Corporate Governance and Ethics: Dick Smith Holdings Limited Analysis

This essay provides a comprehensive analysis of the corporate failure of Dick Smith Holdings Limited, an Australian electronics retailer. It examines the company's downfall through the lens of corporate responsibility and governance, with a specific focus on the role of leadership, organizational culture, and ethical practices. The paper utilizes Schein's culture embedding framework to assess how leadership shaped the company's culture and contributed to its demise. The analysis highlights the lack of ethical behavior, the pursuit of profit over customer needs, and the failure of corporate governance measures as key factors in Dick Smith's collapse. The essay also offers recommendations for preventing similar failures, emphasizing the importance of ethical leadership, strong corporate governance, and a customer-centric approach. The essay concludes by underscoring the significance of ethical practices and responsible leadership in ensuring business success and the long-term sustainability of an organization.

Running head: CORPORATE RESPONSIBILITY AND GOVERNANCE
Corporate responsibility and governance
Name of the Student:
Name of the University:
Author note:

CORPORATE RESPONSIBILITY AND GOVERNANCE
Ethical behaviour and corporate social responsibility are critical to business success of
any company. They are more than just a concept that are used for enhancing the image of an
organisation. According to Tehseen and Ramayah (2015) ethics are the foundation of
business success and might result in business failure if not given proper attention. This paper
shall elaborate on discussing about a company named Dick Smith Holdings Limited and its
failure. It would analyse the situation of the company based on Schein’s framework. The
company seemed to have poor organisational culture, lacks of ethics and values in leadership
which altogether have aided to the downfall of the company. The main aim of this paper is to
explore ethics in relation to the culture of a corporate environment.
Case Background
Dick Smith Holdings Limited was an Australian chain of retail stores, which used to
sell electronics goods and project kits. It was founded in the year 1968 in Sydney by Dick
Smith and his wife but was sold to Woolworths in the year 1980. However, this ownership
was again shifted to another Australian company called Anchorage Capital Partners in the
year 2012. Notwithstanding these facts, the liquidations of the assets of the company led to an
overall return of more than 110 million Australian dollars for Woolworths and Anchorage
seemed to be ended up in floating the shares of the company in the “Australian Security
Exchange” in the year 2013 (Lincoln, 2016). After the floatation, Anchorage held about 20%
of the total shares in the company in 2014. Later, the company was again restrained from
trading on the ASX following a downfall in the market capitalisation of more than 80% in the
year 2015 (Gallagher, Ignatieva & McCulloch, 2015). Online service rights, intellectual
property rights and brand name were bought by Kogan.com and the other assets of Dick
Smith were up for liquidation.
The Schein’s Framework

CORPORATE RESPONSIBILITY AND GOVERNANCE
Using the Schein’s six culture embedding framework, it could be assess how
leadership played a role in setting up of the culture and tone within Dick Smith Holdings Ltd.
Lin et al. (2017) in this context have claimed that having a corporate codes of conduct are
important to follow in the development of an effective and positive organisational and
corporate culture. With the same, it is also to note that it helps in influencing positive
attitudes and behaviours among the employees for making them performing to their utmost
potential (Chan et al., 2014). According to Frisch and Huppenbauer (2014), corporate codes
of conduct can only be successful when the employees’ behaviours were affected by the
dedication and commitment of the management team. Values of the senior management of
the organisation also helps in reinforcing good corporate culture and makes the organisational
leaders to become an integral part of the process of decision making and at the same time,
overcome the cultural failures and issues that could be experienced at the companies.
Furthermore, it is also to mention that analysis of corporate failure of Dick Smith
Holdings Ltd. would be a subject of bringing in change and some important improvements
for maintaining a good corporate culture and promoting positive mind-sets among the
organisational employees and customers. On the basis of the six culture embedding
framework developed by Schein, the primary one comprise of the skills and the abilities of
paying attention to the leaders while leaders communicate about their important information
and message to the organisational employees and through focusing on giving clear signals for
keeping them informed regarding the code of conduct in the organisation. The activities after
acquisition that were pertaining to the Dick Smith Holdings Ltd. comprised of the policies
that were undertaken by Anchorage Capital that were damaging to the long lasting
development visions for the firm (Dumay & Guthrie, 2017). It is to mention that while
policies like such proved to be advantageous in the increase of the profit limits in the
financial statements of the firm, the consequences of such type of unethical practices led to

