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1 Introduction

The Australia corporate world has been shaken by the demise of another major company,
the third such collapse in a matter of weeks. “One.Tel”, the country’s fourth largest
telecommunications company (telco), ceased trading on the Australian stockmarket on
May 28 and was put into the hands of an administrator after an investigation of the
company’s financial situation showed it to be insolvent (Cook. T, 2001).

The One.Tel collapse has lay off its 1,400 workers and also impacting on a host of small
creditors owed thousands of dollars for goods and services. Many faced bankruptcy and,
according to the reports, will receive nothing from the company windup. The fact that
workers’ entitlements are under threat while the major creditors and company executives
are protected is a further embarrassment to the government which is trying to overcome
the hostility engendered by its big policies over the last five years (Cook. T, 2001).

This assignment embarks on the issues leading to the collapse of “One.Tel” ; breaches of
the corporate governance and persons involved; and how the breaches could have been
avoided.

1.1 Company Background


One.Tel is the generic term used to describe a group of Australian based
telecommunications companies, including principally the publicly listed One.Tel Limited
(ACN 068 193 153) established in 1995 soon after deregulation of the Australian
telecommunications industry (Media Coverage).

The company was established by Jodee Rich and Brad Keeling who had secured large
investments from Murdoch and Packer business empires (Media Coverage). One.Tel
attempted to create a youth-oriented image to sell their mobile phones and One.Net
internet services, with a slogan “You’ll tell your friends about One.Tel”, to draw the
connection between the brand and personal communication. One.Tel also has a mascot
known as “The Dude1”. Large murals were printed upon the garishly-painted walls of
company’s offices all around the world. Internally, the company had a fondness for
applying the One.-prefix to everything relating to the business: One.Dude, One.Team, etc
(Media Coverage).

Chronological outline of One.Tel

One.Tel was listed on the Australian Stock Exchange (ASX) not long after it was founded
in 1995 to 2001. It went into voluntary administration on 29 May 2001 and into
liquidation, upon a decision made by creditors in the administration on 24 July 2001. It
began business in May 1995 with a total initial seed capital of approximately $5 million.
The ownership structure of the company was: Optus 28.5%; FAI 18%; James Packer 5%;
Kalara Investment 50% (approximately). Kalara Investment was owned by Jodee Rich
and Brad Keeling (Media Coverage). PBL and New Corp’s support gave One.Tel
credibility and cash base to fund it rapid expansion both domestically and overseas
(Cook.T, 2001).

The original thought process began with a simple initiative: they wanted to start a new
telephone company, one that the average person would understand. The company was
very people focussed and focussed on the residential market, as opposed to corporate
business. They wanted the consumer or everyday person in the street, to have access to
the entire suite of telephony products, which is why the company was marketed with the
catch phrase “100% telephone Company”. One.Tel had three core product offerings:
fixed wire long distance, Internet service provision and mobile telephony (Wikipedia).

Its business expanded greatly and included operations in the United Kingdom and several
other countries; it came to have 2.4 million customers world-wide including 500,000 in
the United Kingdom. One.Tel came to do business reselling Optus Mobile Phone
Services, reselling Telstra Local and Long Distance International Calls, reselling Telstra

1
The Dude was a cartoon-like depiction of a rather stupid man in his early twenties. His main role was to
inform the public in television and print advertisements that even a stupid and lazy person such as himself
could get a mobile phone with One.Tel (Media coverage)
Internet Services, selling pre-paid phone cards for long distance calls; and set about but
did not complete constructing a mobile phone network of its own. A huge expansion of
activities and liabilities was involved in constructing the network, including contracts
committing expenditure of more than $1.1 billion with lucent Technologies. The Group
associated with One.Tel employed 3000 persons throughout the world and had many
subsidiaries. In 1999 News Ltd and Publishing and Broadcasting Ltd made investment
around $1 billion in One.Tel.

One.Tel experienced huge trading losses and reductions in net realisable value in 2001 up
to 29 May 2001. During this period One.Tel incurred net trading loss of at least $92
million. In these months the liquidity position of One.Tel worsened by very large
amounts; from a deficiency of $24.5 million on February 2001 to a deficiency of $98.7
million on 29 May 2001. The deficiency in liquidity precipitated the failure of One.Tel’s
business. Facts were established on the deterioration which occurred in the financial
position and performance of One.Tel from 1 January 2001 onwards. By 28 February
2001, One.Tel actually requires a cash injection at least$270 million to continue its
existing operations and meet current and reasonably foreseeable liabilities, and the
requirement for cash injection was at least $287 million by 31 March 2001. One.Tel
would also incur additional indebtedness to Lucent Technologies of approximately $365
million for capital works relating to the construction of the network (NSW Supreme
Court, 2003).

