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Assignment 1

The document is a case study about MegaMart plc, a medium sized UK retailer experiencing falling profits and share price. Rex Lord, the company's founder and CEO, dominates the company and resists oversight. Students are asked to analyze agency problems at MegaMart, assess its corporate governance practices, and argue for appointing independent directors.

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14 views

Assignment 1

The document is a case study about MegaMart plc, a medium sized UK retailer experiencing falling profits and share price. Rex Lord, the company's founder and CEO, dominates the company and resists oversight. Students are asked to analyze agency problems at MegaMart, assess its corporate governance practices, and argue for appointing independent directors.

Uploaded by

ijazkhan.83381
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

UNIVERSITY OF CENTRAL PUNJAB

SPRING 2024
Course Title: Governance, Risk & Ethics
Course Code: AFHU3033

Assignment No. 1
Course Instructor: Ms. Maham Fatima

Section: B Program: BS-AF Date: 28-11-2024

Submission Date: 5-4-2024 Maximum Marks: 15


Program Objective: Course Objective: Course Learning Objective:

PO1, PO2, PO3, PO4 CO1, CO2, CO3 CLO-1, CLO-2,C LO-4

TO BE FILLED IN BY THE STUDENT


Student Name: Registration No: Sr. No:

Instructions: Submit at given deadline. Use this formate for submission. Chat GTP is not
allowed.

Assignment Topic & Details: “Governance and Responsibility”


Case Study
MegaMart plc is a medium sized retailer of fashion goods with some 200 outlets spread
throughout the UK. A publicly quoted company on the London Stock Market, it has pursued a
growth strategy based on the aggressive acquisition of a number of smaller retail groups. This
growth has gone down well with shareholders, but a significant slowdown in retail sales has
resulted in falling profits, dividends and, as a consequence, its share price. MegaMart had been
the creation of one man, Rex Lord, a high profile entrepreneur, convinced that his unique
experience of the retail business gained through a lifetime working in the sector was sufficient to
guide the company through its current misfortunes. His dominance of the company was secured

Page 1 of 2 Assignment
through his role as both Chairman and Chief Executive of the company. His control of his board
of directors was almost total and his style of management such that his decisions were rarely
challenged at board level. He felt no need for any non-executive directors drawn from outside the
company to be on the board. Shareholders were already asking questions on his exuberant
lifestyle and lavish entertainment, at company expense, which regularly made the headlines in
the popular press. Rex's high profile personal life also was regularly exposed to public scrutiny
and media attention. As a result of the downturn in the company's fortunes some of his
acquisitions have been looked at more closely and there are, as yet, unsubstantiated claims that
MegaMart's share price had been maintained through premature disclosure of proposed
acquisitions and evidence of insider trading. Rex had amassed a personal fortune through the
acquisitions, share options and above average performance related bonuses, which had on
occasion been questioned at the Shareholders' Annual General Meeting. His idiosyncratic and
arrogant style of management had been associated with a reluctance to accept criticism from any
quarter and to pay little attention to communicating with shareholders. Recently, there has been
concern expressed in the financial press that the auditors appointed by MegaMart, some 20 years
ago, were also providing consultancy services on his acquisition strategy and on methods used to
finance the deals
Required:
a. Explain the nature of the agency problem that exists in MegaMart. (5 marks)
b. Assess the extent to which MegaMart's corporate governance arrangements and situation
fail to constitute governance best practice. (5 marks)
c. Rex Lord has consistently resisted the appointment of independent, non-executive
directors to the board of MegaMart plc. Construct a case for MegaMart appointing
independent non-executive directors.
(5 marks)

Page 2 of 2 Assignment

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