INSEAD Library

Includes bibliographical references and index

Digitized

Greed and Corporate Failure The Lessons from Recent Disasters Contents Foreword Preface Acknowledgements xi xiii xv Chapter I Introduction Poor strategic decisions Overexpansion Dominant CEOs Greed, hubris and a desire for power Failure of internal controls Ineffective boards Other issues The millennium meltdown The recent past The aftermath 2 2 3 4 5 6 7 8 9 II Chapter 2 Barings and Allied Irish Bank: Lessons Ignored A new dawn: Around-the-clock global trading 'The sixth great power' Marrying the traditional and the entrepreneurial The party is over Confused reporting lines in a matrix management structure Enter a 'star performer' ­ Nick Leeson The Singapore business The cover-up and creation of the 88888 account Discovery and collapse The fallout 'Plus ca change, plus c'est la même chose' The unlearnt lessons Memories are short What went wrong and lessons to learn Why Allied Irish repeated the mistakes of Barings and lessons to learn 13 14 16 18 19 I9 20 22 23 24 25 26 26 27 28 29 vii viii Contents Chapter 3 Enron: Paper Profits, Cash Losses The earthquake The creation of Enron The Enron culture A changed environment creates new opportunities Changing the rules of the game 'Mark-to-market' accounting Increasingly adventurous trading operations Expanding the traditional business The broadband story Reporting spectacular financial performance Market and other pressures start to take their toll Being creative with off-balance-sheet transactions The impact of these deals Storm clouds gather The downfall The Powers committee post-mortem What went wrong and lessons to learn The consequences 33 34 35 36 37 38 39 41 41 42 43 44 44 46 46 48 49 50 56 Chapter 4 WorldCom: Disconnected The genesis of WorldCom A tumultuous few years Some doubts surface Moving into new markets The tracker stock diversion A cosy relationship with investment banks Strained personal finances Accounting shenanigans No checks and balances Rumbled at last What went wrong and lessons to learn 59 60 61 63 64 65 66 67 68 70 72 73 Chapter 5 Tyco: Greed, Hubris and the $6000 Shower Curtain Three decades of growth and profit Dennis Kozlowski ­ a man with persuasive powers Last vestiges of frugality disappear An acquisition a day ... Extending the portfolio into telecoms and finance The share price on a downward trajectory The house of cards comes tumbling down Blurred boundaries The fallout What went wrong and lessons to learn 81 81 83 85 86 87 88 90 91 92 94 Chapter 6 Marconi: Establishment to Wunderkind to Basketcase The man with the Midas touch Contrasting leadership styles 98 99 100 Contents A new strategic vision Defence ­ weighing up the options Jumping on the telecoms bandwagon The tide turns Epilogue What went wrong and lessons to learn 102 104 105 108 111 112 ix Chapter 7 Swissair: Crashed and Burned Swissair takes off Airline industry deregulation in Europe An alliance is proposed McKinsey's vision for Swissair Spreading its wings into Europe Hunting for potential partners A distinguished, but ineffective, board Reality dawns Aftermath What went wrong and lessons to learn 116 116 117 117 119 121 123 I25 126 128 129 Chapter 8 Royal Ahold: Shopped Till He Dropped The first century ­ from small local shop to international group New team at the top Ambitious plans for rapid expansion Embarking on a major spending spree Food service industry points to new growth opportunities Massaging the figures The engine begins to falter The Argentinian problem From mutterings of trouble to full-blown crisis Heads must roll Ahold after van der Hoeven What went wrong and lessons to learn Has Ahold really changed? 135 136 137 138 138 140 142 143 144 144 145 147 147 151 Chapter 9 Parmalat: Milking the System From local Italian milk company to international dairy giant Home, church and factory Explosive growth A force to be reckoned with Going for broke Things turn sour The decline continues The Epicurum Fund A sinking ship Criminal investigations How did Parmalat do it? What went wrong and lessons to learn The perils of overexpansion 153 154 155 156 157 158 159 160 161 163 165 166 170 171 Contents Chapter 10 Conclusions What has been done? A first priority: Improving boards and boardroom performance Shareholder involvement The need to realign executive compensation Increase the involvement of the audit committee Reform of the investment banks Reform of the accounting profession 'Profit is an opinion, cash is a fact' What next? I73 174 175 177 177 179 179 180 182 182 184 186 187 199 Epilogue List of Abbreviations Glossary Index