placed in the market to face it. The whole market has shrunk significantly and it’s expected late 2009 or early 2010 the market confidence will increase and the industries will be back to their normal positions. However there are quite a few major companies have already gone out of business.

The following graph depicts the stock market performance based on the individual industries.


When the whole world is considered Telecom industry in the whole world has done quite well. Mobile telecom and fixed line are few of the industries which have survived the downturn in the market. Mobile Telecom market is the least hit considering the credit crunch and the panic in the market since last year. The commodity itself is a product which people can’t afford not using it.

Communication is a key, and this is one of the reasons there were no major failures in the telecom industry considered to the Banking Sector and Automobile sector, the worst hit industries in the recent past. In addition to this there is a very good control imposed by the regulatory bodies and the worst penalty could be the cancellation of their operating licenses which would be the end of a Telecom Company. In 2006 Korean Ministry cancelled the 3G operating license for LG telecom and this made the CEO Nam Yong to resign from the Company.

5.1 Analysis of data

For our analysis purposes three major Telecom providers in UK are considered. As few of the major providers are being owned by companies outside UK, the companies still owned by the UK companies are taken into consideration and the following companies are discussed in detail,


BT ( British Telecom)

CPW ( Carphone Warehouse)

Vodafone Share Price performance – 2005 – 2009

This graph depicts the share price of Vodafone over the period of 5 years from 2005 to 2009. Share prices have fluctuated over the period with a steep rise in 2008. During the later part of 2006 and early part of 2009 the share prices have reached the lowest level within the last 5 years. The lowest price is being in the region of 110 pence and the highest price it has reached to 190 pence.

BT Group Plc – Share Price performance

BT share prices have risen gradually over the years and has reached the peak in 2008. However the price has fallen in 2009. This is mainly due to the economic downturn and the panic in the market rather than other factors.

Carphone Warehouse PLC – Share price performance

Sources for the above graphs :,,,,,,

Carphone Warehouse PLC’s share has risen gradually since 2005 and has achieved the peak in 2008 . However the price has reached the lowest level in early 2009. The share price has started to grow again and promises a healthy growth in the foreseeable future.

Analysis of Financial Information in the market for the three major Telecommunication companies in UK

The following tables summarise the Turnover, Net Profit, Earnings Per Share, Average Share Price and the Shareholders’ Equity in the above discussed companies.

Sources for the above graphs :,,,,,,

Net Profit Analysis

The following Bar chart illustrates the behaviour of the share prices for the three companies from 2004 – 2009. BT and CPW have not shown any shock in the Net Profits. They vary within a range and fluctuation is minimal compared to the major variation in the Net Profit for Vodafone. They have a very good year in 2005 a decent rise from 2004. However shockingly they have made a huge loss in 2006 and they have managed to overcome this only in 2008. In the meantime financial year ended in 2009 is not very promising. However the 2008/2009 economic downturn did effect almost all the companies.

Average Share Price Analysis

The following chart reflects the way the average share price has behaved for these companies. Considering the figures it’s hard to find any trend in the change in share price, except for 2009, where all three companies have faced a fall in the share prices. Late 2005 to early 2008 have been a good year for both BT and CPW, while Vodafone has maintained a unchanged price 2008 where they had a rise in the share price and then it has fallen in 2009.

Earnings Per Share

While BT and CPW maintained a similar trend of Earnings per share Vodafone had some bad years in between 2005 – 2008. This is a direct result of the profits made in the similar years.

Correlation between the Share Price and the Return On Equity

The following table relect the Share Prices and the Return on Equity for these companies and the facts from these tables are used to calculate the Correlation in between Share Price and Return on equity. The excel formaul ‘ =CORREL(A1:A5,B1:B5)’ has been used to claulcate the Correlation.

In general when the correlations vary in between +1 and -1, where +1 is both variables are perfectly positively correlated, ie change in one varaible will make a change in the other variable to the same extent, and -1 is perfectly negatively correlated where change in one variable will make a negative change in the other variable to the same extent, where as 0 represents there is no relationship and both variables are perfectly independent.