At its peak, One.Tel’s strengths were recognised in consumer marketing and information
systems, intuitive platforms and resources based on R&D in the Australian Next
Generation Network, One.Tel continued to build quality, value for money telephony
products and services while remaining a low cost provider (Wikipedia).

1.2 “One.Tel” Collapse


The company was specifically geared to making money through stockmarket speculation.
Reports indicated the bonuses paid to Rich and Keeling were specifically tied to the rise
of the company’s share rather than profit or any other indicator of the overall viability of
the company (Cook.T, 2001).

One.Tel’s rapid expansion was way beyond its financial capacity coupled with its
misguided management decision. It was also badly hit by the changes in the European
network providers and more generally, One.Tel was caught up in the international
collapse of dotcom ventures (Cook.T, 2001).

The company’s high risk, low yield strategy, with generous incentives for new customers
could not be sustained in the small Australian market which had six mobile phone
providers – the second largest number of any country in the world 2 (Cook.T, 2001). The
fatal flaw in the business model of the company was that the telecom services were
offered to subscribers at lower than the price the company was paying for them itself. It
could only survive as long as it could raise new capital investment more rapidly than it
was burning money. Exhibit 1 provides an indication of the rate of worldwide growth that
was achieved. However, this remarkable growth was taking place without regard to
profitability or returns to shareholders, as Exhibit 2 demonstrates (Avison. D, Wilson. D.
& Hunt. S).

Exhibit 1: Growth of One.Tel Limited


Year Ended Sales Rev. $ Subscribers
1996 65.0m 80,000
1997 148.0m 160,000
1998 207.0m 290,000
1999 326.0m 642,000
2000 653.0m 1,840,000
Source: Table 2-An IT Failure and a Company Failure: A Case Study in Telecomuncations (One.Tel
Annual Report (2000)

Exhibit 2: Profitability of One.Tel Limited


2
The US, with a population more than 10 times larger than Australia, has seven mobile network providers.
The UK and Germany have only three (Cook.T, 2001).
Period Profit/Loss $
Year to June 1999 9.9m profit*
Year to June 2000 295.9m loss**
Half-year to Dec. 2000 132.0m loss**
Source: Table 2-An IT Failure and a Company Failure: A Case Study in Telecomuncations *One.Tel
Annual Report (2000);**newssanviews14780(2001)

The first public indication that the company was in trouble was the resignation of Rich
and Keeling. News Corporation and PBL initiated an investigation into company’s books
and promised a $132 million cash injection aimed at reassuring the markets. However,
the investigation found that the company needed at least $400 million to remain viable,
the offer was withdrawn (Cook.T, 2001).

One.Tel was declared insolvent in June 2001 and has since been liquidated3.

2 Who Killed One.Tel?


The thread leading to the collapse of One.Tel including: inappropriate management
compensation; creative accounting; failure of directors and managers to exercise due
diligence; lack of adequate regulation; and lack of independence in audit function
(Leung, P., Cooper, B.J., 2003).

Jodee Rich and Brad Keeling – Founder & Joint Managing Director
Keeling and Rich used their marketing skills and unwavering positive public statements
to promote the company and made assurance that One.Tel would have A$103 million at
June 30 (Hopkins. N.,2001).

Keeling did not fathom the true position of One.Tel; he wholly misunderstood the facts
One.Tel’s financial position and performance. Rich, particularly, was misleading the
market and shareholders by saying that the company is having big cash surpluses and
heading to profits; and the company was on target to meet its subscriber numbers and
gross profit projections. Through the last quarter of 2001, Rich gave the board and
3
The decision is reported as ASIC v Rich and Ors [2004] NSWSC 836.
directors James Parker and Lachlan Murdoch repeated upbeat assurances that the
company’s cash position and profitability is improving (Exhibit 3) (Lampe A.,2004). Rich
and Keeling were very much running the show at One.Tel, and they presented the
accounts to Geoff Kleeman as they wanted him to see, large sum of money were being
moved around the group between the subsidiaries to disguise the true situation (ABC-
Lateline, 2001).

