Corporate Governance and Financial Crises: Case Studies

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Assessment 1 – Understanding Corporate Collapses -
Short written answers
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Table of Contents
1. Research the three cases of early corporate collapses in Australia mentioned in the textbook on
page 11: Alan Bond, Laurie Connell of Rothwells and the Girvan Corporation. Prepare a brief
report outlining the case(s). What was the underlying reason for the failure? Would today's
corporate governance codes, rules and regulations have prevented these outcomes?.....................3
2. Explore the collapse of financial institutions mentioned in Chapter 1 on page 17 of the
textbook. Prepare a brief report on corporate governance implications stemming from the global
financial crisis..................................................................................................................................5
References........................................................................................................................................7
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1. Research the three cases of early corporate collapses in Australia mentioned in the
textbook on page 11: Alan Bond, Laurie Connell of Rothwells and the Girvan Corporation.
Prepare a brief report outlining the case(s). What was the underlying reason for the
failure? Would today's corporate governance codes, rules and regulations have prevented
these outcomes?
The concern and ideas of many stakeholders had dominated in 1980 due to the issues and
challenges of economic collapse in Australia. That was become necessary for the higher
authorities to derive such approaches which helps to make the shareholders strengthen. Different
models and approaches had utilized to build the performance of country on the basis of
denationalisation of state run entities, electricity, coal, gas and so on. These were denationalised
in the UK sand overseas. There were some different aspect which has shown some issues and
challenges which made hurdle to find the right and valid resolutions regarding the collapse.
The country UK had faced some issues and challenges in the year of 1980. The insider
information had been driven from Drexel, Burnham and lambert. They made an information
about the people who made the massive issue of junk bond financial collapse in corporate
governance of united Kingdome (Tricker, 2015). The names which had been raised were Ivan
Boesky, Michael Levin and Michael Milken. There were some other people as well questioned
regarding the government issues which were faced by the country. That was shown that one of
the Japanese securities were found to have major links and connections with the regulatory.
These issues made higher authorities resigned from their posts as the president if both of the
securities had resigned and freed their positions. These could be stated as one of the major reason
of failure that there was lack of understanding in the internal structure of corporate governance.
That was also mentioned in 1989 by the report of national companies and security commission
that the Rothwells did not performed satisfactory duties which result as the financial collapse and
dissatisfaction in the company. The precise history of company background makes understanding
about some of the different aspects related to the company.
The company was established by an entrepreneur having the dream to become successful. The
company was started in acquisition by providing loan to the smaller companies and which are
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attaining by other entrepreneurs. Afterwards the financial collapse help in Australia by 1987
which attain negative impact for the company of Laurie and he had to face downfall due to the
failure of the people who did not paid their loan (Prowle, et. al., 2014). By the end of financial
year the report gad also disclosed by the company and become massive collapse for its growth
and success. These were some of the issues which had faced by the company at initial level.
Moreover some of the other financial collapse also looked into the governance of United
Kingdom and that was become necessary for the higher authorities to make focus on such issues.
That was resulted into the more critical research over governance issues of the country. The
question was also raised about the major reason of collapse. That was quite disappointing that
nobody had provided justifies response on the issues. These made board and directors more
aware about the financial and internal structure of the governance (Nizaeva & Uyar, 2017). They
had implemented some different strategies and approaches to reduce the circumstances of
collapse.
The precise analysis of financial collapse made an understanding about the issues which have
been faced by the companies in early time. The current regulation and legislations are quite strict
in Australia. These regulations can help the companies to make the formation of those
approaches which can be beneficiary for country. The current stage of country is quite strong to
reduce these challenges in appropriate manner.
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2. Explore the collapse of financial institutions mentioned in Chapter 1 on page 17 of the
textbook. Prepare a brief report on corporate governance implications stemming from the
global financial crisis.
The United Kingdom again faced the situation of collapse in 2007. The country had forced to
face downfall in different kind of loans and financial aspects. The companies had implemented
different ideas and strategies to overcome such issues. Some of the companies made low interest
rates other made the changes in their credit debts. Financial institutions ran their business with
the help of mediators who provided them the availability of different sources of money making.
The financial institutions had changes their loans into securities and sold them to other financial
securities. These approach made risk in context of financial formation of the country. The banks
also did not allowed and agreed to make that risky approach to be followed. Banks had to face
large issues and it became harder to determine the policies in precise manner (Tricker, 2015).
Central bank also needed to make efforts to reduce the liabilities of their customers.
The very first issues had faced by Northern rock bank which had been held by British
government. These collapse and issues made some challenges for different organizations related
to mortgaged industry. They also had to face the issues of financial imbalance and mismatches.
That is understood by US government that the financial issues of country needs to have the
proper resolutions and legislations regarding the issues. Different bank of United States had
made approaches to utilize different crisis. These strategies helped the country to overcome the
issues and made quite strong financial approach. The financial crisis made some of the
governance issues. These issues made the higher authorities struggle with different aspects and
forced them to make some different strategies. The companies and banks also had to face the
issues and challenges related to political and legal factors (Veldman & Willmott, 2016). That
was understood by the company that they have to take some major changes to overcome such
issues.
Moreover regulatory authorities took some significant changes to reduce the issues and
challenges. It can be understand that the financial structure of the country requires to be balanced
as these is the reflection of economy of that company. Australia had to face lot of crisis due to
the financial collapse and the economy of country become unbalanced. Different changes had
made by the regulatory which encouraged shareholders to make more legal and precise sharing
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in the building of financial development. That was also suggested to make the allocation of
different strategies which have been followed by other countries. The critical analysis also made
to understand the major factors which are becoming the reason of collapse in the country. Risk
management also initiated to building up the changes in some different accountability and
shareholders involvement in the business. These helped the country to make some policies which
provided the company the approaches of expanding financially for long term.
Different type of changes which implemented in the country were related to the banking and
financial context. There was the re-election procedure for the chairman of whole board. The
main initiative was to make some other resources availability. New policies and skills also
introduced which was majorly required for the country. These skills mainly focused for the
person who have effective decision making skills and can build more effective financial
approaches. The board had decided to make the different analysis by the time period of three
years (Mees, 2015). That was also become necessary to take reviews and viewpoints of different
directors and authorities to build or formulate any of the decision. These were some of the
changes which helped the higher authorities to build strong financial structure.
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References
 Mees, Bernard 2015, ‘Corporate governance as a reform movement’, Journal of
Management History, vol. 21, no. 2, pp. 194–209.
 Nizaeva, Mirgul & Uyar, Ali 2017, ‘Corporate governance codes of Eurasian Economic
Union countries: a comparative investigation’, Corporate Governance: The International
Journal of Business in Society, vol. 17, no. 4, pp. 748–769.
 Prowle, Malcolm & Harradine, Don 2014, ‘Austerity and financial governance: a UK
case study of the National Health Service’, The International Journal of Public Sector
Management, vol. 27, no. 3, pp. 212–224, accessed from.
 Tricker, R. Ian (Robert Ian) 2015, corporate governance : principles, policies, and
practices Third edition. Oxford University Press, Oxford, United Kingdom.
 Veldman, Jeroen & Willmott, Hugh 2016, ‘The cultural grammar of governance: The UK
Code of Corporate Governance, reflexivity, and the limits of “soft” regulation’, Human
Relations, vol. 69, no. 3, pp. 581–603.
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