1 Introduction

The Australia corporate world has been shaken by the demise of another major company,

the third such collapse in a matter of weeks. “One.Tel”, the country’s fourth largest

telecommunications company (telco), ceased trading on the Australian stockmarket on

May 28 and was put into the hands of an administrator after an investigation of the

company’s financial situation showed it to be insolvent (Cook. T, 2001).

The One.Tel collapse has lay off its 1,400 workers and also impacting on a host of small

creditors owed thousands of dollars for goods and services. Many faced bankruptcy and,

according to the reports, will receive nothing from the company windup. The fact that

workers’ entitlements are under threat while the major creditors and company executives

are protected is a further embarrassment to the government which is trying to overcome

the hostility engendered by its big policies over the last five years (Cook. T, 2001).

This assignment embarks on the issues leading to the collapse of “One.Tel” ; breaches of

the corporate governance and persons involved; and how the breaches could have been

avoided.

1.1 Company Background

One.Tel is the generic term used to describe a group of Australian based

telecommunications companies, including principally the publicly listed One.Tel Limited

(ACN 068 193 153) established in 1995 soon after deregulation of the Australian

telecommunications industry (Media Coverage).

The company was established by Jodee Rich and Brad Keeling who had secured large

investments from Murdoch and Packer business empires (Media Coverage). One.Tel

attempted to create a youth-oriented image to sell their mobile phones and One.Net

internet services, with a slogan “You’ll tell your friends about One.Tel”, to draw the

connection between the brand and personal communication. One.Tel also has a mascot

known as “The Dude1”. Large murals were printed upon the garishly-painted walls of

company’s offices all around the world. Internally, the company had a fondness for

applying the One.-prefix to everything relating to the business: One.Dude, One.Team, etc

(Media Coverage).

Chronological outline of One.Tel

One.Tel was listed on the Australian Stock Exchange (ASX) not long after it was

founded in 1995 to 2001. It went into voluntary administration on 29 May 2001 and into

liquidation, upon a decision made by creditors in the administration on 24 July 2001. It

began business in May 1995 with a total initial seed capital of approximately $5 million.

The ownership structure of the company was: Optus 28.5%; FAI 18%; James Packer 5%;

Kalara Investment 50% (approximately). Kalara Investment was owned by Jodee Rich

and Brad Keeling (Media Coverage). PBL and New Corp’s support gave One.Tel

credibility and cash base to fund it rapid expansion both domestically and overseas

(Cook.T, 2001).

The original thought process began with a simple initiative: they wanted to start a new

telephone company, one that the average person would understand. The company was

very people focussed and focussed on the residential market, as opposed to corporate

business. They wanted the consumer or everyday person in the street, to have access to

the entire suite of telephony products, which is why the company was marketed with the

catch phrase “100% telephone Company”. One.Tel had three core product offerings:

fixed wire long distance, Internet service provision and mobile telephony (Wikipedia).

Its business expanded greatly and included operations in the United Kingdom and several

other countries; it came to have 2.4 million customers world-wide including 500,000 in

the United Kingdom. One.Tel came to do business reselling Optus Mobile Phone

Services, reselling Telstra Local and Long Distance International Calls, reselling Telstra

1 The Dude was a cartoon-like depiction of a rather stupid man in his early twenties. His main role was to inform the public in television and print advertisements that even a stupid and lazy person such as himself could get a mobile phone with One.Tel (Media coverage)

Internet Services, selling pre-paid phone cards for long distance calls; and set about but

did not complete constructing a mobile phone network of its own. A huge expansion of

activities and liabilities was involved in constructing the network, including contracts

committing expenditure of more than $1.1 billion with lucent Technologies. The Group

associated with One.Tel employed 3000 persons throughout the world and had many

subsidiaries. In 1999 News Ltd and Publishing and Broadcasting Ltd made investment

around $1 billion in One.Tel.

One.Tel experienced huge trading losses and reductions in net realisable value in 2001 up

to 29 May 2001. During this period One.Tel incurred net trading loss of at least $92

million. In these months the liquidity position of One.Tel worsened by very large

amounts; from a deficiency of $24.5 million on February 2001 to a deficiency of $98.7

million on 29 May 2001. The deficiency in liquidity precipitated the failure of One.Tel’s

business. Facts were established on the deterioration which occurred in the financial

position and performance of One.Tel from 1 January 2001 onwards. By 28 February

2001, One.Tel actually requires a cash injection at least$270 million to continue its

existing operations and meet current and reasonably foreseeable liabilities, and the

requirement for cash injection was at least $287 million by 31 March 2001. One.Tel

would also incur additional indebtedness to Lucent Technologies of approximately $365

million for capital works relating to the construction of the network (NSW Supreme

Court, 2003).