Exhibit 3

According to former One.Tel Director James Parker, in August 2000 he asks Rich about
One.Tel’s cash position. Rich told him One.Tel would “readily achieve” $115 million in cash
holdings by the end of October and that the British operation “will start throwing off large
amounts of cash. It will be a jewel and a cash cow” (Lampe A.,2004)

In financial year ended 30 June 2000 One.Tel reported loss of $291 million. The share
price plummeted to below $1. Despite the loss, Rich and Keeling each received a
$560,000 basic salary and a $6.9 million bonus (Media Coverage).

Avison. D, Wilson. D. & Hunt. S contended that, Rich concentrated very much on the big
picture. Cadzow (2001), suggested his attitude was “why bother with petty concern like
faulty billing systems…when you can be thinking about global expansion”. Paul Budde,
communications analyst, put forward two failure of management as the reasons for the
collapse. Firstly, the decision to spend $1.2 billion building their own mobile network,
which Budde, argued was just ego and macho on Rich’s part. Secondly, the state of the
billing and debt-collection system, caused the company to go to the wall (Cadzow, 2001).

Mark Silberman – Finance Director


He did not exercise powers with respect to the company with due care and diligence;
allegingly misled the board as to One.Tel’s true financial position. One.Tel’s accounts
was kept by juggling the creditors, deferring payments of million dollars repatriating
money from overseas subsidiaries.

John Greaves – Chief Financial Officer


He fails to exercise his judgement with duty of care of an expert being a Chartered
Accountant, with extensive background in finance function of public company and as
chief financial officer at One.Tel. As a Chartered Accountant, he should be able to
properly assess One.Tel’s financial performance and spot the discrepancies in the books
thus alerted the board.

Rodney Adler – Company Director


He dumps One.Tel’s stock in the tumbling market. He is known to have sold off 6 million
One.Tel shares raising $2.2m after directors meeting on May 17 (Cook.T, 2001).

James Packer and Lachlan Murdoch – Board Directors


Stephen Mayne (2001) reported, they are responsible for approving the bonus deals and
pumping in hundreds of millions that triggered these very bonus payments which then
helped destroy confidence in the company. James Packer sacked PBL chief executive
Nick Fallon for questioning the One.Tel investment then hired a One.Tel spruiker in Peter
Yates to take over. As board director, they did not exercise their rights looking after the
One.Tel as they attended to the major parts of their multi billion empires. They should not
have sat on the board when there is no way in the world they had the time to keep an eye
on Rich and Keeling and hold them accountable.
3 Breach of Corporate Governance Issues

3.1 Laws Relating to Duties of Directors


Directors’ Duties
The directors of a company are responsible for the management of the company’s
business.4 Management encompasses not only the day-to-day running of the company’s
operations but also the development an implementation of a long-term strategy; ensuring
proper balance between the interest of various stakeholders; ensuring any activity
concerning the company is carried out in the interest of the company (Kala. A, 2003).
Directors, individually and as a board, bear the primary duty to carry out the corporate
governance policies of the company.

The ASX’s principles of Good Corporate Governance and Best Practice


Recommendations summarises the responsibilities of the board:
1. Lay solid foundations for management and oversight, including its control and
accountability system;
2. Structure the board to add value by ratifying, appointing and removing the chief
executive officer (or equivalent), and the company secretary;
3. Promote ethical and responsible decision-making, input into and final approval of
management’s development of corporate strategy and performance objectives;
4. Safeguard integrity in financial reporting, reviewing and ratifying system of risk
management and internal compliance and control, code of conduct and legal
compliance;
5. Make timely and balanced disclosure;
6. Respect the rights of shareholders;
7. Recognise and manage risk, approving and monitoring the progress of major
capital expenditure, capital management, acquisitions and divestitures, and
approving and monitoring financial and other reporting;

4
The actual division of powers is dictated by the internal rules of the company, including the articles of
association of the company and the provisions of the Company Act itself (Kala. A,2003)
8. Encourage and enhanced performance, monitoring senior management’s
performance and implementation of strategy, and ensuring appropriate resources
are available; and
9. Remunerate fairly and responsibly
10. Recognise the Legitimate interest of stake holders (Eric Mayne, 2005 & Kala. A,
2003).

Director’s duties can be found in common law and statute law.