5.2 Summary of the Findings

Considering the above information and analysis of data we can derive at the following decisions. All three companies do follow the principles of corporate governance, even though the fact is that there are certain principles have to be followed as it’s required by the regulatory bodies.

Comparing the Corporate Governance principles followed by these organisations Vodafone’s annual report has explained in detail the principles they follow. They have 26 directors in the board and 9 are non executive independent directors. This aligns well within the corporate governance principles. Other companies also follow the same principle, but the limited number of directors may threaten the power of the independent directors and the limited knowledge and expertise.

As we have limited access to their internal information, purely based on the Corporate Governance principles published in their annual reports, published information and from the research of the business media and press reports Vodafone can be ranked 1 compared to BT and CPW in adherence to the Corporate Governance principles. BT can be ranked as number 2 and CPW as number 3. This is merely a judgement based on the facts and not based on any numbers.

Considering the Correlations in between the Share price and Return on Equity Vodafone carries a correlation of -0.168666435, as it’s below 0 , it’s a negative correlation where as share price and the return on equity are negatively related. The main reason for this is the huge losses Vodafone made in between 2005-2007. Even though there were major losses the share prices has not fluctuated greatly. This has generated a negative correlation. When BT and CPW are taken in to consideration they have a positive correlation as they are above 0. Generally the correlation between these two variables should be positive and Vodafone has behaved exceptionally.

In the meantime except for Vodafone, other two companies have a similar trend in their Net Profit , share price and earnings per share.

Analysis of the Corporate Governance structures followed by the selected companies



Carphone Warehouse


Vodafone have clearly mentioned their Board is committed to maintain a high level of Corporate Governance which is a key to prove their transparency to the stakeholders and build up a confidence in the market. Vodafone prides itself as one of the companies that has the best Corporate Governance practices in place and has outperformed 98.2% of companies in the telecommunications sector group and 98.1% of the companies in the UK.

BT Group has acknowledged they do follow the best practice in the industry and endeavour to abide by the Corporate Governance principles

The CPW board has expressed they recognise the importance of a high Standard corporate governance in the organisation. They also have confirmed that the organisation complies with the corporate governance requirements

Listed in

London Stok Exchange & New York Stock Exchange

London Stock Exchange

London Stock Exchange

Adherence to Combined Code

Shares has been listed in the London Stock Exchange in accordance with the Listing Rules

Comply with the provisions of the combined code on Corporate Governance

BT Shares have been listed in both the London Stock Exchange and the New York Stock Exchange.

Follows the principles of Corporate Governance both in UK and US.

Shares are listed in the London Stock Exchange

Comply with the listing requirements set out by the Financial Services authority and according to the Combined Code

Number of Executive Directors




Number of Non-executive Directors




Duties of Non-Executive Directors

Being a source for providing the skills and experience and providing guidance.

Analysing the decisions made by the CEO and the other parties.

By doing the risk analysis of the company checking the duties of each party

The number of directors(9) in BT shows how independent the system is.

BT has exceeded the requirement of Corporate Governance code by having a board mixture of Non –Executive Directors in the board

This provides more confidence to the shareholders especially the transparency

CPW Non-executive Directors have been selected considering their knowledge and experience, where they can guide the group in the right direction providing valuable advice.

CPW's Corporate published governance policy does not explain in details in regards to the duties of their Non-executive directors.

External Auditors

Vodafone has followed correct procedures in selecting the auditors and have appointed Deloitte LLP as their External Auditors. They one of the big Audit firms in the market.

internationally and has to adhere to the US Corporate Governance codes, mainly the Sarbanes Oxley codes of principles

BT has appointed Pricewaterhouse Coopers as their External Auditors.

They are independent and will report to the shareholders and also work closely with the Audit Committee.

PWC are a reputed firms of Auditors and they have so far done a good job

CPW board has appointed Deloitte LLP as their external auditors. Deloitte is one of the big four Audit firms in thge Country.

CPW board have clearly set up a policy in regards to the audit and non audit services to be undertaken by Deloitte.