At its peak, One.Tel’s strengths were recognised in consumer marketing and information

systems, intuitive platforms and resources based on R&D in the Australian Next

Generation Network, One.Tel continued to build quality, value for money telephony

products and services while remaining a low cost provider (Wikipedia).

1.2 “One.Tel” Collapse

The company was specifically geared to making money through stockmarket speculation.

Reports indicated the bonuses paid to Rich and Keeling were specifically tied to the rise

of the company’s share rather than profit or any other indicator of the overall viability of

the company (Cook.T, 2001).

One.Tel’s rapid expansion was way beyond its financial capacity coupled with its

misguided management decision. It was also badly hit by the changes in the European

network providers and more generally, One.Tel was caught up in the international

collapse of dotcom ventures (Cook.T, 2001).

The company’s high risk, low yield strategy, with generous incentives for new customers

could not be sustained in the small Australian market which had six mobile phone

providers – the second largest number of any country in the world2 (Cook.T, 2001). The

fatal flaw in the business model of the company was that the telecom services were

offered to subscribers at lower than the price the company was paying for them itself. It

could only survive as long as it could raise new capital investment more rapidly than it

was burning money. Exhibit 1 provides an indication of the rate of worldwide growth that

was achieved. However, this remarkable growth was taking place without regard to

profitability or returns to shareholders, as Exhibit 2 demonstrates (Avison. D, Wilson. D.

& Hunt. S).

Exhibit 1: Growth of One.Tel Limited

Year Ended Sales Rev. $ Subscribers

1996 65.0m 80,000

1997 148.0m 160,000

1998 207.0m 290,000

1999 326.0m 642,000

2000 653.0m 1,840,000

Source: Table 2-An IT Failure and a Company Failure: A Case Study in Telecomuncations (One.Tel

Annual Report (2000)

2 The US, with a population more than 10 times larger than Australia, has seven mobile network providers. The UK and Germany have only three (Cook.T, 2001).

Exhibit 2: Profitability of One.Tel Limited

Period Profit/Loss $

Year to June 1999 9.9m profit*

Year to June 2000 295.9m loss**

Half-year to Dec. 2000 132.0m loss**

Source: Table 2-An IT Failure and a Company Failure: A Case Study in Telecomuncations *One.Tel

Annual Report (2000);**newssanviews14780(2001)

The first public indication that the company was in trouble was the resignation of Rich

and Keeling. News Corporation and PBL initiated an investigation into company’s books

and promised a $132 million cash injection aimed at reassuring the markets. However,

the investigation found that the company needed at least $400 million to remain viable,

the offer was withdrawn (Cook.T, 2001).

One.Tel was declared insolvent in June 2001 and has since been liquidated3.

2 Who Killed One.Tel?

The thread leading to the collapse of One.Tel including: inappropriate management

compensation; creative accounting; failure of directors and managers to exercise due

diligence; lack of adequate regulation; and lack of independence in audit function

(Leung, P., Cooper, B.J., 2003).

Jodee Rich and Brad Keeling – Founder & Joint Managing Director

Keeling and Rich used their marketing skills and unwavering positive public statements

to promote the company and made assurance that One.Tel would have A$103 million at

June 30 (Hopkins. N.,2001).

3 The decision is reported as ASIC v Rich and Ors [2004] NSWSC 836.

Keeling did not fathom the true position of One.Tel; he wholly misunderstood the facts

One.Tel’s financial position and performance. Rich, particularly, was misleading the

market and shareholders by saying that the company is having big cash surpluses and

heading to profits; and the company was on target to meet its subscriber numbers and

gross profit projections. Through the last quarter of 2001, Rich gave the board and

directors James Parker and Lachlan Murdoch repeated upbeat assurances that the

company’s cash position and profitability is improving (Exhibit 3) (Lampe A.,2004).

Rich and Keeling were very much running the show at One.Tel, and they presented the

accounts to Geoff Kleeman as they wanted him to see, large sum of money were being

moved around the group between the subsidiaries to disguise the true situation (ABC-

Lateline, 2001).