Fiduciary Duties
Common law and equitable duties owed by directors are collectively referred to as
general law duties:
 to act in bona fide in the best interest of the company – means to act in good faith,
honestly without fraud or collusion. It is the obligation which trust law places on
someone who must act in the best interest of another;
 to exercise powers for their proper purposes – directors are required to exercise their
powers for the purpose for which they were conferred. Thus, using a power granted
by the legislation or the constitution of company for an ‘impermissible’ reason makes
action void as abuse power. This is so even though the director honestly believed the
action to be in the best interest of the company. Here the test is objective, not
subjective as in the case of common law duty to act in good faith;
 to retain their discretionary powers – the board must not, without express authority
from constitution, or from statute, delegate their discretion to others. Nor can the
directors simply accept the direction of others as to how they will vote at board
meetings;
 to avoid conflicts of interests - fiduciaries are not permitted to place themselves in
any position where there is an actual or potential conflict between their personal
interest and their duty to the company e.g. contracts with the company, personal
profits and competing with the company; and
 to act with care, skill and diligence – this is not a fiduciary duty. The duty of a trustee
in respect of the skill and care required a much heavier one than that of a director. A
director is expected to run a business aimed at making a profit and therefore must be
in a position to take risks to enhance the prospects of the enterprise. Directors are
chosen because of their ability to make good business judgements (CPA).

The legislative position of the Corporations Act 2001 (Cwlth) is set up as follows:
• Section 180 requires the Director or Officer to exercise a degree of care and
diligence that a reasonable person would exercise in the Corporations
circumstances, with a “safe harbour” for those who satisfy the “Business
Judgement” rule.
• Section 181 requires the Director or Officer to act in good faith in the best
interests of the Corporation and for proper purposes.
• Section 182 prohibits a Director or Officer from acting improperly so as to use his
position to gain an advantage for themselves or someone else. Or to cause
detriment to the corporation.
• Section 183 precludes a person who obtains information because he is a Director,
from improperly using that information to gain an advantage for himself or for
someone else, or to cause detriment to the corporation.

3.2 Analysis of the Breach


Rodney Adler – Company Director
Adler contravened his directorial duties as an officer pursuant to s. 180, 181,182 and 183
of Corporations Act 2001. He fails to ensure One.Tel make affordable expansion and
loans and fails to ensure the company has a proper system of controls and audits in its
business to avoid defalcations by other Officers and employees. Immediately after the
directors meeting on May 17 2001, he sold off 6 million One.Tel shares raising $2.2
million. He did not care for the benefits of shareholders, company and employees of
One.Tel. He is in for getting as much as he can before the company collapse. None of the
“Business Judgement” rule nor acting in good faith matters to him. By selling his shares,
he is using his position as a director in One.Tel to gain advantage for himself by using the
information gained in the board’s meeting. He is using privileged information gained at
the board for trading in his own benefits and gains. It does not matter to him the
implications or consequences to the company by his act of dumping One.Tels share.

Mark Silberman – Finance Director


He fails to supervise One.Tel’s finances adequately and failed to keep the board informed
and he might have fiddle with the accounts by simply juggling the creditors, deferring
payments and repatriating money from overseas subsidiaries. And this had mislead the
board of the actual cash flow of One.Tel.

John Greaves – Chief Financial Officer


Greaves relied on the financial information supplied to him by others, including the
executing directors. The financial information supplied to Greaves was limited and
inaccurate in material respects. He fails to take reasonable steps to:
• promptly ensure that he and the board were aware of certain financial
circumstances, including cash balances and the aging of debtors, in January,
February and March 2001;
• monitor the management of One.Tel to properly assess the financial position and
performance and detect material adverse developments;
• ensure that all material information was available to the board, particularly
concerning the adequacy of cash reserves, and the actual financial position of
various segments of the business; and
• ensure that systems (billing and accounting system) (Exhibit 4) were maintained
and monitored which resulted in accurate and financial information flowing from
management to the board (Jaques.M.S.).

Exhibit 4: Excerpts from IT Failure and Professional Ethics:The One.Tel Case


One Senior accountant suggested that `The place was a joke. There are no structures, no
accounting systems, no processes and no control` (Barry, 2002,p185). David Barnes, the
group financial controller, finally resigned stating he was not prepared to do what his bosses
were asking, and that he considered it completely unethical (Barry, 2002,p.255).

Being a qualified Chartered Accountant and with his expertise he should not rely on the
information provided by others. He should take an active role in ensuring the accounts of
the company has been correctly reported and the accounting system is in place and alert
to Silberman’s act of keeping the accounts simply by juggling the creditors, deferring
payments and repatriating money from overseas subsidiaries.