Even though Deloitte carries out non audit services, the CPW board has reassured this is not affecting the independence of the external auditors

Nominations Committee (NC)

Vodafone’s NC appoints the directors for the committee

The main duty of NC is to ensure the board contains the experienced and qualified people to manage the board

BT’s NC are selected based on the experience & knowledge and BT ensures that they have the capacity to select the correct members

The NC meets whenever necessary to discuss the succession planning of the company.

Duties of Nomination Committee

Providing leadership to run the company and appoint candidates, with succession planning.

Providing guidance in selecting the Governance body and the auditors.

Having regular inspection on Audit and Remuneration Committees. Discussing issues to the attention of the Board.

The main responsibilities are succession planning and advising on the Internal appointments including the chair /Chief Executive Officer

Taking the responsibility for Succession planning and overseeing the selection and appointment of Directors

Having regular check ups on the internal appointments and the company

Remuneration Committee

Finalising the wages for the directors.

Salaries motivate the directors to perform their duties and ensures the remuneration is not excessive .

Ensuring the salaries of the directors abide by the combined code

The Remuneration committee is made of the chairman and the four non-executive directors.

The committee ensure the remuneration is according to the combined code.

Duties of Remuneration Committee

Determining salaries of the directors

Providing guidance in finding the correct consultancy.

Identifying correct people for the chair and Executive directors

Recommending the salaries for the Management

Ensuring non of the members are using company finances to enhance their personal finances

Audit Committee

As per to the Combined code an Audit committee is in place with members who has wide knowledge in finance.

They meet twice a year with External auditors without the directors being present. This helps to analyse the concerns the Auditors have in regards to the operations of the company

The Audit Committee is made up of all Non-executive directors.

The appointments are for the period of three years.

The members in Audit committee are experienced not only in finance but also in consultancy & IT.

The committee meets 4 times a year.

CPW Audit committee consists of the Chairman and the other four non-executive directors.

They met four times in the last financial year ended.

The committee ensures the company is acting according to the combined code.

Duties of Audit Committee

Monitoring the expenditures and the investments of the company.

Assuring effectiveness on the internal & External auditors.

Quality assurance of the accounts and ensuring proper accounting policies are followed.

Playing an active role in monitoring the Company’s compliance efforts for Section 404 of the Sarbanes-Oxley Act and receiving progress updates at each of its meetings.

Making recommendations in regards to appointing the External Auditors and dealing with the resignation

Ensuring the Key Partners from the External Auditors are rotated on appropriate intervals

Discussing the Scope of the Audit work to be carried out:

Measuring the performance of the External Auditors:

Monitoring the integrity in the financial statement

Checking whether the internal functions are efficiently managed.

Doing risk analysis occasionally to overcome any inconsistencies.

Advising the directors in hiring or firing of the employees and advising on the remunerations

Ensuring the independence of the External Auditors

Roles of Chairman and Chief Executive

The duties of the chairman and the CEO are clearly stated which is required for Good Corporate Governance.

This will ensure unfettered powers in decision making.

Chairman will provide Good Leadership and Chief Executive will be manage the organisation and implement business strategies.

This has been followed to the rule by BT as they have a part time chairman and a Chief Executive officer. T

These roles have been clearly separated and they have written description approved by the Nominations Committee

CPW's Chairman and CEO are independent and their roles are separated clearly and have written documentation in place.

Board Effectiveness

Shares are listed in the London Stock according to the provisions of corporate governance stated in Combined Code.

More concerned on providing good service

Taking the responsibility for the following: Business Strategy, Budgeting, Controlling, Effective Management, Policy Making, Internal Control

They have a very strong board and the board meet each year whenever there is a requirement to make a strategic decision.

They have met 6 times in the last financial year. They have acknowledged the board is responsible for providing guidance and leadership to achieve the goals of the organisation.

Internal Control System

The board is more concerned in having a good internal control systems and take action to avoid any risks or failures.

Though the risks or failures cannot be fully avoidable they take actions to minimise them.

The Board is responsible for controlling internal activities and managing risk.

They have designed a system to manage the risks than avoiding them.

