Connection between commonly used financial ratios and misrepresentation of financial statements of collapsed corporations

This paper unravels dynamic and intriguing shifts in the use of financial ratios in signaling corporate collapse. An empirical examination of the anecdotal evidences from notable recent corporate collapses coupled with the short-lived usefulness of financial ratios in various prediction models suggest that companies(1) that deliberately misrepresent their financial statements may have taken cues from the ratios that are commonly investigated. This proposition is supported by an extensive examination of over 50 studies conducted between 1968 and 2002. The erosion in the reliability of numbers in financial statements has led to significant distortions in the predictive power of financial ratios when used in signaling corporate collapse. Recent collapses such as Parmalat in Europe, Enron and WorldCom in the U.S. and HIH in Australia, present yet another reminder that financial statement items are being misrepresented. These are all large corporations with well-established household names, and are for sure closely monitored by financial communities around the globe. Nevertheless, a common thread seems to link the collapse of these companies: none of these collapses were foreseen by credit rating agencies or foretold by the widely accepted bankruptcy prediction models. Why? This paper attempts to use some anecdotal evidence in order to provide logical explanations to the existence of such a common thread. It argues that there appears to be anecdotal evidence to suggest that directors of publicly listed companies that have collapsed may have deliberately misrepresented financial statement items.

Ensuring balance in corporate governance : parts 2F.1 and 2F.1A of the Corporations Law

Effective corporate governance must balance the competing, and at times conflicting, objectives of efficient endeavour and accountability. The CLERP amendments to the Corporations Law introduced on 13 March 2000 go a long way towards providing this balance. While the business judgement rule was introduced to promote efficient endeavour, Pts 2F.1 and 2F.1A maintain corporate accountability. This article compares Pts 2F.t and 2F.1A of the Corporations Law. It is argued that, although there are procedural and substantive differences between the two parts that need to be understood by practitioners, the importance of the two Parts is that they work together to provide for a much-needed improvement and enhancement of shareholder rights and remedies, thus upholding accountability in corporate governance.

Related party transactions under Pt 2E of the corporations act: time for reconsideration

The related party provisions under Pt 2E of the Corporations Act 2001 were introduced in 1992 to protect the resources of companies and shareholder interests by requiring that directors disclose financial benefits given to 'related parties' -- those capable of exercising significant influence over the giving of such benefits. The contention of the authors in this article is that Pt 2E has been unsuccessful in achieving its intended purpose, and should be repealed in its entirety. The authors argue that the various provisions of Pt 2E are so confusing and convoluted that they potentially violate the rule of law virtue that laws must be promulgated in a manner that is clear, so that it is apparent from reading the laws what one must do. Further, [*2] the manner in which Pt 2E is presently drafted, especially the definition of related party, fails to reflect the purpose behind the provisions, making the overall operation of Pt 2E ineffective. It is also argued that Pt 2E is superfluous since the fiduciary duty of directors to disclose a conflict of interest, and to a lesser extent the requirement for disclosure of material personal interests under s 191 of the Corporations Act, adequately deal with the transactions presently attracting the attention of Pt 2E. In light of all this, it is contended that the law would be demonstrably improved by repealing Pt 2E.

The right to privacy and corporations

Traditionally the right of privacy has not been recognised at common law. However, recently the High Court has indicated that it may be willing to develop a new tort of invasion of privacy. Several of the justices have stated that the new action would only relate to natural persons, not corporations. This is because the principles said to underpin the right to privacy, autonomy and dignity, are supposedly inapposite to corporations. This article argues that this reasoning is flawed. Neither the right to autonomy nor dignity is capable of underpinning the right to privacy. Hence, no sustainable basis has so far been advanced for restricting the availability of any future tort of invasion of privacy to individuals. This article also questions whether a separate tort is needed in view of the protection already provided to the privacy interests of individuals and corporations under the equitable doctrine of confidence.

Prosecuting corporations and officers for industrial manslaughter-recent Australian developments

There have been concerns for some time about whether breaches of duty that cause a worker's death are appropriately dealt with under occupational health and safety legislation, or whether criminal prosecution is warranted in those cases involving recklessness or gross negligence. Defaulting employers are rarely prosecuted under existing criminal laws and there are serious doctrinal barriers to finding a corporation guilty of mens rea offences.
The Australian Capital Territory leads the way in Australia with the recent introduction of new criminal offences of industrial manslaughter for corporations and their senior officers. These laws rely on concepts of corporate liability based on organisational responsibility and corporate culture in the model Criminal Code Act 1995 (Cth) , thus avoiding the limitations of the identification doctrine. Other active Australian jurisdictions, whilst initially open to the notion of industrial manslaughter laws, have preferred to make changes to existing OHS laws to deal with the problem of workplace fatalities.
Whilst it has its limitations, and applies only in Australia's smallest jurisdiction, the Australian Capital Territory legislation reflects a commitment to treating workplace deaths with the seriousness they deserve, and making it easier to prosecute corporations whose operations are conducted recklessly or with gross negligence.

