Application Of Corporate Governance Principles For Corporate Failure

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Application of corporate governance principles prevent corporate failure (One.Tel Ltd case) Introduction an basic concepts It is notable that recalling the past two centuries and all departments of the financial system, there have been only handful failures in Australia (Davis, 2004, p. 10). In recent decades, however, some large and famous companies unexpected collapsed, such as Pyramid Building Society and most recently HIH groups and medical insurance providers UMP (Davis, 2004, p. 237). There is not an exclusive definition regarding what ‘corporate failure’ means (Rankin, Stanton, Ferlauto, McGowan, & Tilling, 2012, p. 365). In simple words, a company is said to have failed when it cannot repay its financial promises (Davis, 2004,…show more content…
Although the revenue of the company kept growing from 207m to 653m during 1998 to 2000, and the number of subscribers increased 6 times during the period. But the annual report of 2000 indicated that the profitability turned worse and worse, form $9.9m profit in 1999 to $132m loss in half year of 2000. Inside the company, there was no hierarchy in the structure of the company, which led to ineffective communication (123HelpMe.com, 2015). In other words, the structure is not well-developed. Outside the company, when the company facing the crisis, its two largest shareholders, News Ltd and PBL, did not provide any additional capital (Monem, 2011). One.Tel failure had been indicated since there was a sharp drop in its share price and its cash reserve kept falling. On 29 May 2001, One-Tel’s auditor forecasted that the company needed another $240 to $370 million cash flow to stay alive for the next six months (Cook, 2011). With not sufficient fund to repay debt, on 24 July 2001, the creditors voted to wind up company. Three choices for One.Tel to prevent collapse. It is against our common sense that when a company has ability to expending and earning an increasing revenue and customers, it died. But from the perspective of corporate governance, the failure of the company is written. One.Tel’s governance performance in a very low level. One apparently evidence is that One.Tel’s audit,
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