Strategic Purpose

One major scandal revealed in 2001 was Enron, a major energy company located in Houston, Texas (Auerbach, 2010, pp. 6). This organization collapsed because of their deceptive accounting practices and mismanagement. In 2001, Enron fraudulent practices became a public scandal, and because of these practices, shareholders lost $74 billion and thousands of employees (pp. 2). Unfortunately, investors lost their retirement accounts and because they lost many employees, it left many people unemployed. Essentially, Enron kept huge debts off their balance sheets. There were so many businesses and investors that were linked to Enron, and its bankruptcy was a major movement in Congress to make a legislative initiative towards the Sarbanes-Oxley Act of 2002.

Governance is usually delivered through an agreed constitution, through a complex web of customs and practices, underpinned by a shared system of ethics, to a range of stakeholders from the shareholder to the customer in that institution. Styles of governance vary depending on the nature and size of the body concerned. At one extreme is the rule-based style adopted by public sector bodies, which may be concerned with conformity rather than performance. At the other extreme are the churches and clubs where governance is based on trust. Most corporate bodies have an amalgam of both trust and rules in appropriate proportions. The Logic being that trust can only work with open governance.

Corporate governance is based largely on trust – the trust, by the stakeholders, that revenues will be fairly shared, and that those directly involved in running the company are running it in an aboveboard, honest, and open manner, and that they represent the best

The lives that people live is created in such a manner that many may not understand. These creation generates a vision that may craft a business as specific individual set a curtain criteria. And to do so, a primary aim is create, but that does not necessary statement that this dream may be reality. A strategic objective must be implemented to ensure that path of righteous to the reality. People have dreams and goals, but the way people approach it may determine the success or failure conclusion.

For any not of profit organizations to be successful, it is important that many organizations enlist three statements that describe the purpose of their organization. A mission statement, a vision statement and values statement are considered to be the simplest and the most effective governance tools that an organizations needs in order to succeed. Having these statements can define and guide the organization in the direction that will assist with the creating the future of the community.

The first section of this essay focuses on the possible causes of corporate failures including dominant CEO, poor strategy decision and the failure of internal control. Secondly, it discusses how the third edition of corporate governance principles and recommendations could be applied to prevent the causes of the failure. The 1st, 2nd, and 7th principles along with specific recommendations will be mentioned in this section. However, the context is concerned solely with the causes stemming from Dick Smith itself.

The beginning of the twenty first century marked the dawn of a new age, but with its arrival brought a chilling reality that saw the credibility of corporate America being sorely tested due to the scandals that rocked the foundation of capitalism at its heart and soul. This disconnects saw executive management and the board of directors at odds with shareholders and stakeholders over how to attain wealth accumulation while still creating an atmosphere of good corporate governance. This paradigm led some to question that if managers, who are the principal agents of the corporation, act in the best interest of the company or for themselves. Lord Acton once stated, “Power corrupts, and absolute power corrupts absolutely”. There were three specific corporate scandals that led to failed confidence in the financial sector and the subsequent legislation known as Sarbanes-Oxley Act of 2002 which attempted to address this malfeasance: Enron, WorldCom, and Arthur Andersen.

Despite its humble beginnings in 1844 as a simple general store turned financial firm, the Lehman Brothers greed drove their firm into the ground. It seemed as if Lehman Brothers was indestructible. Surviving through the railroad bankruptcies in the 1800’s, the Great Depression of the 1930’s, two world wars, a capital shortage in 1994, and everything in-between, it seemed the firm was built to last. However its inevitable end started in the early 2000’s with the housing boom after the repeal of the Glass-Steagall act.

When you think about corporate governance and the scandals that come to mind is Enron. This turned out to be scan in which Enron lied about its profits, shady dealings and concealing debts. A lot of regulations came down from the government regarding corporate responsibility and regulations. Big businesses had a lot of freedom to do what they wanted to do. Directors, Shareholders, and Presidents of companies needed to take another look at how their businesses were being run. What needs to change and what needs to be implemented so this doesn’t happen to us?

The book “The Strategist” begins the reader down a path that will build an organization that will survive into the future. It begins by asking a question, which on the surface seems trivial. The author asks the reader to answer the question” Does your company matter?” On the surface, and as it plays out in the text, most people instinctively answer in the affirmative. However, a closer look at each person’s organization and with some soul searching we inevitably find many of us are on the wrong track and we need to reevaluate our “purpose”. This organizational specific purpose is the key point of the reading.

The world has witnessed a series of corporate bankruptcies in the recent decades like Enron, Lehman Brothers Inc, Global Crossings, and Tyco in the USA; HIH in Australia, Parmalat in Italy, APP in Asia, and Islamic bank Ltd. of South Africa. These collapses have weakened and shaken the confidence of shareholders, debtors, governmental institutions, and other similar relevant stakeholders in corporate governance (CG) and the stock markets, and led to regulating many reforms and codes of best governance practices all over the world, to strengthen transparency and restore confidence in financial markets (Barros et al., 2013). For instance, after the financial failure of Enron and dissolution of Arthur Anderson; one of the five largest audit and accountancy partnerships in the world, U.S enacted the Sarbanes-Oxley act of 2002; France regulated the financial security law of 2003, as many other countries developed a set of regulations in the aftermath of huge corporate scandals. In Addition, the integration and globalization of financial markets also has given significance and highlighted the importance of CG as claimed by Srinivasan & Srinivasan (2011).

It’s amazing the amount of financial scandals there has been happening during the past decade, most of them from the financial banking system. Reckless management practices that try to lure the public with false statements in order to fill up their own pockets. Scandals such as, the Bernie Madoff with his ponzi scheme, The Libor Scandal with the fixed rates, as well as the famous scandal of the Lehman Brothers, all of them were great acts of corruption and unethical behavior, trying to abuse of the public position for private gain.

The strategic issue(s) apparent in this case study revolve around three primary factors, firstly, the perspective of the company in dealing with the socialization processes (or lack of) of its employees within an international spectrum (coming from an American background). Secondly, the staunch and seemingly unreasonable demand imposed upon Frank Waterhouse by Bill Loun, to ensure the success of the program at the expense of dealing with Donaldson; whom in his own right could and might have been a good choice if it were not for the multitude of issues that came with his arrival at Argos in Germany. Thirdly, there is a lack of employee-to-employee communication that was seemingly the core of the issues that were arising; revolving around

Most of the world has heard of Enron, the American, mega-energy company that “cooked their books” ( ) and cost their investors billions of dollars in lost earnings and retirement funds. While much of the controversy surrounding the Enron scandal focused on the losses of investors, unethical practices of executives and questionable accounting tactics, there were many others within close proximity to the turmoil. It begs the question- who was really at fault and what has been done to prevent it from happening again?

From this case study, it showed how Lehman Brothers walked down to the end of it business. Through Lehman Brothers’ case, it reflects the ugly side of a corporate. A big recognized company collapse due to it unsuccessful leadership management, culture and dishonesty by it people caused the company walked down to the end of it business. There are several points showed how it gone bankrupted.