Corporate Failures 1

Corporate Failures 2

Thesis: Although corporate failure has been perceived as a problem that faces most cooperatives

and financial companies as a result of mismanagement, some highly skilled and

underappreciated managers disagree with this notion. These managers have been able to

either prevent or reduce corporate failures by simply being committed to “Accounting for

the Future (AFTF)” instead of blaming the CEO’s. This implies that, with such

commitment the international community could resolve the culture of corporate failures

by initiating laws that permit stockholders bill of rights thereby restoring the

accountability to the owners of these financial bodies.

Corporate Failure

Corporate failure refers to the massive loss or reduction of a company’s equity or shares

to a level that exceeds its earning for a very long period of time as a result of a management

culture that is based on self service and greed (Vanessa, 2009). Alternatively, O’Neill &

Brabazon, (2006) suppose that corporate failure can also imply conditions where top

management of a financial institution are incompetent to handle important policy issues of an

organization resulting into an organization being incapable of paying its debts; a condition

commonly known as credit crunch or bankruptcy. The extend of such danger, however is a

matter of debate, as it might not be very important to blame the CEO’s by the mere fact that they

are in charge of authority and also responsible for management and monitoring of the finances

(O’Neill & Brabazon, 2006).

The first cause of corporate failure is attributed to poor strategic decisions within the

company. According to O’Neill & Brabazon, (2006) majority of company executives and
 Corporate Failures 3

managers have a tendency of assuming various issues which are critical in determining the

company’s profitability and progress such as marketplace, customers, and competitors.

Christopher, (2010) believes that this is due to the fact that executives and managers are the core

controllers of companies and therefore failure of these executives to identify and adopt right

strategy for any corporate company is more likely to drive the corporation in a wrong direction.

Similarly, wrong strategies on the available business opportunities would also make it hard for

the executives to restructure their corporation for profitability. Christopher, (2010) further argues

that most financial bodies which fail had probably experienced managerial reasoning and

strategic thinking breakdown thus making the company executives to be exposed to executive

mindset failure. In such instances, corporate managerial sector tend to use their position in

making major decisions about the company instead of being open-to new ideas. The international

community has universally agreed that companies could resolve corporate failures associated by

poor strategic planning by adopting “Accounting for the Future (AFTF)” model. This model

involves incorporating existing accounting technologies, trends, and development in the financial

companies.

Secondly, corporations have also failed as a result of over-expansion and ill-judged

acquisitions. Whenever a corporation decides to cooperate or partner with an enterprise that has

non-identical ideas, then the corporation might encounter undesirable acquisition which would

expose the company to failure instead of spearheading it to success through various benefits

(Wright, 2010). In situations where there is improper coordination of various business

partnerships, corporations would fail to adhere to effective and prompt communication and

proper documentation, and deeds which acts as the guiding principle for acquisitions of shares.

This would imply that the company will be forced to have soured relations with partners leading
 Corporate Failures 4

to possible bankruptcy. Christopher, (2010) agrees with Venessa’s, (2009) view citing that

continuous organization success can result into risk taking because of over confidence in

dealings. Therefore corporations might decide to enact over-expansion pegging their vision on

the previous success without considering possible alternatives or making important enquiry.

Failure of business internal controls and ineffective boards is another major cause of

corporation failure (O’Neill & Brabazon, 2006). Corporation relies majorly on the internal

control such as information, control systems, and structures. This implies that, whenever these

structures are not managed well then they would hinder corporate performance instead of helping

in boosting its growth (Wright, 2010). Failure to properly manage the structures in a corporation

would endanger the critical pieces of information making the management not to understand

certain procedures. Nevertheless, corporate boards might become ineffective by not allowing

open-mind for new ideas (Wright, 2010). That is, the board might be driven by attitudes of

confinement to old ideas and unwillingness to learn new ideologies as a result of self service and

greed that has been the major cause of bankruptcy in financial institutions. Such cases occur

when CEOs decide prefer to consult old-inappropriate beliefs whenever they are faced by any

form of corporate challenge or whenever they over generalize various aspect of the market.

However, economist tend to disagree with such argument based on the fact bankruptcy is a

necessary and healthy part of capitalism.

Having realized that majority of corporative failures are associated to operational risks,

Christopher, (2010) have suggested that corporate failures could be resolved by adopting well-

defined vision that outlines the mission and the intended roles of the organization. This solution

advocates for the need of such companies to acknowledge suppliers, employees, customers, and

responsibilities of every person in their vision so as to avoid power strife (Vanessa, 2009).
 Corporate Failures 5

Although most people might agree with such measures due to the belief that it would allow such

organizations to mobilize and unite all its members for a common good, highly skilled and

underappreciated managers tend to differ with such solution. Their argument is based on the fact

that resolving the problem of corporate failures transcends dealing with mismanagement since

they are not the major cause of corporate failures. As such, their solution is based on breaking

the damn unions and the regulators from the federal government.

It is also important for nations, executives, boards, and financial bodies to have well

detailed and defined business plan to enhance corporate business. From Christopher’s, (2010)

perspective this would involve first knowing exactly the type of industry and the appropriate

vision to adopt for the success of the corporation. For such plan to be realistic, the federal

government should ensure that the management of these financial organizations is accountable to

the owners. O’Neill & Brabazon (2006) concur with this idea citing that taking into account the

above factors puts emphasis on the stakeholders’ bill of rights that prevent them from starting a

corporate model that they cannot manage. However, most CEOs would argue that such bill of

rights is not essential as it would deprive them of the right to exercise their authority, manage the

organizations freely and report on the company’s financial status.

Lastly, the corporate should be able to take into account various factors such as direct and

indirect competition that the organization is likely to face (Christopher, 2010). This aspect is of

critical importance when it comes to designing and expanding corporate organizations either

through expansions or adopting a totally new product. Business models require adoption of

simple model that allows for increased complexity as time progresses. Such model is said to be

conducive because it recognizes and allows room for organizational growth (Christopher, 2010).
 Corporate Failures 6

Similarly, corporate failure would be eliminated by avoiding concepts that advocates for

new product instead of improving on the available practices.

From the above discussion, it is clear that corporate failures are not only caused by

mismanagement, but also results from federal unions and filed regulators. Mismanagement

occurs whenever there are poor strategic decisions, over-expansion and ill-judged acquisitions,

and ineffective boards. On the other hand, corporate failure can result from unions and the

ridicules federal regulations which can be resolved by adopting laws that permit stockholders bill

of rights thereby breaking the union and eliminating federal regulators.

 Corporate Failures 7

Reference

Christopher, R. L. (2010). Whitewashing war: historical myth, corporate textbooks, and

possibilities for democratic education. New York: Teachers College, Columbia

University.

O’Neill, M. & Brabazon, A. (2006). Corporate Failure Prediction Using Grammatical Evolution.

Journal of Biologically Inspired Algorithms for Financial. 3-4 (1), 219-228.

Vanessa, F. (2009). Corporate insolvency law: perspective and principles. Cambridge, UK:

Cambridge University Press.

Wright, E. R. (2010). Bailouts: public money, private profit. New York: Columbia University

Press.