They also confirm the system will provide a reasonable but not absolute assurance against material misstatement or loss.

CPW has established a Risk Management programme to ensure the management is able to identify , assess and mitigate the risk and make correct decision for the organisation.

The directors take the responsibility to manage the internal control system and avoid any risks.

Relationship with Shareholders

Shareholder meetings are conducted twice in a year to worldwide to update the shareholders of the company performance and investments.

Regular Annual General meetings are held to ensure shareholders are kept in the loop.

The directors have regular meeting with the investors and update the shareholders.

The chairman meets the major shareholders at their request to discuss the company performance and the internal issues such as executive remuneration, organisational policies and governance issues

The company communicates with the Shareholder through the Annual General meetings The CEO and the Chairman meets with the investors to discuss the performance and future direction of the company.

Role of the Board

According to the Combined Code the board takes responsibility for the whole operation of the firm in the right direction and achieving the goals.

They are accountable for the failure or success of the firm and are answerable to the shareholder.

Responsible for effective reporting of the Groups’ corporate governance principle.

The Board meeting is held 8 times a year to discuss the company performance and future improvements.

Their corporate governance procedure completely derived from the combined code.

The corporate governance ensures that cross directorship does not exist in the Vodafone

BT Board has accepted in their statement that they are committed to operating in the best interest of the stakeholders and will work with Integrity and maintaining high level of standards.

They do also declare that they are responsible for the good performance of the company.

CPW Board has worked throughout the year concentrating in the areas of Management, Internal Control and Risk Management.

They have understood the importance of thei roles to guide the company to achieve the goals .

They have functioned through several committees.

The board also have ensured they have the necessary resources to achieve the organisation's goals.

Chapter 6: Discussions

6.1 Implications for the Research Question

Based on the above calculations and findings it is decided Vodafone follows the best corporate principles compared to the other two companies. In the meantime the other two companies also follow good corporate governance. Vodafone had some exception years which has given some figures which are exceptional and against the general principles. If those two exceptional years are ignored all the companies reflect the same principles of growth and returns. As they follow good corporate governance principles we can come to a conclusion if companies follow good corporate governance it will reflect in the results. However we can’t simply derive at this decision without considering other factors such as economic climate. Corporate governance came in to existence only recently and companies are slowly adopting to these principles gradually.

Without doing a detailed research for a longer period it’s hard to come to any definite conclusion. In summary and analysing the above facts it can be said corporate governance principles does influence the performance but this can be only concluded with certainty after doing a research for a much longer period in the future and in a decent and a strong economy.

There are few main theories that discuss the corporate governance principles. Few of the theories are Agency Theory, Transaction cost Economics theory, Stakeholder theory, stewardship theory and hegemony theory. In UK the commonly used concept in managing the companies is Agency theory, which is based on the principles of shareholders. That is companies are owned by shareholders and the management is the agent of the shareholders and they are answerable to the shareholders and should act with responsibility. Even though there are few issues in the UK companies in regards to management misappropriation UK is doing considerably well based on this agency theory set out in the corporate governance principles.

6.2 Comparison of Findings with existing theory and previous empirical research

Empirical research as discussed earlier discussed various ways of corporate management in companies around the world. In UK the corporate governance principles are built on the various reports, which are systematically developed considering the failures in the world and the reasons for those failures. Compared to the other major developed countries UK can be considered as one of the countries with a strong corporate governance, which can be clearly seen considering the major corporate failures in the world.

United States which is one of the countries with a strong economy can be considered as the worse in corporate governance facing quite a number of major corporate failures and UK so far as incorporated new regulations to avoid the same. For example UK learnt from the Worldcom’s and Enron’s failure and incorporated the strict rules of the independence between the Chairman and CEO and also the importance of the number of Executive and Non executives and the decision making power of the directors.

The failure for the major companies can be linked with the corporate governance principles as follows,

Enron – The roles of the Chairman and CEO was not very independent, External Auditors did not follow the principles, Internal Control was weak and the Non-executive directors did not use their independence, The Board did not behave in a responsible way.