James Packer and Lachlan Murdoch – Board Directors


Both, being otherwise engaged in their other more lucrative business empire. They did
not monitor the business and left the running of the business to both Rich, Keeling and
Silberman. They did not know the true financial position of the company and make
judgement according to information or promises made by Rich. They further approved
bonuses of $6.9 million to Rich and Keeling in financial year ended 30 June 2000 despite
reporting a loss of $291 million. Packer sacked PBL chief executive Nick Fallon for
questioning the One.Tel investment (Mayne S.). As a director, he should have been alert
when Fallon question One.Tel’s investment and investigation should be carried out to
verify the fact and financial status of the company.

Jodee Rich and Brad Keeling – Founder & Joint Managing Director
As joint managing director, both failed to mange their responsibilities including
responsibility to properly assess the financial position and performance of the group and
detect and assess any material adverse development; and taking reasonable steps in
ensuring that the directors are fully informed of all material financial information about
the adequacy of cash reserves and One.Tel’s actual financial position and performance.
They did not take steps to either to apprise themselves of the financial situation and the
deterioration from about the end of January until about the end of April 2001, or to ensure
that the board was aware of them. They also made public statements about One.Tel’s
financial position and performance which is entirely incorrect and no reasonable factual
basis for them. It is also their duty to notify ASX the actual circumstances of the
company’s financial position and performance, which they did not and thus did not
comply with their duty. Failures to ensure the establishment of proper system to produce
accurate and reliable financial information, failure to maintain cash reserves at a level
which ensured liquidity and failure to employ an appropriately qualified finance director.
On top of that, the two help themselves to a lucrative salary and bonuses.

4 Conclusion
All the directors mentioned above has breach the corporate governance rule as a director
of a company one way or another. Adler, Silberman, Greaves, Packer, Murdoch, Rich and
Keeling have all failed to carry out their fiduciary duties by acting in their own interest
which do not include taking any active participation or interest in caring for the benefit of
the company and shareholders’ interest. They are not interested to investigate on the
actual financial performance and ensure the correct accounting reporting of One.Tel’s
accounts. They failed to employ their expertise to the management of the company and
failed to carry out the fiduciary duties as company director: to act in bona fide in the best
interest of the company; to exercise powers for their proper purposes; to avoid conflicts
of interests and to act with care, skill and diligence.

It is obvious from the analysis above that Rich and Keeling pursued their self interest or
obsession in building their own mobile network by expanding too fast and investing all
the cash in One.Tel without having a thought for maintaining cash reserves at a level
which ensured liquidity. They also did not stop to apprise the accounting system used to
control the payments and collections system. When being queried, they presented a
version of account which is incorrect to the public and ASX. They did not act in good
faith and honestly without fraud or collusion. They do not care for the financial
performance of the company instead plays on the share prices by giving baseless
statement and expanding the company to push up the share prices so that they can get
their director’s bonuses. As a director, they are expected to run a business aimed at
making a profit with calculated risk instead they keep expanding beyond One.Tel’s
financial capability. They also help themselves to hefty bonuses when the company is at
the eve of collapsing.

Apart from not carrying out their duties as directors, Packer and Murdoch has also
approved bonuses to Rich and Keeling when it is clear from the company accounts that it
is facing losses. Bonuses paid to directors should be tied to company performances not
assurance and forecast for future earnings.

Adler, Silberman, Greaves, Packer, Murdoch, Rich and Keeling each have breach the
Corporations Act 2001 (Cwth) section 180,181 and 182 as they failed to exercise a degree
of care and diligence, to act in good faith in the best interests of the Corporation and
caused detriment to the corporation. However, apart from s.180, 181 and182, Adler has
also breach s.183 whereby it precludes a person who obtains information because he is a
Director, from improperly using that information to gain an advantage for himself or for
someone else, or to cause detriment to the corporation. Adler sold off his shares at
One.Tel after attending the directors meeting, apparently he is using the information he
gets during the meeting and knows that something is very wrong with the company
therefore sold off his shares.
5 Proposed Legislative Response
Just because [Directors and senior executives] have personal money invested, or are
on the board representing a major investor, does not mean they do not have to worry
about other shareholders, creditors or employees. Their responsibilities extend
beyond self-interest. “Recent collapses suggest that the dangers of ‘cliqueness’ of
directors and senior executives cannot be ignored (RMIT, 2001). Corporate
governance is, in its broadest sense, the stewardship responsibility of corporate
directors to provide oversight for the goals and strategies of a company and to foster
their implementation. The recent collapse of HIH insurance and One.tel suggested
that “One size does not fit all” when it comes to corporate governance. The
governance structures and practices should be tailored to meet appropriate corporate
and governance activities and needs. The ASX has produce its own set of new listing
requirements and this was followed by the Federal Government’s implementation of
the Corporation Law CLERP9 reform proposals from 1 July 2004 (Rhyn D.v. and
Holloway D.A).

