Corporate Governance in Harris Scarfe: Harris Scarfe Department Stores is a company that was founded in 1849 in Adelaide, South Australia and housed various major South Australian department stores. The history of the organization is traced to a period when the founding partners John C. Lanyon and George Peter Harris arrived in this region to institute an ironmongery and hardware business. In the initial years, the company carried out its business activities i.e. retailing business in its premises in Adelaide. However, the firm also manufactured several leather products such as luggage and saddlery. In the early 2000s, Harris Scarfe was among some of the companies that collapsed and shocked the Australian society. The collapse was attributed to corporate scandals and accounting irregularities that made the company to be on the brink of facing administration.

Collapse of Harris Scarfe:

In 2001, the suppliers and customers of the company as well as a huge portion of its employees were surprised by the sudden cash-flow problems that rocked the thriving business. Throughout South Australia, Harris Scarfe made headlines when worried suppliers entered its store in Rundle Mall and started to remove their stock directly from the stores in front of the surprised employees and customers. These suppliers carried out their actions since the organization had bought huge amounts of stock on credit. As a result, Harris Scarfe soon entered into voluntary receivership, which was accompanied by the withdrawal of its shares from the Australian Stock Exchange. Following an analysis of the firm's books, Harris Scarfe was left with multimillion dollar debts since its assets had been re-valued well beyond the market value in attempts to cover its spiraling losses.

During a court session, one of the company's accountant testified that the accounts of the organization had been falsified since 1994 ("Falsification began at Harris Scarfe," 2004). The accountant, Anthony Wight, stated that this practice started five years before Adam Trescowthick became the firm's executive chairman. The accountant also stated that he was directed by Alan Hodgson, the then Chief Financial Officer, to falsify the accounts in 1994. While he was uncomfortable with the directive, Mr. Wight obeyed since the requests became more frequent to an extent that he was regularly making monthly changes. By the time the organization was placed into voluntary administration in April 2001, it had debts worth $93 million to creditors and another $50 million in company debt.

The accounting irregularities that led to Harris Scarfe's corporate scandal were discovered following the emergence of astounding allegations of theft in the organization's monetary quagmire. As the analysis of the company's balance sheet was the main pointer of the irregularities, its report was quickly overshadowed by allegations of a total cover-up by its top executives. According to the findings of a private investigator, huge amounts of stock were being taken from the store while Harris Scarfe's senior management seemed unconcerned and did nothing about it.

Even though the allegations of irregularities in bookkeeping and security procedures were not extraordinary, the claims of the senior management's action to knowingly and intentionally cover up the evident theft of hundreds of thousands of stock on a regular basis were quite shocking (Barker, 2001). In further attempts to divert the increasing public attention, the organization refused to answer any calls and diverted its inquiries to a Melbourne firm that dismissed the findings of a private investigator as those of a disgruntled worker. The company in Melbourne also argued that these findings by the investigator could not be trusted since the detective's work was not up to scratch. However, the culmination of the scandal was when the allegations reached the Australian Securities and Investment Commission.

Corporate Governance in Harris Scarfe:

Since history has constantly demonstrated that accounting failure is usually a determinant of unexpected corporate collapses, corporate failures and accounting irregularities and scandals are normally interrelated. Corporate failures tend to be perennial problems during times of economic downturn and have usually left the accounting profession defending itself. In reaction to the instances of accounting failures, several reforms such as new legislative measures have been adopted from time to time as part of curbing the occurrences of such instances in the future. However, as the corporate failures have continued to occur, there has been an increased need for further corporate governance reforms that are geared towards ensuring that past irregularities do not happen in the future.

The recent corporate failures since early 1980's have brought the significance of good corporate governance into sharp focus. This is evident through the publication of several articles and magazines that state that it may be the time or period to have an increased analysis at the processes of corporate governance across organizations. After the evaluation, the necessary elements of good corporate governance should not only be established but also integrated...

The effective integration of the elements of good corporate governance measures should include the maintenance of a suitable balance between the roles of performance and conformance of the board or another governance body (Barrett, 2001).
The events at Harris Scarfe in the early 2000s suggest that the organization's corporate governance practices were less than ideal. This is particularly because Harris Scarfe's financial statements showed that its directors were not committed to the principles underpinning best practices in corporate governance. The lack of best practices in corporate governance at Harris Scarfe can be attributed to poor relationship between the firm's board and other corporate shareholders, the lack of independence of its auditors, and inefficient corporate culture.

Good corporate governance or best practices in corporate governance are usually directed by essential principles. These principles are normally geared towards helping the government and regulatory agencies to analyze and enhance the legal, organizational, and dogmatic framework for corporate governance. Moreover, they focus on the financial and non-financial publicly traded companies as part of developing good corporate governance across organizations. Good corporate governance is in turn a crucial element in enhancing economic efficiency and improving growth as well as boosting investor confidence.

Notably, corporate governance basically incorporates a set of relationships between an organization's management, its board, shareholders, and other stakeholders. Consequently, this aspect provides the framework with which the objectives of an organization are developed and the means for achieving them and evaluating performance are established ("OECD Principles of Corporate Governance," 2004). An organization corporate governance practices are usually affected by the relationships among participants in its governance system, particularly controlling and individual shareholders. The other crucial participants in a firm's corporate governance include its employees and other stakeholders. The relationships between these participants and their interactions vary widely and are subject to the law and regulation, voluntary adaptation, and market forces.

Some of the most important and common principles of good corporate governance include establishing the foundation for efficient corporate governance framework, promotion and protection of shareholders' rights and major ownership functions, and the equitable treatment of shareholders. The other principles include understanding the role of stakeholders in corporate governance, the responsibilities of the board, and ensuring timely and accurate disclosure.

An organization should establish an efficient corporate governance structure that promotes transparent and efficient markets, shows the separation of responsibilities across the regulatory, supervisory, and enforcement authorities, and is consistent with the rule of law. The framework should also provide the framework for facilitating and protecting the exercise of the rights of shareholders. As a result, all the company's shareholders should have equitable treatment and have the opportunity to receive effective redress for violation of their rights. Through mutual agreements or by law, the framework needs to recognize stakeholders' rights and encourage active cooperation in sustainability of the organization's business operations and practices. The corporate governance framework should also provide strategic guidance of the firm, efficient evaluation of management by the board, and accountability of the board to the firm and the shareholders. The final important aspect of the corporate governance framework is associated with disclosure and transparency on all materials about the organization such as its ownership, governance, performance, and financial status.

Deficiencies in Harris Scarfe's Corporate Governance:

The corporate failure of Harris Scarfe is associated with some deficiencies in some areas of corporate governance and violation of the important principles in corporate governance. Some of the major areas with deficiencies in the corporate governance system include & #8230;

Decisions by the Senior Management:

One of the major reasons for the collapse of Harris Scarfe is some of the decisions taken by the firm's senior management. First, as previously discussed, the company's Chief Financial Officer directed the accountant to falsify accounts as part of efforts to conceal the illegal practices. Secondly, the former Chief Operating Officer stated that he knew he was offering false financial reports to its board prior to the collapse in 2001 ("Harris Scarfe," 2005). It's evident that the company's top executives collaborated in making decisions towards accounting irregularities and presentation of wrong financial reports. In addition, Harris Scarfe senior management also collaborated in taking various measures to cover the accounting fraud from the shareholders and other stakeholders of the organization.

Some of the firm's senior management such as the executive chairman and Mr. Daniel…