Corporate Governance

2313 Words10 Pages
One.Tel and its corporate governance issues Table of contents Introduction One.Tel collapse Impact of One.tel collapse Legal proceedings against One.tel’s directors Things can be learnt from One.tel’s failure Conclusion Introduction Lack of proper corporate governance can be a disaster for campanies. In recent years, major Australian companies such as HIH, One.tel and Harris Scarfe failed under dramatic and high profile circumstances. As a result, executive and non executive directors from each of these companies have spent time in jail. They were vastly different companies, operating in different industries, and failed for very different reasons. However, there was one common link between them. All had poor corporate…show more content…
One.Tel’s ever increasing investments in tangible and intangible assets and its deepening cash deficit in operating activities were financed by issuing both debt and equity. It issued equity capital of $430.3 million and $818.8 million in 1999 and 2000 respectively and raised $58.9 million and $139.8 million of debt in 1999 and 2000 respectively. It could only survive as long as it could raise new capital investment and debts more rapidly than it was burning money. Inappropriate board structure The board of directors is the ultimate decision making body of an organization and is responsible for major investment, financial and operation policies, and strategic directions of the company. It also provides an important supervisory role of company executive management. Moreover an audit committee and other board committee such as remuneration committee also play important role as a component of corporate governance. It is quite doubtful that One.Tel had a proper board structure. For the year 1997-98, One.Tel had four members in the board with two joint managing directors (chief executive officers) and two non-executive directors of whom one acted as the chair of the board. All board members were subject to election each year except one of the managing directors. This ensured that at least one of the existing managing directors remained as one of the CEOs for all
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