The Corporate Failures of the Six Corporate Giants

Overview

This part of the research focused on the discussions concerning the reasons behind the failure of six corporate giants (i.e. Enron, Health International Holdings Insurance, Royal Ahold, Parmalat, UBS and Northern Rock Bank Plc). This elaborates the issues behind corporate failure.  For instance,

ENRON, because of the audit failure done by its accountant Arthur Andersen and the board members failing to understand the importance of their responsibilities.

HIH, one of the Australia's largest insurers, because the board had not grasped the concept of conflict of interest and had exhibited a lack of due diligence in corporate governance; and the failure in management done  by an ineffective audit committee.

ROYAL AHOLD, one of the world's largest international retail grocery and food services, was one of the major success in the 1990's but is one of the major failures in corporate governance suffering a complete melt down, because the fraud had remained undetected and  management and shareholders failed to act adequately. However, unlike other corporate scandals, Royal Ahold is able to survive and recover from the events.

PARMALAT, Italy’s giant diary foods producer, because of the accounting scandal committed. Parmalat was founded by Calisto Tanzi, an Italian food producer heir and was Tanzi family-oriented. It had for years hid its loses, overstated its assets, recorded non-existent assets, understated its debts and diverted cash to Tanzi family members.

UBS, one of the banks that had been hit hardest by the US sub-prime  crisis. Due to its high risk exposure, UBS had to write down almost US$40 million. The board, as the ultimate responsible body was responsible for the bank's risk exposure and risk strategy.

NORTHERN ROCK BANK PLC, a victim of speculation on the sub-prime market and the credit crunch. It had speculated heavily on the sub-prime mortgage market with funds it did not have. The British government and Bank of England had known of this throughout 2007 and prevaricated and ignored the problem until the collapse of the Bank seemed inevitable. In February 2008, the British government nationalised the Bank.

 

Aside from this, this discussion also aims to explore how corporate finance, technology, leadership and change with respect to their business practices affect the competitive advantage of any organisation. The presence of strong and effective leadership in accordance to financial and business management in today’s organisation imposes a great responsibility to the organisation’s team and management networks as these attributes imply the overall capacity of the organisation’s performance like for instance, in terms of operations and research development and of course its competitive advantage. 

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