Exhibit 3

In financial year ended 30 June 2000 One.Tel reported loss of $291 million. The share

price plummeted to below $1. Despite the loss, Rich and Keeling each received a

$560,000 basic salary and a $6.9 million bonus (Media Coverage).

Avison. D, Wilson. D. & Hunt. S contended that, Rich concentrated very much on the big

picture. Cadzow (2001), suggested his attitude was “why bother with petty concern like

faulty billing systems…when you can be thinking about global expansion”. Paul Budde,

communications analyst, put forward two failure of management as the reasons for the

collapse. Firstly, the decision to spend $1.2 billion building their own mobile network,

which Budde, argued was just ego and macho on Rich’s part. Secondly, the state of the

billing and debt-collection system, caused the company to go to the wall (Cadzow, 2001).

According to former One.Tel Director James Parker, in August 2000 he asks Rich about

One.Tel’s cash position. Rich told him One.Tel would “readily achieve” $115 million in cash

holdings by the end of October and that the British operation “will start throwing off large

amounts of cash. It will be a jewel and a cash cow” (Lampe A.,2004)

Mark Silberman – Finance Director

He did not exercise powers with respect to the company with due care and diligence;

allegingly misled the board as to One.Tel’s true financial position. One.Tel’s accounts

was kept by juggling the creditors, deferring payments of million dollars repatriating

money from overseas subsidiaries.

John Greaves – Chief Financial Officer

He fails to exercise his judgement with duty of care of an expert being a Chartered

Accountant, with extensive background in finance function of public company and as

chief financial officer at One.Tel. As a Chartered Accountant, he should be able to

properly assess One.Tel’s financial performance and spot the discrepancies in the books

thus alerted the board.

Rodney Adler – Company Director

He dumps One.Tel’s stock in the tumbling market. He is known to have sold off 6 million

One.Tel shares raising $2.2m after directors meeting on May 17 (Cook.T, 2001).

James Packer and Lachlan Murdoch – Board Directors

Stephen Mayne (2001) reported, they are responsible for approving the bonus deals and

pumping in hundreds of millions that triggered these very bonus payments which then

helped destroy confidence in the company. James Packer sacked PBL chief executive

Nick Fallon for questioning the One.Tel investment then hired a One.Tel spruiker in

Peter Yates to take over. As board director, they did not exercise their rights looking after

the One.Tel as they attended to the major parts of their multi billion empires. They should

not have sat on the board when there is no way in the world they had the time to keep an

eye on Rich and Keeling and hold them accountable.

3 Breach of Corporate Governance Issues

3.1 Laws Relating to Duties of Directors

Directors’ Duties

The directors of a company are responsible for the management of the company’s

business.4 Management encompasses not only the day-to-day running of the company’s

operations but also the development an implementation of a long-term strategy; ensuring

proper balance between the interest of various stakeholders; ensuring any activity

concerning the company is carried out in the interest of the company (Kala. A, 2003).

Directors, individually and as a board, bear the primary duty to carry out the corporate

governance policies of the company.

The ASX’s principles of Good Corporate Governance and Best Practice

Recommendations summarises the responsibilities of the board:

1. Lay solid foundations for management and oversight, including its control and

accountability system;

2. Structure the board to add value by ratifying, appointing and removing the chief

executive officer (or equivalent), and the company secretary;

3. Promote ethical and responsible decision-making, input into and final approval of

management’s development of corporate strategy and performance objectives;

4. Safeguard integrity in financial reporting, reviewing and ratifying system of risk

management and internal compliance and control, code of conduct and legal

compliance;

5. Make timely and balanced disclosure;

6. Respect the rights of shareholders;

7. Recognise and manage risk, approving and monitoring the progress of major

capital expenditure, capital management, acquisitions and divestitures, and

approving and monitoring financial and other reporting;

4 The actual division of powers is dictated by the internal rules of the company, including the articles of association of the company and the provisions of the Company Act itself (Kala. A,2003)

8. Encourage and enhanced performance, monitoring senior management’s

performance and implementation of strategy, and ensuring appropriate resources

are available; and

9. Remunerate fairly and responsibly

10. Recognise the Legitimate interest of stake holders (Eric Mayne, 2005 & Kala. A,

2003).

Director’s duties can be found in common law and statute law.

