On the determinants of derivative usage by Australian companies

This paper provides an examination of the determinants of derivative use by Australian corporations. We analysed the characteristics of a sample of 469 firm/year observations drawn from the largest Australian publicly listed companies in 1999 and 2000 to address two issues: the decision to use financial derivatives and the extent to which they are used. Logit analysis suggests that a firm's leverage (distress proxy), size (financial distress and setup costs) and liquidity (financial constraints proxy) are important factors associated with the decision to use derivatives. These findings support the financial distress hypothesis while the evidence on the underinvestment hypothesis is mixed. Additionally, setup costs appear to be important, as larger firms are more likely to use derivatives. Tobit results, on the other hand, show that once the decision to use derivatives has been made, a firm uses more derivatives as its leverage increases and as it pays out more dividends (hedging substitute proxy). The overall results indicate that Australian companies use derivatives with a view to enhancing the firms' value rather than to maximizing managerial wealth. In particular, corporations' derivative policies are mostly concerned with reducing the expected cost of financial distress and managing cash flows. Our inability to identify managerial influences behind the derivative decision suggests a competitive Australian managerial labor market.

Foucault goes to the footy: professionalism, performance, prudentialism and playstations in the life of AFL footballers

This paper will report on a research project funded by the Australian Football League (AFL) that is exploring the emergence and evolution of a ‘professional identity’ for AFL footballers – an identity that has many facets including the emerging ideas that a professional leads a balanced life, and has a prudent orientation to the future. The research is informed by Foucault’s later work on the care of the Self to focus on the ways in which player identities are governed by coaches, club officials, player agents and the AFL Commission/Executive; and the manner in which players conduct themselves in ways that can be characterised as professional - or not. The paper explores elements of these processes by analysing the forms of risk management that Clubs use in the processes of List and Player management that they engage in as a consequence of AFL rules. Psychological testing and profiling of players is becoming more important in identifying, recruiting and managing players. The paper discusses how this testing is used to identify character or personality traits prior to initial recruitment in the draft or trading processes – and suggests that a number of issues related to workplace surveillance and identity emerge as a result.

Corporate governance failure and its impact on National Australia Bank's performance

The National Australia Bank (NAB) is the largest financial services institution listed on the Australian stock exchange and is within the 30 most profitable financial services organisation in the world. In January 2004, the bank disclosed to the public that it had identified losses relating to unauthorised trading in foreign currency options amounting to AUD360 million. Thisforeign exchange debacle was classified as operational risk, the risk of loss resulting from inadequate or failed processes, people, or systems and reiterated the importance of corporate governance for banks. Concurrent issues of National Australia Bank's AUD4.1 billion loss on US HomeSide loans in 2001, the degree of strength of their risk management practices and lack of auditor independence, were raised by the US Securities and Exchange Commission in 2004, reinforcing the view that corporate governance had not been given the priority it deserved over a number of years. This paper will assess and critically analyse the impact of corporate governance failure by management and Board of Directors on NAB's performance over the years 2001-2005.

Accountability and board functionality: National Australia Bank's experience

The National Australia Bank’s (NAB) experience of corporate governance has been contrary to current standards of good corporate governance, accountability and risk management. Over the last few years NAB’s misadventures have brought it under intensive media scrutiny with the HomeSide losses and the investigation by the Securities and Exchange Commission in the USA for breaches of auditor independence. More recently the unauthorised trading by its foreign exchange dealers violated NABs risk management practices and the subsequent board crisis resulted in significant downgrading of the share price on the Australian Stock Exchange (ASX). This paper briefly reviews the international history of corporate accountability and its growth in Australia. The increasing shareholder and legislative pressure to improve sustainability, accountability and board functionality have driven these issues to the forefront of Governing Boards’ agendas worldwide. The board remains ultimately responsible for all actions of the company and this is highlighted by APRA’s recent release of the new governance standard APG510 for implementation by October 2006. The impact of NAB’s board dysfunction on its overall performance is compared with the other major banks in Australia. Cost efficiency ratios, share price and total shareholder return are used as measures of performance and profitability. It is clear, from NAB’s recent experience, as the worst performer of all the majors, with a 19.7% fall in net profit and a cost to income ratio of 57.4% in 2004, that the NAB board needs to improve its performance and accountability to meet a sustainable increase in profitability and higher return for investors.

The Australian Government`s abandoned infrastructure outsourcing program: what can be learned?

Early in 2001, after a damning public report by the Auditor-General, the Australian Federal Government abandoned its highly promoted “whole of government” IT infrastructure outsourcing initiative. This about-face was greeted in the press with reports that the initiative was a “fiasco”. Yet a four-year case study conducted by the authors suggests a more complex picture. Like many other “selective” outsourcers of IT, the Federal Government had been led to believe that it was adopting a relatively low risk strategy that would, if well managed, lead to significant cost savings and operational benefits. Instead, despite having implemented many widely promoted “best practices”, the Federal Government found a substantial discrepancy between what outsourcing promised to deliver, and what was actually achieved. In this respect their experiences were no different from those of many other large IT organizations engaged in selective IT outsourcing, who responded to a substantial contemporaneous survey. This case study examines why the Government’s expectations were not achieved, and arrives at conclusions that have important implications for decision makers confronted with choices about sourcing IT service delivery.

