NAME - RIYA THAKKAR
COURSE – B.COM(H)
COLLEGE – LAKSHMIBAI
COLLEGE , DELHI UNIVERSITY
GROUP AND MIRRORS GROUP
MAXWELL COMMUNICATION CORPORATES AND MIRROR GROUP
• REASON FOR DEBACLE
• ANALYSIS - FLAWS IN CORPORATE GOVERNANCE
• CHRONOLOGY OF EVENTS
O Maxwell Communication Corporation was a leading British Media
O It was listed on the London Stock Exchange and was a constituent of
the FTSE 100 Index.
O The Company was established in 1964 as the British Printing
O In 1981 Robert Maxwell launched a dawn raid on the Company
acquiring a stake of 29%. The following year he secured full control
By the end of the 1980s the Maxwell Empire, comprising more than 400
companies was loosely organized into three clusters.
• In November 1991, chairman of
the group companies Robert
Maxwell, 68, was found
drowned behind his yacht.
• Global empire of publishing and
other businesses collapsed.
• Investigations revealed that
Maxwell’s group companies
owed £2.8 billion to its bankers.
• Robert Maxwell created a £530 million hole in the
pension funds of 16,000 employees of Mirror Group
• These pension funds were ‘borrowed’ in a desperate
attempt to prop up the ailing Maxwell Communications.
• The company went into administration following the
death of Robert Maxwell.
• The London based Maxwell Communication Corporation
also filed the chapter 11 bankruptcy petition in New York.
Reasons for Debacle
Acquisition through Heavy Debt
• The borrowings were personal as well on company accounts.
• The company borrowed $3 billion in 1988 to buy the US
publishers Macmillan and Official Airlines Guide.
Financial Difficulties and Diversion of Funds
• The Maxwell Empire kept afloat only by shifting funds around his maze,
misappropriating pensioner’s funds, and relentless deal making.
• Despite Maxwell’s eroding financial condition, he was able to pass annual
• In 1991, Maxwell sold Pergamon and floated Mirror Group Newspapers
as a public company.
Uncertainties following the death of Maxwell
• The stocks of Maxwell Communication plunged to $2.18 on 5
November 1991 from high of $4.28 a share in April 1991 and
further dropped to $0.63.
• The decline in stock value was of special concern to Maxwell’s
creditors, since most of the family’s 68 percent stake in the
company was pledged as collateral for loans.
Maxwell's death (1991) triggered a flood of instability with banks. The
company incurred heavy debts. His two sons Kevin and Ian struggled to hold
the empire together, but were unable to prevent its collapse.
Maxwell had used hundreds of millions of pounds from the company’s pension
funds to shore up the shares of his group and save his companies from
There was a huge loss of pension funds for the employees. Eventually, these
funds were replenished with money from banks as well as British Government
but this replenishment was limited. Pensioners received about 50% of their
The son of Maxwell, Kevin was also declared bankrupt with debts of 400
million pounds. In 1995, Maxwell’s sons Kevin and Ian and 2 other former
directors went on trial for the conspiracy to defraud, but were unanimously
acquitted by the jury in 1996.
Flaws in Corporate Governance
• Domineering CEO
• Maxwell had a complete control over the companies of his
• Personally controlled the movement of funds around his big
• Relegated all the ethical and professional standards for
commercial benefits and empire building.
• Ineffective Board
• Directors and all other reputed persons did not discharge their
• Excessive borrowings of funds, pledging of shares to raise funds,
unrestricted and improper movement of funds etc. took place
under the control of directors and it appeared that they were
helpless because of the dominating personality of Maxwell.
• Lack of Transparency
• Improper segregation between the company’s assets and
pension assets of employees.
• Creditors, shareholders and even the family members of
Maxwell were not fully aware of the corporate structure of
• Flaws in the audit
• The auditors of the company failed to identify the transfers
Maxwell was making from the Mirror Group pensions, even
though they were in the position of doing so.
• Complaints were lodged against the auditors of the
company by Institute of Chartered Accountants in England
Chronology of Significant Events
• Robert Maxwell’s private companies obtained controlling
interest in British Printing Corporation (1981), Mirror Group
Newspapers and many other substantial companies.
• Maxwell started transferring pension fund monies to private
companies as the borrowings.
• Maxwell’s private company further incurred borrowings of over
300 million pounds by way of pension funds and bank loans.
• The company borrowed $ 3 billion and acquired privately
owned publishing groups Macmillan and Official
• Maxwell started facing financial crisis and found it difficult o
repay the borrowings of $ 3b.
• On 5th November, Robert Maxwell died. His body was found
drowned behind his yacht.
• Eventually, the stock of Maxwell Communication plunged to
$2.18 from $4.28 a share and further dropped to $0.63.
• And thereafter, inspite of considerable efforts by Robert’s son
Kevin and Ian, his empire collapsed.