Fiduciary DutiesCommon law and equitable duties owed by directors are collectively referred to as

general law duties:

to act in bona fide in the best interest of the company – means to act in good faith,

honestly without fraud or collusion. It is the obligation which trust law places on

someone who must act in the best interest of another;

to exercise powers for their proper purposes – directors are required to exercise their

powers for the purpose for which they were conferred. Thus, using a power granted

by the legislation or the constitution of company for an ‘impermissible’ reason makes

action void as abuse power. This is so even though the director honestly believed the

action to be in the best interest of the company. Here the test is objective, not

subjective as in the case of common law duty to act in good faith;

to retain their discretionary powers – the board must not, without express authority

from constitution, or from statute, delegate their discretion to others. Nor can the

directors simply accept the direction of others as to how they will vote at board

meetings;

to avoid conflicts of interests - fiduciaries are not permitted to place themselves in

any position where there is an actual or potential conflict between their personal

interest and their duty to the company e.g. contracts with the company, personal

profits and competing with the company; and

to act with care, skill and diligence – this is not a fiduciary duty. The duty of a trustee

in respect of the skill and care required a much heavier one than that of a director. A

director is expected to run a business aimed at making a profit and therefore must be

in a position to take risks to enhance the prospects of the enterprise. Directors are

chosen because of their ability to make good business judgements (CPA).

The legislative position of the Corporations Act 2001 (Cwlth) is set up as follows:

Section 180 requires the Director or Officer to exercise a degree of care and

diligence that a reasonable person would exercise in the Corporations

circumstances, with a “safe harbour” for those who satisfy the “Business

Judgement” rule.

Section 181 requires the Director or Officer to act in good faith in the best

interests of the Corporation and for proper purposes.

Section 182 prohibits a Director or Officer from acting improperly so as to use his

position to gain an advantage for themselves or someone else. Or to cause

detriment to the corporation.

Section 183 precludes a person who obtains information because he is a Director,

from improperly using that information to gain an advantage for himself or for

someone else, or to cause detriment to the corporation.

3.2 Analysis of the Breach

Rodney Adler – Company Director

Adler contravened his directorial duties as an officer pursuant to s. 180, 181,182 and 183

of Corporations Act 2001. He fails to ensure One.Tel make affordable expansion and

loans and fails to ensure the company has a proper system of controls and audits in its

business to avoid defalcations by other Officers and employees. Immediately after the

directors meeting on May 17 2001, he sold off 6 million One.Tel shares raising $2.2

million. He did not care for the benefits of shareholders, company and employees of

One.Tel. He is in for getting as much as he can before the company collapse. None of the

“Business Judgement” rule nor acting in good faith matters to him. By selling his shares,

he is using his position as a director in One.Tel to gain advantage for himself by using the

information gained in the board’s meeting. He is using privileged information gained at

the board for trading in his own benefits and gains. It does not matter to him the

implications or consequences to the company by his act of dumping One.Tels share.

Mark Silberman – Finance Director

He fails to supervise One.Tel’s finances adequately and failed to keep the board informed

and he might have fiddle with the accounts by simply juggling the creditors, deferring

payments and repatriating money from overseas subsidiaries. And this had mislead the

board of the actual cash flow of One.Tel.

John Greaves – Chief Financial Officer

Greaves relied on the financial information supplied to him by others, including the

executing directors. The financial information supplied to Greaves was limited and

inaccurate in material respects. He fails to take reasonable steps to:

promptly ensure that he and the board were aware of certain financial

circumstances, including cash balances and the aging of debtors, in January,

February and March 2001;

monitor the management of One.Tel to properly assess the financial position and

performance and detect material adverse developments;

ensure that all material information was available to the board, particularly

concerning the adequacy of cash reserves, and the actual financial position of

various segments of the business; and

ensure that systems (billing and accounting system) (Exhibit 4) were maintained

and monitored which resulted in accurate and financial information flowing from

management to the board (Jaques.M.S.).

Exhibit 4: Excerpts from IT Failure and Professional Ethics:The One.Tel Case

Being a qualified Chartered Accountant and with his expertise he should not rely on the

information provided by others. He should take an active role in ensuring the accounts of

the company has been correctly reported and the accounting system is in place and alert

to Silberman’s act of keeping the accounts simply by juggling the creditors, deferring

payments and repatriating money from overseas subsidiaries.