Leadership, culture and employee deceit : the case of the National Australia Bank

The National Australia Bank (NAB), one of Australia's largest banks, announced losses in 2004 of AUD$360 million due to unauthorised foreign currency trading activities by four employees who incurred and deceptively concealed the losses. The NAB had in place risk limits and supervision to prevent trading desks ever reaching positions of this magnitude. However, the risk management policies and procedures proved ineffective. The purpose of this paper is to analyse the deceit, via a content analysis of official investigative reports and other published documents, to determine the extent to which the Bank's culture and leadership may have influenced the rogue traders' behaviour. The findings suggest that cultural issues, and the role played by the Bank's leaders, were influential in creating a profit-driven culture that ultimately impacted the Bank's foreign exchange operating activities.

The Australian Government`s abandoned infrastructure outsourcing program: "fiasco" or relatively typical?

Early in 2001, after a damning public report by the Auditor-General, the Australian Federal Government was forced to abandon its highly promoted “whole of government” infrastructure outsourcing initiative. This about-face was greeted in the press with reports that the initiative was a “fiasco”. Yet a four-year case study of the initiative suggests a more complex picture. The initiative can be viewed in a quite different light on the basis of comparisons with a contemporary survey of 240 Australian organisations engaged in IT outsourcing. This reveals that many of the negative outcomes associated with this “fiasco” are typical of those experienced by large Australian organisations. This has important implications for decision makers confronted with choices about sourcing IT service delivery.

Micropayments and e-commerce transactions : Thailand

Online payments in electronic commerce (e-commerce) are usually carried out with credit cards because they are the most convenient to use. Web sites that do not accept credit cards risk losing their customers. Yet potential customers do not include only credit card holders. There are a lot of potential customers who do not have credit cards, some for cultural reasons, others because of trust implications and others because of cost. Even among those who have credit cards, some do not buy online just because they do not feel that the system is secure enough to give away their credit card information over web pages. More importantly perhaps, credit card payments are not suitable for small-value purchases due to their high-incurred overheads to merchants.

Managing FM (support services): business risks in the healthcare sector

This paper presents research findings of 365 NHS Trust executives in the UK and builds on work carried out on risk perceptions and treatment in facilities management operations and business support activities in the NHS Trusts. The research utilises a business approach of viewing healthcare facilities not only as fixed “assets” occupying hospital sites and space, but it also considers them as that “tangible” part of the service chain process underpinning the provision of clinical services to both internal (departments or directorates) and external customers. The research found that customer satisfaction, service delivery certainty, customer involvement, service quality reliability, health and safety are highly rated by the NHS executives. The paper classifies healthcare related risk constructs into seven elements namely: customer care, corporate, legal, commercial finance and economics, business transfer, and facilities transmitted

The Code Red epidemic : a case study

An analysis of log files from an immune World Wide Web server was used to discover the patterns of infection from the Code Red worm variants.  Analogies are drawn to biological systems.  The need for protection is commented on.

Some of my students are prisoners : issues and dilemmas for social work educators

Higher education recruitment principles and procedures which seek to redress social exclusion have inadvertently resulted in the authors discovering that some of their students are incarcerated. Notwithstanding the important logistical issues which may emerge as a consequence of accepting prisoners into a programme of social work education, it would seem that the inclusion of prisoners is symbolic of a fundamental difference in philosophy with a risk management stance which expects that social work educators act as gatekeepers to the profession, especially in respect of students with criminal convictions.

Corporate governance, board responsibilities and financial performance : the National Bank of Australia

This paper examines board responsibilities and accountability by management and Board of Directors in relation to the National Australia Bank's (NABs) performance. The NAB, an international financial service provider within the top thirty most profitable banks in the world, is compared with the Australian major banks. The evidence suggests that NABs poor performance was consistent with a lack of accountability, poor corporate governance and board dysfunction associated with fraudulent currency trading and the subsequent AUD360 million foreign currency losses. The NAB's performance is investigated by utilising accounting-based measures of profitability and cost efficiency as proxies for performance. Following the foreign currency trading losses in 2004 the NAB under-performed the other major Australian banks in terms of profits, cost to income ratio and growth in assets. In terms of profitability and cost efficiency NAB had the lowest ROE and ROA with a 19.7% fall in net profit and the highest cost to income ratio of 5 7.4% of any of the five largest banks. This case study provides an Australian example of poor corporate governance and suggests that financial institutions and regulators can learn from the NAB's experience. Failure to have top-down accountability can have significant impact on over-all performance, profitability and reputation. In particular, it suggests that management and Boards need to review their risk management procedures and regulators need to be more pro-active in their prudential oversight of financial institutions.

A qualitative investigation of the safety culture of two organisations

A qualitative investigation of the safety culture of two contrasting organisations was undertaken. The research sought to identify categories and themes in the data that highlighted similarities and differences in salient safety issues for employees from the two organisations. The participants were 131 employees attending safety training sessions in a large national retail organisation and a heavy manufacturing organisation. Unobtrusive observation was used to collect data during the safety training sessions. Thematic analysis was used to identify emergent categories and themes from the data. Ten broad categories with relevant themes were identified and provided some insight into the safety culture of the two organisations, with both similarities and differences being evident. Participants from both organisations mentioned management issues in relation to safety, discussed the impact of employee risk- taking behaviour on safety, made reference to a blame culture, and raised integrity issues regarding safety. For the manufacturing organisation, a number of themes focused on contractor issues, while in the retail organisation, several themes highlighted differences in safety attitudes between head office and store-level employees.