The Breakdown Of Dick Smith Electronics

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Identify the Issue:
The breakdown of Dick Smith Electronics has aroused wide concerns in Australia since it brought losses to the related parties at different levels. This essay focuses on analyzing how the company could have possibly avoided the failure if it had applied the third edition of ASX Corporate Governance Principles more effectively.
The ASX Corporate Governance Council defines the ‘corporate governance’ as the framework of rules, relationships, systems and processes within and by which authority is exercised and controlled within corporations (Corporate Governance Principles and Recommendations, 2014). The term “failure” of a corporate can be described as “Insolvency” in Australia (Michaela Rankin, 2012). And the reasons for corporate failure can be grouped into six categories: 1. Poor strategic decisions. 2. Greed and the desire for power. 3. Overexpansion and ill-judged acquisitions. 4. Dominant CEOs. 5. Failure of internal controls 6. Ineffective boards(Michaela Rankin, 2012).

Define the Context:
On November 26, 2012, Anchorage Capital bought the Dick Smith Business from Woolworths for AU$115 million, which was far more than the initial payment of AU$10 million. To generate more cash, Dick Smith was taken into a “big bath” through writing down inventory and non-current assets. These were followed by a big clearance sale that brought the company a huge AU$140 million benefit to operating cash flow during financial year 2013. All of the actions above

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