Ambiguities and inconsistencies in relation to the obligations of proxies under corporations law: a model for reform

This article reconsiders the important question which came to light as a result of the controversial 2002 Coles Myer annual general meeting: do directors that are appointed as proxy have an obligation to vote as directed (and indeed should they)? A recent decision of the New South Wales Supreme Court, which was subsequently approved on appeal, stands for the proposition that proxy holders are agents of the shareholders that appointed them. However, currently the Corporations Act only requires a Chairman appointed as proxy to vote as directed — not an ordinary director. This article briefly explains the present state of the law in Australia on this issue, and then explores some interesting recent judicial remarks which may suggest that ordinary directors appointed as proxy must vote as directed in order to satisfy their director’s duties (both common law and statutory) to the company. We finally outline a proposed statutory reform initiative which seeks to remove the present uncertainty in the law by introducing a blanket requirement that all proxy holders must vote as directed.

A few good men: psychoanalysis, Abu ghraib and (the) American right

This essay proffers a psychoanalytic reading of the events of Abu Ghraib as deeply symptomatic of changes in American foreign policy and political culture. The paper examines the Lacanian understanding of group formation developed by Slavoj Zizek in his work on politics and culture (in Part I), and then applies this understanding to the Abu Ghraib scandal (Part II). In Part III, implications of the analysis are elaborated, in terms of Zizek's contention that the contemporary "permissive society" engenders in subjects the desire for new forms of mastery or "moral clarity".

Correlates of sexual assault in a sample of male African American crack cocaine users

Although numerous studies have reported an association between substance use and sexual assault, little is known about the impact of sexual assault on male African American crack cocaine users. This study found that from a sample of 137 respondents from Houston, Texas, one-third reported having been sexually assaulted at least once during their lifetime. Respondents who reported sexual assault were using cocaine more often and were more likely to be physically dependent on drugs and to report greater numbers of physical health problems due to their drug use. However, no differences were identified in respect of reported mental health problems, or problems with family, friends or the workplace associated with drug use. The findings suggest further research as to the impact of sexual assault on male crack cocaine users is warranted and that clinical staff working with male substance users require some awareness of the impacts of sexual assault.

Statutory injunction - call for amendment to s 1324 of the Corporations Act

It is well documented that s 1324 is a useful tool for restraining a person from engaging in conduct that contravenes the Corporations Act 2001 (Cth). Without examining the provision, one tends to agree with that statement. In practice, however, the provision does not often provide the outcome that is expected. The author argues that the lack of use of s 1324 is due to the uncertainty and ambiguity in the application of the provision. Unlike with ASIC, the test that a person must satisfy when applying for an injunction is not clear cut. Whether damages could be claimed under s 1324 in place of an injunction is also unclear. The article sets out to argue that some integration with the equitable principles is vital for the survival of s 1324, as injunctions are traditionally a remedy conferred in equity and the Parliament has adopted the concept.

The impact of religious affiliation while growing up on substance use by African-American crack cocaine users

This paper explores the relationship between church attendance while growing up and the substance use issues reported by 159 African American crack cocaine users in Houston Texas. It was found that more frequent juvenile attendance at church was associated with being less likely to suffer withdrawal symptoms or to take drugs to avoid withdrawal. However/ there were no differences between regular/ irregular and non-attendees in respect of number of substance use issues reported or attendance at a self help group for substance use/ even though these are often faith-based. The relevance of including questions on religious participation when young in screening instruments to be used with adult substance abusers is questioned.

Medication compliance and satisfaction with treatment for HIV disease in a sample of African-American crack cocaine smokers

The development of treatment regimes for African-American HIV-infected crack cocaine users has often been based on assumptions about compliance with medication regimes rather than evidence. This study sought to obtain baseline information on the adherence to antiretroviral medications by members of this important risk population in Houston, Texas. It was found that for only 5 of a range of 16 antiviral medications was there a significant correlation between levels of compliance reported by respondents and their beliefs as to how effective these medications are. Medication compliance was also found not to be associated with frequency of crack cocaine use in the month prior to interview. Furthermore, irrespective of both gender and their reported extent of medication compliance, the respondents tended to report positive relationships with their treating physician, with higher levels of satisfaction reported by women. These results suggest that the majority of African-American crack cocaine users are able to comply with HIV treatment regimes, with more than half (53%) claiming full compliance for one or more medications, and a further one third (31%) claiming compliance more than half the time. Moreover, these findings suggest that they will continue to take antiretroviral medications even if they have doubts about the effectiveness of these medications.