ABC Learning Ltd Case Study: Analyzing Ethics, Governance & Failure

This case study examines the rise and fall of ABC Learning Ltd, an Australian childcare provider, focusing on the factors that led to its collapse, including a lack of transparency, manipulated accounts, poor management, and inorganic expansion. The case delves into the company's approach to corporate social responsibility and business ethics, highlighting unethical practices such as false accounting information. It analyzes the absence of robust corporate governance systems and the role of auditors in providing inaccurate information. Key lessons learned from the ABC Learning collapse emphasize the importance of proper revenue recognition, focusing on core activities, implementing sound corporate governance practices, and maintaining healthy financial accounts. The study concludes that organizations should prioritize quality services, analyze internal and external factors, and operate with transparency to mitigate the risk of failure.

CASE STUDY OF ABC LEARNING LTD
by Student’s Name
Code + Course Name
Professor’s Name
University Name
City, State
Date

• ABC Developmental Learning centres commonly called ABC Learning were
found in the year 1988 in Ashgrove found in the City of
Brisbane in Queensland, Australia by Eddy Groves and his wife, Le Neve
(Mitu, N.I., 2015).
• The organization’s humble journey started in Australia but soon grew to an
international company renown in providing education and development
services to children.
• The company first grew in Australia having 43 centres in 2001, then beyond
boundaries to USA, UK and even New Zealand in 2005 (Blythe, 2017).
• ABC Learning was listed on Australian Stock Exchange in the year 2003
• In 2006, it acquired La Petite, the 5th largest childcare in UK and second
largest in the US.
• In 2007, it owned 2238 centres worldwide. In 2008, it was forced to sell the
childcare in US to Morgan Stanley and the proceeds used to pay off an
accumulated debt
Introduction

lack of transparency and manipulated accounts.
Poor management and decision making.
 opaque operations as the operations were not clearly
outlined
Related party transactions. For example the appointment of
Queensland Maintenance Services (QMS) which belonged to
his brother in law Frank Zullo.
Poor strategic planning and inorganic expansion
Causes of the fall of ABC Learning Centers

Corporate social responsibility refer to how organizations can
manage their activities to positively impact the society.
ABC was found as government subsidiary before being given to
the community.
It was aimed at helping the community and the surroundings by
providing early childhood education services.
 Achieving the above goals led to its intense expansion and
growth before its collapse.
Business ethics as a component of corporate social responsibility,
focus on examining the ethical or moral problems and the ethical
principles which arise in an organization.
ABC Learning Center in relation to Corporate Social Responsibility and
Business Ethics

 Narrowing down to ABC Learning Ltd, these issues include
the transparency, accounting reports and the accession of
information by the right people.
 The unethical practices especially giving false accounting
information was one of the main contribution for its fall.
ABC Learning Center in relation to Corporate Social Responsibility and
Business Ethics cont’d….

 The learning Centre did not have chains of important corporate governance systems before
collapsing. The founder, Eddy Groves didn’t worry about the corporate governance and
that’s why he had various related-party transactions (Kashyap, 2018).
 The key managers bought into the organization where not focused and were untrustworthy
since they gave false information and conducted accounting irregularities.
The ethical issues relating to corporate governance in the case?

 The role of the auditors in the ABC Learning centers was mainly to
provide true and timely information by reviewing the integrity of
the organization’s financial reporting as well as overseeing the
external auditors’ independence.
 However, the auditors provided unqualified information which
resulted to shareholders losing a lot of money. This unethical
conduct of giving less and false information led loss of education
and care as well as loss of trust for children providers.
Role of the auditors play in ethical view

 Organizations should always recognize revenue properly.
 should focus on their core activities and objectives even
when undergoing a massive growth.
 Organizations should know the importance of corporate governance
practices.
 Health financial accounts is also important as long as an organization
desires to prosper in its activities and services
Lessons learned from the ABC Learning collapse?

 ABC Learning Center fall has enlightened organizations on
how they should operate by keenly observing each and every
activity it undertakes.
 Both the internal and external factors should be always
analyzed well to reduce the risk of the failure or collapse of
organizations.
 They should always be focused on their objectives which
include quality services and not only expansion.
Conclusion

 Alsharari, N.M., 2016. Results Based Costing (RBC) System: Questioning the Unit of Analysis
in ABC. Corporate Ownership and Control, 13(2), pp.587-603.
 Blythe, S.G., 2017. Attention, balance and coordination: The ABC of learning success. John
Wiley & Sons.
 Fogarty, W., Riddle, S., Lovell, M. and Wilson, B., 2017. Indigenous education and literacy
policy in Australia: bringing learning back to the debate. The Australian Journal of Indigenous
Education.
 Gale, T. and Parker, S., 2017. Retaining students in Australian higher education: cultural capital,
field distinction. European Educational Research Journal.
 Garvis, S. and Manning, M., 2017. Australia and early childhood education and care. In An
Interdisciplinary Approach to Early Childhood Education and Care (pp. 9-18). Routledge.
 Kashyap, A.K., Jaswani, U., Bhandari, A. and Dixit, Y.S., 2018. An Introduction to Corporate
Insolvency Law and Reforms in Australia. Corporate Insolvency Law and Bankruptcy Reforms in
the Global Economy, p.107.
 Kuhlthau, C.C., Maniotes, L.K. and Caspari, A.K., 2015. Guided inquiry: Learning in the 21st
century: Learning in the 21st century. ABC-CLIO.
 Mitu, N.I., 2015. ABC learning: collapse of an entrepreneurial venture.
 Phillipson, S., Garvis, S. and Richards, G., 2018. Early childhood education and care in
Australia: a historical and current perspective for a way forward. In International Perspectives on
Early Childhood Education and Care.

References