Worldcom – The Board of Directors did not do an effective job, The Audit committee’s inefficiency, weak internal control and the non-executive directors’ failure of questioning the Board decisions.

Sathyam – Fraud by the Directors, inefficiency of Independent directors ie using their power and independence, External Auditors not conducting their audit and questioning the directors.

In summary all the major failures were a reason of failure to follow the corporate governance principles. The Independent directors have a big role to play despite they will have to earn the wrath of the management and named as negative. The non-executive directors should consider more about the shareholders than the management. It can be argued that companies have to take high risk for high returns. However the management shouldn’t get into gambling and the decisions should be taken with responsibility and not forgetting they are risking someone else’s money. If the correct balance is maintained between achievement and prudence with proper risk management and corporate governance principles the companies can be a major success.

Chapter 7: Conclusion

7.1 Conclusion, evaluation of hypothesis

Corporate Governance has become one of the key facts every company is getting worried about. In the past Corporate Governance was merely a guide as to how the companies should conduct their business. However with the continuous issues in the market the requirement for corporate governance has evolved into a must regulation all the companies should follow. In certain instances the regulatory bodies has imposed strict rules as to that companies should fulfil certain requirements to list themselves in the stock exchange.

In the meantime most of the investors use Corporate Governance as a tool to measure how the companies do their business and whether they could invest without fear. This is a serious concern for the major blue chip companies. Now it has become a trend all the listed companies to allocate a section for Corporate Governance in their Annual Reports.

Even though it gives a comfort to the investor that the companies which follows the corporate governance can be safe places to invest, it’s not an absolute guarantee that they are safe. In the recent past there were major failures and it will be easy to say what went wrong, but why it was not prevented.

In the past aftermath of every corporate collapse the reasons being identified and amendments are being made to the Corporate Governance principles. In summary good corporate governance will enhance the companies’ performance and guide the business in the right path. We can say with confident if the good corporate governance principles are followed the performance of the company will increase and the investor confidence will increase.

In regards to the limitations in this research it was reasonably high and this is mainly the complication to find out the exact relationship between the Share Price and Corporate governance. Our sample size is limited to only three companies due to the difficulties in obtaining information from more companies. As our research is to analyse the telecommunication companies based in UK, most of the major telecommunications are being taken over by companies from Europe, and they are following different corporate governance principles.

The methodologies used were mainly the Return on Equity, changes in Share Price and Correlation. This is to establish the changes in performance and market confidence and to compare this with the corporate governance principles used by the companies. The main issue here is to establish the other factors which could have affected the performance and share price. The other key problem is to establish when these companies actually started to implement the proper corporate governance principles and when the general public were made aware.

The research has been done considering a period of 5-6 years. This is a reasonable period to establish a relationship between the Share price and corporate governance. But the matter of concern is, the corporate governance principles started to get published only recently and it takes more time in the future to establish a reliable result.

7.2 Limitations of the Current Research

The analysis is based on the historical data and we have limited access to the internal data as the companies do not like to disclose the key data mainly for following two reasons,

If the data discloses negative information it will reduce the confidence in the market and affect the share prices and the future of the company

If the data and information is very positive and reflects the company’s performance, this could be used by the competitors to gain competitive advantage.

Our analysis consists of analysing the share price information, and the share price fluctuates on a daily basis and only the average share price is considered in the analysis. The average share price could provide the wrong information as it might ignore the changes

7.3 Recommendations for Further work

Considering the fact that the importance of Corporate Governance is becoming a key concern for the companies and the strict regulations imposed by the regulatory methods, it’s worth collecting more information in the future. The companies also should publish information as to which principles they don’t fulfil during each financial year. The corporate governance should be used as a prevention method rather than a post failure research principle.

To analyse this, the selected companies should be monitored more closely and statistics should be collected as to when public are made aware of the Corporate Governance issues and the immediate reflection in the market on share prices. Also the yearend financial information should be considered with the way the corporate governance issues the company had during the year. It will be a tough task, but the information should be collected on a continuous basis with careful monitoring. For this purpose more companies should be researched and the relationship should be analysed.