James Packer and Lachlan Murdoch – Board Directors

Both, being otherwise engaged in their other more lucrative business empire. They did

not monitor the business and left the running of the business to both Rich, Keeling and

Silberman. They did not know the true financial position of the company and make

judgement according to information or promises made by Rich. They further approved

bonuses of $6.9 million to Rich and Keeling in financial year ended 30 June 2000 despite

reporting a loss of $291 million. Packer sacked PBL chief executive Nick Fallon for

questioning the One.Tel investment (Mayne S.). As a director, he should have been alert

when Fallon question One.Tel’s investment and investigation should be carried out to

verify the fact and financial status of the company.

Jodee Rich and Brad Keeling – Founder & Joint Managing Director

As joint managing director, both failed to mange their responsibilities including

responsibility to properly assess the financial position and performance of the group and

detect and assess any material adverse development; and taking reasonable steps in

ensuring that the directors are fully informed of all material financial information about

the adequacy of cash reserves and One.Tel’s actual financial position and performance.

One Senior accountant suggested that `The place was a joke. There are no structures, no

accounting systems, no processes and no control` (Barry, 2002,p185). David Barnes, the

group financial controller, finally resigned stating he was not prepared to do what his bosses

were asking, and that he considered it completely unethical (Barry, 2002,p.255).

They did not take steps to either to apprise themselves of the financial situation and the

deterioration from about the end of January until about the end of April 2001, or to

ensure that the board was aware of them. They also made public statements about

One.Tel’s financial position and performance which is entirely incorrect and no

reasonable factual basis for them. It is also their duty to notify ASX the actual

circumstances of the company’s financial position and performance, which they did not

and thus did not comply with their duty. Failures to ensure the establishment of proper

system to produce accurate and reliable financial information, failure to maintain cash

reserves at a level which ensured liquidity and failure to employ an appropriately

qualified finance director. On top of that, the two help themselves to a lucrative salary

and bonuses.

4 Conclusion

All the directors mentioned above has breach the corporate governance rule as a director

of a company one way or another. Adler, Silberman, Greaves, Packer, Murdoch, Rich

and Keeling have all failed to carry out their fiduciary duties by acting in their own

interest which do not include taking any active participation or interest in caring for the

benefit of the company and shareholders’ interest. They are not interested to investigate

on the actual financial performance and ensure the correct accounting reporting of

One.Tel’s accounts. They failed to employ their expertise to the management of the

company and failed to carry out the fiduciary duties as company director: to act in bona

fide in the best interest of the company; to exercise powers for their proper purposes; to

avoid conflicts of interests and to act with care, skill and diligence.

It is obvious from the analysis above that Rich and Keeling pursued their self interest or

obsession in building their own mobile network by expanding too fast and investing all

the cash in One.Tel without having a thought for maintaining cash reserves at a level

which ensured liquidity. They also did not stop to apprise the accounting system used to

control the payments and collections system. When being queried, they presented a

version of account which is incorrect to the public and ASX. They did not act in good

faith and honestly without fraud or collusion. They do not care for the financial

performance of the company instead plays on the share prices by giving baseless

statement and expanding the company to push up the share prices so that they can get

their director’s bonuses. As a director, they are expected to run a business aimed at

making a profit with calculated risk instead they keep expanding beyond One.Tel’s

financial capability. They also help themselves to hefty bonuses when the company is at

the eve of collapsing.

Apart from not carrying out their duties as directors, Packer and Murdoch has also

approved bonuses to Rich and Keeling when it is clear from the company accounts that it

is facing losses. Bonuses paid to directors should be tied to company performances not

assurance and forecast for future earnings.

Adler, Silberman, Greaves, Packer, Murdoch, Rich and Keeling each have breach the

Corporations Act 2001 (Cwth) section 180,181 and 182 as they failed to exercise a

degree of care and diligence, to act in good faith in the best interests of the Corporation

and caused detriment to the corporation. However, apart from s.180, 181 and182, Adler

has also breach s.183 whereby it precludes a person who obtains information because he

is a Director, from improperly using that information to gain an advantage for himself or

for someone else, or to cause detriment to the corporation. Adler sold off his shares at

One.Tel after attending the directors meeting, apparently he is using the information he

gets during the meeting and knows that something is very wrong with the company

therefore sold off his shares.

