Corporate Governance: Reasons for Corporate Collapses and Changes in Corporate Governance Practices

CORPORATE
GOVERNANCE

Answer 1
Corporate governance refers to the set of the principles, policies and the procedures that
guide the organisations to conduct their business operations and the advancement of the
interests of the varied range of stakeholders (Tricker and Tricker, 2015). Over the years, the
corporate world has witnessed a range of corporate collapses with the underlying reasons of
the inadequate control measures and the misuse of the powers by the senior management and
other employees of the enterprise. The key corporate collapses of the Australia and the
reasons which led to the same are explained a follows.
The major corporate collapse was of the entity controlled by Mr Alan Bond named as Bond
Corporation Holdings Limited. The enterprise was one the country’s largest companies back
then and had a number of business activities such as real estate, natural resources, brewing,
media, and others. The chief reason for the downfall of the company was whopping debts of
$6.7 billion thereby leading to company struggle to keep receivers and liquidators at bay. The
company owner had engaged in a number of high profile acquisitions, which were majorly
funded by the risky borrowings, and final mounting balance of the loans, which led to
collapse in the event of economic changes (Carnegie and O’Connell, 2014).
The second popular corporate collapse of the merchant bank Rothwells Ltd. brought the
director Mr Laurence Robert Connell in the limelight. The entity was involved in the
provision of financial assistance to a number of popular corporate players in Australia.
However, the fact that the company itself was insolvent and the management of the enterprise
with the aid of the creative accounting practices concealed the fact was a big blow to the
corporate governance principle thereby leading to the downfall of the company.
The yet another corporate failure was that of the Girvan Corporation. The case is regarded as
a clear-cut clash in terms of the interest of the shareholders and the goals of the management
and regarded as breach of the agency theory. The complex corporate structure of the
enterprise facilitated the company in covering the poor performance of the enterprise. The
poor performance indicators such as shortage of the cash flows in the company were long
present which were known and hidden by the management of the enterprise and ultimately
became the reason for the downfall of the entity.
Thus, the study of the reasons of the corporate collapses lead to the conclusion that the
powerful people of the enterprise have been long engaged in moulding the operations of the
enterprise and the presentation of the financial statements as per the individual goals.