CORPORATE RESPONSIBILITY AND GOVERNANCE
Dick Smith Holdings Ltd going into the administration. The falsifying of revenue margins of
Dick Smith Holdings Ltd by means of unethical accounting practices was done by Anchorage
Capital. The short time span in between the floating of the shares of the company and its
liquidation has resulted in several criticisms on the parts played by the directors and senior
executives in the subject of aggravating the dangerous financial scenarios. Inflated profits of
Dick Smith Holdings Ltd have attained at the time of holding term of the Anchorage Capital
can never be represented in the company’s financial statements without ample of assistance
of the organisational directors.
As per the Schein’s model, it is also evident that a profit driven culture was set up at
Dick Smith Holdings Ltd. instead of putting emphasis on the actual objectives and goals of
meeting the customer requirements (Hogan & Coote, 2014). The level of corporate integrity
as a result of good corporate governance procedures in place was not present in the case of
Dick Smith Holdings Ltd. and its board of directors. With the same, the prerequisites in terms
of the floatation were not adhered to by Dick Smith Holdings Ltd. such as the maintaining the
financial statements that represent fair view of the firm. The shortage of measures of
corporate governance along with inadequate disclosure in annual reports has aggravated the
level of diminishing of the company’s financial strength. With the same, the declining of the
stock prices was preventable for the company directors if there had been a good and sound
policy management in place that could effectively address the issues taking place in the
solvency of the companies. Due to this profit driven culture, Dick Smith Holdings Ltd. have
faced huge losses and had finally resulted in decline. It is to state that the organisational
leaders at the company should have been more prominent and must have been acted as role
models for the later generations. They should have reacted to the crisis situation by means of
developing a positive brand image and display good style of management.

CORPORATE RESPONSIBILITY AND GOVERNANCE
It is also to mention that using the Schein’s model, it has been understood that Dick
Smith was a notable failure and its downfall from a cost-effective corporate company into a
firm facing insolvency within three years of its flotation results in showcasing notable level
of mismanagement. Although the organisational leaders were not a part of the deceptive
activities that were taken place in the company, they should have been complied with the
ethical values and responsibilities that they had towards the prevention of such type of
incidents from taking place in the organisation and must have been maintain some standards
too.
Recommendations
After analysing the case of Dick Smith, it has been understood that the company has
not maintained ethical practices and business and have engaged into having a profit driven
culture instead of customer centric. It is very important for the company to comply with the
codes of conduct set and maintain proper business ethics and values in order to ensure the
promotion of good corporate culture and behaviours among the employees (Lund-Thomsen
& Lindgreen, 2014). All these would help the business in building a good status in the
market. It is recommended that for such corporate failure, the leaders of the company should
allocated the resources in proper manner, particularly the human resource by means of
appointing right person for right job roles and responsibilities. The company should develop
certain norms, rules, regulations and laws so that they can maintain an ethical and positive
working environment. The company should have developed a good corporate culture and
must manage good ethics and values for promoting positive attitudes and behaviours among
the employees. Also, the company should ensure to take employee feedbacks that would help
in making the decision making process smoother and effective.

CORPORATE RESPONSIBILITY AND GOVERNANCE
Hence, from the above analysis it is to conclude that having leadership engagement
and positive behaviours are important to guide the employees in right direction and ensure
their productivity and well-being as these helps in ensuring the growth and development of
good corporate culture. Dick Smith was a notable failure and its downfall from a flourishing
corporate company into a firm suffering from liquidation within three years of its flotation
demonstrate notable level of mismanagement. With the same, level of corporate integrity
resulting from good corporate governance measures in place was not present in the case of
Dick Smith Holdings Ltd. and its board of directors. The senior management of the company
also with the board of directors have failed in mitigating the risks of pertaining to the
weakening of the capital structure that was resulted by the policies been adapted by the
Anchorage for inflating the margins of revenue. Declining of the stock prices can also be
avoided for the company directors if there had been a good and sound policy management in
place that could effectively address the issues taking place in the solvency of the companies.

CORPORATE RESPONSIBILITY AND GOVERNANCE
References:
Chan, E. S., Hon, A. H., Chan, W., & Okumus, F. (2014). What drives employees’ intentions
to implement green practices in hotels? The role of knowledge, awareness, concern
and ecological behaviour. International Journal of Hospitality Management, 40, 20-
28.
Dumay, J., & Guthrie, J. (2017). Involuntary disclosure of intellectual capital: is it
relevant?. Journal of Intellectual Capital, 18(1), 29-44.
Frisch, C., & Huppenbauer, M. (2014). New insights into ethical leadership: A qualitative
investigation of the experiences of executive ethical leaders. Journal of Business
Ethics, 123(1), 23-43.
Gallagher, D. R., Ignatieva, K., & McCulloch, J. (2015). Industry concentration, excess
returns and innovation in A ustralia. Accounting & Finance, 55(2), 443-466.
Hogan, S. J., & Coote, L. V. (2014). Organizational culture, innovation, and performance: A
test of Schein's model. Journal of Business Research, 67(8), 1609-1621.
Lincoln, T., 2016. Your successful investing blueprint. Equity, 30(4), p.4.
Liu, M. L., Lin, C. P., Chen, M. L., Chen, P. C., & Chen, K. J. (2019). Strengthening
knowledge sharing and job dedication. Leadership & Organization Development
Journal.
Lund-Thomsen, P., & Lindgreen, A. (2014). Corporate social responsibility in global value
chains: where are we now and where are we going?. Journal of Business
Ethics, 123(1), 11-22.

CORPORATE RESPONSIBILITY AND GOVERNANCE
Tehseen, S., & Ramayah, T. (2015). Entrepreneurial competencies and SMEs business
success: The contingent role of external integration. Mediterranean Journal of Social
Sciences, 6(1), 50.