Corporate Governance and the 2012 Failure of the Hastie Group (Asx)

Topics: Corporate governance, Board of directors, Management Pages: 8 (2732 words) Published: June 16, 2013
Title: Corporate Governance and the 2012 Failure of the Hastie Group (ASX)

Assignment Topic:
An outline of, and brief discussion of the importance of, the bases or criteria for the review of the organisation’s governance (eg, refer to which standards or guiding principles are relevant for the review) and why you need to use them. A brief critical review of the relevance of concepts, principles, standards or other tools and techniques learnt during this subject, in conducting your review A list of recommendations for improvement based on your review

Word Count:(Introduction to Conclusion) 2,445

Executive Summary:
Hastie Group was an ASX listed Engineering Group that entered into voluntary administration on May 28th 2012. Creditors have voted to liquidate what remains of the group as of February 2013. The Hastie Group presented a strong financial position during 2011 and again during 2012 as part of a recapitalisation program. Although Hastie appeared to have good corporate governance practices at first glance the failure of the business points to a shortfall in corporate governance activities at the Hastie Group. This report will examine what some of those failures were; the principles that underpin them and why they were significant. Finally the report will make some recommendations on how the Hastie Group may have improved it Corporate Governance performance.

Table of contents Page No
A) 3

B) 5

C) 7

References9

A) The corporate governance performance of the Hastie Group board has been widely criticized since its dramatic collapse in May 2012. Amongst the most strident critics has been PPB Advisory – who has taken on the role of Administrator. PPB Advisory, in their 2nd report to creditors (Carson, Crosbie & McEvoy 2013, p14) have suggested that a litany of failures ranging from poor strategy, inadequate internal controls and inaccurate and inadequate financial reporting may well constitute breaches of the directors duties under the Australian Corporations Act 2001 and have reported their findings to ASIC. At the least the board will have operated outside the Australian Securities Exchange (ASX) Corporate Governance Principles and Recommendations (ASX 2010, p13-49). These principles form the basis of good corporate governance ideas in Australia and are designed to optimise corporate performance and accountability (ASX 2010, p5) and draw from the ‘if not why not’ philosophy. The board of Hastie have appeared to failed in all four key functions of the board (Tricker 2012, p174, Fig 7.1) being Strategy Formulation, Policymaking, Monitoring & Supervision and Accountability which could reasonably be judged that the Hastie Board of Directors had operated outside of 7 of the 8 principles (the only Principle seemingly being observed was ‘Principle 8 – Remunerate fairly and responsibly) (ASX 2010, p40) described so the review will focus on Principles 3 and 4. ‘Principle 3 - Promote ethical and responsible decision making’ (ASX 2010 p22) The ASX recommends in Principle 3 that companies should actively promote ethical and responsible decision making, in part by clarifying the standards of ethical behaviour required of the board, senior executives and all employees and encourage the observance of those standards. The Hastie Group was a decentralised business and relied on good corporate policy that could reach across geographic and business unit boundaries and they in fact had such a statement ‘Code of Business Conduct’ last reviewed by the board 3rd September 2008. (http://admin.hastiegroup.com.au/library/Revised%20Code%20of%20Conduct%20030908..pdf , last viewed 16Mar2013) It appears however that the businesses within the group did not adhere to the Code of Conduct and it is possible given the rapid growth through acquisition of the group between 2001 and 2011 (Carson, Crosbie & McEvoy 2013, p81) that the policies driven by the Code of...

References: ABC News 30May2012 – Deloitte Failures, Last Viewed 16 March 2013
http://www.abc.net.au/news/2012-05-30/deloitte-faces-questions-over-hastie-collapse/4040850
Carlson I, Crosbie C, McEvoy D, 2013, ‘Hastie Group Limited and Specific Subsidaries Report by Administrators , Last Viewed March 16 2013 http://www.ppbadvisory.com/uploads/i281-439A-report-FINAL-updated-29-Jan-13-.pdf
Hastie Group Annual Share Holder Review 2010, Last Viewed 16 March 2013
http://admin.hastiegroup.com.au/library/Shareholder%20Review%202010_0.pdf
Hastie Group Annual report 2010, Last Viewed 16 March 2013
http://admin.hastiegroup.com.au/library/Hastie%20Group%20Annual%20Report%202010.pdf
Hastie Group Annual Report 2011, Last Viewed 16 March 2013
http://admin.hastiegroup.com.au/library/HastieGroup_AR2011.pdf
Thompson AA, Peteraf MA, Gamble JE, & Strickland, AJ 2012, Crafting and Executing Strategy, 18th Edition, New York, McGraw-Hill.
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