5 Proposed Legislative Response

Just because [Directors and senior executives] have personal money invested, or are on

the board representing a major investor, does not mean they do not have to worry about

other shareholders, creditors or employees. Their responsibilities extend beyond self-

interest. “Recent collapses suggest that the dangers of ‘cliqueness’ of directors and senior

executives cannot be ignored (RMIT, 2001). Corporate governance is, in its broadest

sense, the stewardship responsibility of corporate directors to provide oversight for the

goals and strategies of a company and to foster their implementation. The recent collapse

of HIH insurance and One.tel suggested that “One size does not fit all” when it comes to

corporate governance. The governance structures and practices should be tailored to meet

appropriate corporate and governance activities and needs. The ASX has produce its own

set of new listing requirements and this was followed by the Federal Government’s

implementation of the Corporation Law CLERP9 reform proposals from 1 July 2004

(Rhyn D.v. and Holloway D.A).

ASX Corporate Governance Council (CGC)

The ASX took a proactive stance and formed a plenary council (CGC) of a number of

stakeholder groups (21 in all) including business, the accounting profession, investor

groups, company secretaries, company directors and the Law council resulting in a ten

principles and comprehensive guidelines about operationalising ‘best practice’ corporate

governance. This has given effective regulatory weight in the same way as the UK

“comply or explain” approach. The ASX listing rules were consequently amended so that

the listing rule 4.10 now requires company to disclose their annual reports the extent

which they have followed or elected not to follow these best practice recommendations

(ASX, 2003,p.5). Principle 4 is similar to the requirements of the Sarbannes-Oxley Act in

that CEOs and CFOs are required to submit in writing to their boards that the

corporation’s financial reports present a true and fair view of the operational results and

financial conditions. Whereas Principle 7 covers statements about integrity of risk

management and control compliance is both efficient and effective (Rhyn D.v. and

Holloway D.A).

CLERP 9 Requirements

Intervention by the Australian federal government has resulted in the Corporate Law

Economic Reform Program (Audit Reform & Corporate Disclosure, CLERP 9) Bill being

released for comment on 8 October 2003. It subsequently passed through Parliament (late

June 2004) and had a commencement date of 1 July 2004. The primary objectives of the

Act involve promoting transparency, accountability and enhancing shareholders rights.

According to the Department of Treasury (the administrators of corporate law) it will

augment auditor independence, achieve better disclosure outcomes and improve

enforcement arrangements for corporate misbehaviour (Treasury, 2003).

CLERP 9 does, however, propose to extend the reform processes beyond the narrow

boundaries of the corporate governance recommendations and principles produced

internationally and in Australia. In future, shareholders will be able to comment on, and

take non-binding vote on the mandated remuneration disclosures for executives and

directors (Dawes, 2003). They are also concerns on the issue of continuous disclosure

and associated penalties for companies that do not comply with the requirement (Brown,

2003; Anonymous, 2002).

One of the more important provisions, relates to the need for the annual directors’ report

to include a more detailed operating and financial review of the company performance.

This is to be sufficiently detailed to enable shareholders and others to make informed

assessments of the company’s current position and future strategies. In addition, the

legislative requirement for CEOs and CFOs to make a formal written declaration to the

board of directors that the annual financial statements are ‘true and fair’ takes Australia

down the USA path of the Sarbannes-Oxley Act. It would certainly would have a

sobering and salutary effect on the company senior executives if, in future corporate

failures, some senior management personnel are taken away in manacles in the back of

police vehicles if this provision is breach (Rhyn D.v. and Holloway D.A).

Good governance is not guaranteed, however, merely by implementing ‘best practice’

guidelines and recommendations. Organizations needs to ensure that the governing

boards meetings does not become ‘rubber stamping’ exercise and implement both ‘form

and substance’ changes emanating from the best practices governance recommendations

(Rhyn D.v. and Holloway D.A).

Sonnenfied (2002) highlights a particularly positive response to the conundrum of

managerial prerogative and the adoption of a ‘form over substance’ approach to

governance of organizations. He argues that it is not the rules and regulations of the

governing process that count but the way people work together is vital. Therefore, what

distinguishes exemplary (effective) boards is that they are robust, effective social systems

(2002, p. 108). In other words they exhibit a ‘healthy’ boardroom culture. This is the

most critical of the additional elements needed to ensure that good governance practice is

translated into ‘better’ organizational performance. The role of the chair and that of the

independent members (particularly staff members) needs to be expanded to help deliver

this ‘healthy’ culture. Such culture is enabled by openness, trust and strong relationship

building amongst the differing parties and members. This will allow organizations to reap

the benefits from their existing knowledge/intellectual capital and unlock and realise the

full potential of the organization (Rhyn D.v. and Holloway D.A).