Question

One of the worst of Bond’s acquisitions was the ailing American brewer G Heileman, for which he paid $1.26 billion in 1987, around three times what it was worth. Heileman, Bond figured, would be the perfect vehicle to launch his local brewing assets – Swan, Castlemaine and Tooheys – in the US market. It turned out to be merely another symptom of an incurable condition which caused Bond to do deals and then juggle his increasingly massive debt to pay for them.

In the same year he bought Heileman, Bond also made the most expensive art purchase the world had ever known. But the $US54 million he paid for Vincent van Gogh’s Irises was typical of his unusual deals, its purchase having been financed to the tune of around $US27 million by the auctioneer Sotheby’s. Bond never paid them back, and the painting never graced any of his homes. Bond meanwhile struck another deal during the same period that typified his doubtful business acumen and became part of Australian business folklore.

The purchase from Kerry Packer of the Nine Network for $1.05 billion, and its later sale back to Packer for $300 million was a dream transaction – but not for Bond. By 1989, the man who had marched boldly into boardrooms around the world found himself firmly on the back foot with Bond Corporation’s debt at astonishing levels and his once compliant bankers clamouring for repayment. More persistent than the bankers, however, was the English businessman Roland “Tiny” Rowland, in whose company Lonrho, Bond, using yet more borrowed money, had acquired a substantial holding. Rowland pulled Bond’s business empire apart in a 93-page document he published showing it to be insolvent and trading illegally. Rowland’s revelations made an already slippery slope ever more perilous. The first part of his father’s forecast came to pass in 1991 when Bond faced trial for theft over a deal to rescue the failed Rothwells merchant bank. It was a case that revealed much about how business was done Bond-style.

Bond allegedly talked a business colleague Brian Coppin into tipping a few million into a rescue of Rothwells while concealing that Bond Corp would receive a $16 million fee for organising the rescue. Bond served six months, only to be acquitted at a re-trial. That success proved fleeting as the world continued to crash down around the man who little more than a decade earlier had been named Australian of the Year. In 1996 Bond was committed to stand trial for defrauding the shareholders of Bell Resources, a company he had acquired from the late Robert Holmes a’Court, of more than $1 billion. He also stood trial and was jailed over a fraudulent art deal involving the Edouard Manet painting La Promenade which Bond’s public company, Bond Corp, sold to his private company Dallhold for $2.46 million. He got four years for stealing the money from Bell resources and three for the art deal. Together the guilty verdicts made him the biggest fraudster in Australian history.

Research the case of early corporate collapses in Australia mentioned in the textbook on page 11: Alan Bond. Prepare a brief report outlining the case. What was the underlying reason for the failure? Would today's corporate governance codes, rules and regulations have prevented these outcomes? (200 words)

Answer 1

According to Sykes (1996), Alan Bond was the person who took Australia to lowest position after taking it to the highest once. He was known as one of the best directors and the finest personality in Australia. Bond during 1997 pleaded guilty and sentenced many years in prison over his misconduct regarding Bell Resources as Bond kept using the finances of Bell Resources to show good cash reserves at Bond Corporation and reportedly transferred more than A$1.2 billion from Bell Resources to Bond Corporation using his influence and controlling interest in the Bell Resources. Bond Corporation eventually collapsed and Bell Resources suffered a paramount loss and goodwill because of this (Delilkhan, 1990). The directorship of Bond was the main reasons of all this and the management was working in their own best interest rather than in the interest of shareholders which is termed as agency theory. Auditors of company also failed to predict this collapse and had undue influence of the management.

Corporate governance would have avoided all the above corporate failures. The composition of directors of a company under corporate governance would have helped the corporation like Bond corporation to keep the interests of the company aligned with that of shareholders and not the interests of the directors like Alan Bond who misrepresented the true position of the company in order to fulfill his own goals and motives and in return both Bond Corporation and Bell Resources suffered (Salim, et al., 2016).

Furthermore, an audit committee would have helped prevent the catastrophic events for the above corporation as timely information about the false practices and negative cash flows would have given time to rectify the errors and find a solution to the compiling problems. Separate roles of chairman and CEO would have created a sense of responsibility in both of the persons and they would have worked in the best interest of shareholders as there would have been a supervision over their shoulders. To recapitulate, corporate governance would have prevented the collapse of such huge corporations and many would have saved from undue suffering and financial losses.

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