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SUBMITTED BY-
NAME - RIYA THAKKAR
COURSE – B.COM(H)
COLLEGE – LAKSHMIBAI
COLLEGE , DELHI UNIVERSITY
MAXWELL COMMUNICATION
GROUP AND MIRRORS GROUP
NEWSPAPER
CONTENT
 MAXWELL COMMUNICATION CORPORATES AND MIRROR GROUP
NEWSPAPERS(UK)1991
• INTRODUCTION
• DEBACLE
• REASON FOR DEBAC...
INTRODUCTION
O Maxwell Communication Corporation was a leading British Media
Company.
O It was listed on the London Stock ...
Maxwell
Empire
Publicly Listed
Companies
Mirror Group
Maxwell
Communication
Private
Company
Robert Maxwell
Group
By the en...
DEBACLE
• In November 1991, chairman of
the group companies Robert
Maxwell, 68, was found
drowned behind his yacht.
• Glob...
• Robert Maxwell created a £530 million hole in the
pension funds of 16,000 employees of Mirror Group
newspapers.
• These ...
Reasons for Debacle
Acquisition through Heavy Debt
• The borrowings were personal as well on company accounts.
• The compa...
Uncertainties following the death of Maxwell
• The stocks of Maxwell Communication plunged to $2.18 on 5
November 1991 fro...
Maxwell's death (1991) triggered a flood of instability with banks. The
company incurred heavy debts. His two sons Kevin a...
Flaws in Corporate Governance
• Domineering CEO
• Maxwell had a complete control over the companies of his
empire.
• Perso...
• Lack of Transparency
• Improper segregation between the company’s assets and
pension assets of employees.
• Creditors, s...
Chronology of Significant Events
1980-84
• Robert Maxwell’s private companies obtained controlling
interest in British Pri...
1988
• The company borrowed $ 3 billion and acquired privately
owned publishing groups Macmillan and Official
Airlines Gui...
Corporate Governance Project
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Corporate Governance Project

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Case Study of Maxwell communication Group and mirrors group newspaper

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Corporate Governance Project

  1. 1. SUBMITTED BY- NAME - RIYA THAKKAR COURSE – B.COM(H) COLLEGE – LAKSHMIBAI COLLEGE , DELHI UNIVERSITY
  2. 2. MAXWELL COMMUNICATION GROUP AND MIRRORS GROUP NEWSPAPER
  3. 3. CONTENT  MAXWELL COMMUNICATION CORPORATES AND MIRROR GROUP NEWSPAPERS(UK)1991 • INTRODUCTION • DEBACLE • REASON FOR DEBACLE • AFTERMATH • ANALYSIS - FLAWS IN CORPORATE GOVERNANCE • CHRONOLOGY OF EVENTS
  4. 4. INTRODUCTION O Maxwell Communication Corporation was a leading British Media Company. 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 Corporation. O In 1981 Robert Maxwell launched a dawn raid on the Company acquiring a stake of 29%. The following year he secured full control of it. British Printing Corporation (1964) British Printing and Communication Corporation (1982) Maxwell Communication Corporation (1987)
  5. 5. Maxwell Empire Publicly Listed Companies Mirror Group Maxwell Communication Private Company Robert Maxwell Group By the end of the 1980s the Maxwell Empire, comprising more than 400 companies was loosely organized into three clusters.
  6. 6. DEBACLE • 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.
  7. 7. • Robert Maxwell created a £530 million hole in the pension funds of 16,000 employees of Mirror Group newspapers. • 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.
  8. 8. 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 audits. • In 1991, Maxwell sold Pergamon and floated Mirror Group Newspapers as a public company.
  9. 9. 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.
  10. 10. 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 bankruptcy. 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 pension entitlement. 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. AFTERMATH
  11. 11. Flaws in Corporate Governance • Domineering CEO • Maxwell had a complete control over the companies of his empire. • Personally controlled the movement of funds around his big empire. • 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 responsibilities effectively. • 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.
  12. 12. • 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 the company. • 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 and Wales.
  13. 13. Chronology of Significant Events 1980-84 • Robert Maxwell’s private companies obtained controlling interest in British Printing Corporation (1981), Mirror Group Newspapers and many other substantial companies. 1985 • Maxwell started transferring pension fund monies to private companies as the borrowings. 1987 • Maxwell’s private company further incurred borrowings of over 300 million pounds by way of pension funds and bank loans.
  14. 14. 1988 • The company borrowed $ 3 billion and acquired privately owned publishing groups Macmillan and Official Airlines Guides. 1990 • Maxwell started facing financial crisis and found it difficult o repay the borrowings of $ 3b. 1991 • 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.

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