Chapter 8: Reflective Statement

I did this research study as part of my Masters in Business Management study. During the third semester I was reading through the newspapers about the corporate failure in Satyam Computers and found the articles very interesting. I started reading the Indian website Economic Times and various other websites about the failure of the multimillion company and found out there were other corporate failures in past. When I was reading about these corporate failures the media coverage concentrated quite a lot about Corporate Governance. This made me quite interested in getting to know more about Corporate Governance.

During this time I had to submit my proposal for my dissertation and decided that I should be doing my project on Corporate Governance and selected a topic on Corporate Governance and submitted my proposal. The outcome of the proposal was positive. When my supervisor was changed I was advised to do my research on Corporate Governance based on one business sector, as my topic will be very wide if I select Corporate Governance in general for all the business sectors. While doing the research I realised how hard it would have been if I had selected the Corporate Governance in the common industry as a whole. I now understand why it was meant as a wide topic and I am very thankful for my supervisor. In the meantime my supervisor spent quite a lot of his valuable time in guiding me in the right path and providing with worthy advice on a continuous basis.

I feel the satisfaction of an achievement after successfully completing this research study. By doing this research I had the opportunity to learn about the different corporate governance structures and this study helped me to enhance my knowledge by discovering the principles of corporate governance theories that exist. I was quite astonished to see how the corporate failures could have been avoided by following the corporate governance principles.

I feel satisfied with the methodology I used. However I do have to say it was not an easy task to collect data and do a like with like comparison as most of the telecommunication companies in UK are not actually UK based. I decided to take three companies that are UK based as it will be helpful to compare the financial data and do a like with like analysis.

I am glad to say this is a really good opportunity to develop my writing and reading skills. In my personal opinion I feel you learn more when you do it yourself, in any kind of study. I am grateful to my Supervisor in that way for keeping faith in me and gifting me the opportunity and guidance to do the dissertation myself. I feel this is the main part of my MBA that I enjoyed the most doing something myself with the guidance on how to do it and present it.

Being a student from Sri Lanka, where English is the third language this dissertation helped to improve my communication skills through continuous reading and writing while doing the research. I got the opportunity to visit London School of Economics Library and the British Library and to go through their online journals and mass data collection. The collection of corporate governance books I read improved my knowledge in corporate governance & the procedures. I had to go through a lot of web pages to get the current updates of the financial data.

Analysing the data using using Ms Excel and Word gave me the opportunity to develop my computer skills. The different education system in UK “Do on your own” was very different from the spoon feeding education system in Sri Lanka. The supervisor always met us individually in classes and clarified our problems and guided us how we should proceed. Initially I was worried thinking of the huge task ahead of me , but at the end I feel confident that I could be able to do any research with the skills I have gained through this study.

We were able to apply what were taught in our previous semesters in this research. But what we felt was while doing the dissertation classes the supervisor covered most part of the Research Methodology section. It was useful to have this section when we are actually doing the dissertation as we didn’t have a clue of why we are learning this when we studied Research Methodology in our 2nd Semester.

Even though the classes were useful when we came to the dissertation classes we felt that we need a revision which our supervisor happily did for us. I feel the research methodology classes in 2nd semester should only cover the guidance for the proposal. We felt the guidance from the supervisor specially helped us in completing this dissertation. The project outline he provided us directed us in the correct path. The weekly classes we had with him and the individual meetings in the class helped us to choose the correct procedures.

I am currently working as a Finance & Admin Officer covering two organisations Association for Professional Music Therapists & British Society for Music Therapy which is in the merging Process. This is going to help me vastly as an in charger for the Administration & finance operations in these 2 organisations. I personally feel this dissertation is going to help me to help the Committee in the merging process. The reading habit will help me to read more on the margin process and how it can be implemented. The corporate governance theories we studied and the application of it will help me to prepare a system how the committee can govern and monitor the organisation in future. In future when I take responsibility in an organisation as a controller of Finance I will be able apply what I learnt independently in the firm’s processes.

Even though this work is an independent work the guidance was very crucial for us.


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