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Institute of business and management

Assignment Corporate governance

Submitted to.
Lecturer Saad Mehmood

Submitted by.
Muteeb ul Hassan 2017 BBA 158

Section C

Companies
SHELL
Barings Bank
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Barings Bank

1. How would you apportion blame for Barings’ collapse among

Nick Leeson, the senior management, the auditors and the
regulatory authorities?

Many were responsible for the collapse of Barings but nick Leeson had major hand in collapse of Barings bank
due to his fraudulent activities those activities could not been performed until others person were involved from
senior management, the auditors, and regulatory authorities were involved Management let lesson for settling his
on trades by putting him in charge of dealing desk and back office

2. Discuss the basic internal control failures referred to in the Bank of

England report.
Management failure to control Leeson for settling his on trades by putting him in charge of dealing desk and back
office due to internal failures the company faced collision

 Lesson had final say on following

 Payments
 Ingoing and outgoing confirmations and contracts
 Reconciliation statements
 Accounting entries
 Position reports

Lesson was considered perfectly placed to relay false information back to London
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3. What lessons do you believe can be learned from Barings’

collapse?

 A number of important lesson are there for senior bank managers including the importance of
internal controls and audit reports
 Following should be avoided by banks
 Lack of internal checks and balances
 Lack of understanding of businesses
 Poor supervision of employees
 Lack of clear reporting cline

4. Does the Barings saga make it more likely or less likely that these
events could be repeated?

Due to baring its less likely that this type of case may happen again but types of fraud change but it was a wakeup
call for all the banks worldwide that if u do not focus on every one you face such circumstances

5. Is it reasonable to suggest ‘corporate greed’ as an explanation for

Barings’ collapse?

Yes one of the cause is corporate greed because management gave freedom to Leeson to gain profit but instead he
used cross trade to gain profit if management was strong had uncontrolled employees it may not had happened

6. Which stakeholders were most badly affected by the collapse of

Barings?

Shareholders are primary stakeholders, and their interests are protected or diminished by how well the bank deals
with the interests of other stakeholders, such as employees, customers (retail and wholesale), partners and
suppliers, communities (including consumer advocates) and regulators As whole it was bankrupted everyone was
affected by that whoever it was
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Shell

1.To what extent were the events facing Shell in 2004 caused by
human failings or structural (organizational) failings?

Shell is in trouble after twice cutting its estimated oil reserves. The first dose of bad news came in January,
when the Anglo-Dutch oil giant slashed its reserves by 3.9bn barrels, or a fifth of total holdings, in locations
such as Nigeria. Reserves form a valuable asset for an oil company and any reclassification into less certain
categories is a major cause of concern. The company is now conducting an internal investigation and the
securities and exchange commission (SEC), the US financial watchdog, is carrying one out as well. Some
analysts believe the SEC is partly at fault because it has failed to issue clear industry guidelines when it
comes to reporting reserves

2.Discuss the potential difficulties facing the members of the parent

companies in attempting to monitor and control the activities of
management.
In January 2004, Royal Dutch/Shell (Shell), the third largest oil exploration and production company in the world,
announced that its financial statements had shown inflated oil reserves in the earlier years, and that it would
downgrade nearly four billion barrels of its 'proven'oil and gas reservesThis announcement created a furor among
the investors and industry analysts who blamed the complex and opaque twin-board governance structure for the
company's problems. Experts believed that this structure lacked accountability and facilitated financial
manipulations. The case study examines in detail the twin board governance structure of Shell and the loopholes
in such structure.

In order to restore investor confidence, Shell announced a merger of the Royal Dutch/Shell Group of Companies
under a single parent company in October 2004. The case highlights the key proposals and examines the pros and
cons of this merger plan.
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3.Is it desirable that oil companies should be allowed to exercise

discretion over how they book oil and reserves?
No, its not desirable that oil companies should be allowed to exercise discretion over how they book and
reserves, they going to work against nature. they should work under the strict laws made by the government

4.Since the market will sooner or later determine if reserves have

been overstated, does it matter that overbooking can take place?
Yes, off course it maters a lot. because the booking depends on the usage of that particular area. So
we can say that if the reserves have been overstated the overbooking can take place. So dealing with
these situations the company has to plan and forecast earlier .