ASX Corporate Governance Council (CGC)

The ASX took a proactive stance and formed a plenary council (CGC) of a number of
stakeholder groups (21 in all) including business, the accounting profession, investor
groups, company secretaries, company directors and the Law council resulting in a ten
principles and comprehensive guidelines about operationalising ‘best practice’ corporate
governance. This has given effective regulatory weight in the same way as the UK
“comply or explain” approach. The ASX listing rules were consequently amended so that
the listing rule 4.10 now requires company to disclose their annual reports the extent
which they have followed or elected not to follow these best practice recommendations
(ASX, 2003,p.5). Principle 4 is similar to the requirements of the Sarbannes-Oxley Act in
that CEOs and CFOs are required to submit in writing to their boards that the
corporation’s financial reports present a true and fair view of the operational results and
financial conditions. Whereas Principle 7 covers statements about integrity of risk
management and control compliance is both efficient and effective (Rhyn D.v. and
Holloway D.A).

CLERP 9 Requirements
Intervention by the Australian federal government has resulted in the Corporate Law
Economic Reform Program (Audit Reform & Corporate Disclosure, CLERP 9) Bill being
released for comment on 8 October 2003. It subsequently passed through Parliament (late
June 2004) and had a commencement date of 1 July 2004. The primary objectives of the
Act involve promoting transparency, accountability and enhancing shareholders rights.
According to the Department of Treasury (the administrators of corporate law) it will
augment auditor independence, achieve better disclosure outcomes and improve
enforcement arrangements for corporate misbehaviour (Treasury, 2003).

CLERP 9 does, however, propose to extend the reform processes beyond the narrow
boundaries of the corporate governance recommendations and principles produced
internationally and in Australia. In future, shareholders will be able to comment on, and
take non-binding vote on the mandated remuneration disclosures for executives and
directors (Dawes, 2003). They are also concerns on the issue of continuous disclosure and
associated penalties for companies that do not comply with the requirement (Brown,
2003; Anonymous, 2002).

One of the more important provisions, relates to the need for the annual directors’ report
to include a more detailed operating and financial review of the company performance.
This is to be sufficiently detailed to enable shareholders and others to make informed
assessments of the company’s current position and future strategies. In addition, the
legislative requirement for CEOs and CFOs to make a formal written declaration to the
board of directors that the annual financial statements are ‘true and fair’ takes Australia
down the USA path of the Sarbannes-Oxley Act. It would certainly would have a
sobering and salutary effect on the company senior executives if, in future corporate
failures, some senior management personnel are taken away in manacles in the back of
police vehicles if this provision is breach (Rhyn D.v. and Holloway D.A).
Good governance is not guaranteed, however, merely by implementing ‘best practice’
guidelines and recommendations. Organizations needs to ensure that the governing
boards meetings does not become ‘rubber stamping’ exercise and implement both ‘form
and substance’ changes emanating from the best practices governance recommendations
(Rhyn D.v. and Holloway D.A).

Sonnenfied (2002) highlights a particularly positive response to the conundrum of


managerial prerogative and the adoption of a ‘form over substance’ approach to
governance of organizations. He argues that it is not the rules and regulations of the
governing process that count but the way people work together is vital. Therefore, what
distinguishes exemplary (effective) boards is that they are robust, effective social systems
(2002, p. 108). In other words they exhibit a ‘healthy’ boardroom culture. This is the most
critical of the additional elements needed to ensure that good governance practice is
translated into ‘better’ organizational performance. The role of the chair and that of the
independent members (particularly staff members) needs to be expanded to help deliver
this ‘healthy’ culture. Such culture is enabled by openness, trust and strong relationship
building amongst the differing parties and members. This will allow organizations to reap
the benefits from their existing knowledge/intellectual capital and unlock and realise the
full potential of the organization (Rhyn D.v. and Holloway D.A).