New book looks at what went wrong and what can be done
Is there any way of preventing corporate collapses and avoiding their huge cost?
A new book out today, Collapse Incorporated, looks at the recent history of corporate collapses in Australia and collects a variety of expert views on what should be done.
The cost of the collapse of the various 1980s entrepreneurial high fliers has been estimated at $20 billion and the demise of just one of the recent collapses, HIH, has been estimated at $2.7 to $4 billion.
Former NCSC chairman, Mr Henry Bosch, who has written the introduction to the book, notes that collapses have been a recurrent part of the system, with their cost getting greater and more needing to be done to prevent them.
"The demonstrated ability of those who have presided over corporate collapses to live in luxury on money received from bankrupt companies undermines confidence in the system," Mr Bosch said.
"These and other weaknesses suggest that legislators, judges and regulators could do more to protect investors and reduce the likelihood of further collapses.
"A larger role could be played by the shareholders themselves.
"It is clear that institutional shareholders are prepared to pay a significant premium for well governed companies but many Australian institutions make little effort to influence the governance of the companies they own, and even the most active of them lag far behind their counterparts in the northern hemisphere.
"Most small shareholders remain ignorant bystanders," Mr Bosch said.
University accounting professors, Frank Clarke and Graeme Dean, who have contributed chapters, see a common thread of disaster in corporate collapses over the past 50 years, from Reid Murray in 1960.
They see the recent batches of failures as reinforcing the obvious -- that corporate regulation and control is no more effective now than it was in the past.
In searching for common reasons and models to predict likely collapses, they see many of the collapses as being individual in nature, with no model able to overcome creative accounting.
Two contributing authors, Stephen Cohen and Damian Grace, hope that better ethics might be part of the solution but they also note that even when all parties act in good faith and with probity, conflicts and failures still occur.
Law and criminology professor, Rick Sarre, argues that we can't just rely on legal regulation or simply leave matters to the market.
He says companies, with the positive encouragement of government, must develop initiatives to cultivate a culture of compliance, including an awareness of the possibility of illegality, a personal ethic of care and an assumption of responsibility in the event that improper practices occur.
Professor Robert Baxt, a former chairman of the Trade Practices Tribunal, in seeking cures for corporate collapse, believes it is vital we strike an appropriate balance between the need for investor protection and encouragement of corporate initiative.
We don't need more rules, he says, since these increase costs for all companies, nor should we punish business risk takers who act within the law.
Professor Baxt confidently predicts that corporate collapse will always be part of the market environment, resulting in ongoing calls for more regulation and protection.
He argues that the present regulatory regime is quite satisfactory but we need to ensure regulators are properly resourced and that accounting rules need to be reviewed continuously.
Business information group, CCH Australia, has published Collapse Incorporated, which has the subtitle "Tales, Safeguards & Responsibilities of Corporate Australia".
CCH publishes a wide range of expert content in the areas of tax, law, accounting and human resources and this book is its first in retail publishing.
Established in 1969, CCH is a subsidiary of international business publishing group, Wolters Kluwer, which recorded sales for 2000 of A$6.7 billion.
ISSUED FOR: CCH AUSTRALIA LIMITED
FOR FURTHER INFORMATION:
CORPORATE: MR WILLEM VAN ZANTEN,
REGIONAL DIRECTOR ASIA PACIFIC,
CCH AUSTRALIA LIMITED
TEL 02 9857 1300 OR
RE COLLAPSE INCORPORATED:
MS DIANA MARKS,
TEL 02 9857 1538 OR
MR DUANE SHORE,
TEL 02 9857 1351,
CCH AUSTRALIA LIMITED
MR HENRY BOSCH,
FORMER CHAIRMAN NCSC,
TEL 03 9497 2660
CONTACT: IAN WESTBROOK
TEL (02) 9231 0922
MOBILE 0407 958 137
For review copies of Collapse Incorporated, please contact Westbrook Communications.
A copy of this release can be downloaded from www.westbrookfin.com.au.