CASE STUDY

In an article published in the journal International Review of Applied Economics, $2019,$ the authors set out a detailed account of the near$-$total financial collapse of one of South Africa's best$-$known companies, Steinhoff $($Steinhoff International Holdings NV$).$

You are referred to the following article to answer the questions relating to the Steinhoff case study on corporate governance: Rossouw, J$.$ & Styan, J$.2019.$ Steinhoff collapse: a failure of corporate governance. International Review Applied Economics, $33(1)$: $163-170.$

The article gives an account of the following:

The former successes of the company, Steinhoff International Holdings, as a top$-10$ company on the Johannesburg Stock Exchange. The article explains that the company had significant market capitalisation with Steinhoff shares being bought by numerous unit rust investment schemes and pension funds. This implies that a large number of South Africans with money in a pension or provident fund were unintentional stakeholders in Steinhoff through their indirect shareholding. Subsequently, in $2018,$ the national Parliament of South Africa held two parliamentary hearings into the Steinhoff meltdown owing to the fact that pension funds had lost in excess of R$20$ billion following the decline in Steinhoffs share price

An account of Steinhoff's history starting in $1964$ in West Germany as a furniture supplier; its corporate international expansion and growth to become the world's second largest furniture retailer with a presence in $33$ countries and employing $130000$ employees.

Details of the Steinhoff collapse that followed the resignation of its chief executive, Markus Jooste, when it became clear that the company's external auditors were not prepared to sign off its $2017$ financial statements. Early signs of looming problems are discussed, such as the concerns raised by international media houses about the company's investment position. In addition, the details of a confidential report leaked to$,$ inter alia, Deloitte and a German magazine are discussed.

The lessons that can be learned from the collapse of Steinhoff as a classic case of corporate governance failure. The collapse also shows the danger of an all$-$powerful chief executive, and the limitations of a two$-$tier board structure. The board structure is discussed in detail and mention is made of the fact that this structure is more common in Europe. The first tier was the Supervisory Board and the second was the Management Board which consisted of just three individuals, all members of the executive management. The Management Board reported to the Supervisory Board which in turn was accountable to the share$-$ holders. The risk of this structure is highlighted and the associated corporate governance shortcomings that led to the eventual collapse of the company with dire consequences for shareholders and stakeholders Questions are also raised about the accountability of board members who were allowed to walk away without penalty after the collapse A further lesson centres on the audit firm's Deloitte South Africa and Deloitte Netherlands relied on the accountability. work done by outside auditors based in Germany.

Questions are asked about the auditing standard pertaining to reliance on the work of other auditors. Finally, collar crime is addressed and discussed. the ability of the South African authorities to investigate and prosecute white collar crime is addressed and discussed.

Souree: Rossouw & Styan $(2019$: $163-170)$

CASE STUDY QUESTIONS

Please refer$-$ to the following article as summarised in this textbook and answer the following questions: Rossouw,J$.$ & Styan, J$.2019,$ Steinhoff collapse: a failure of corporate governance. International review of applied economics, $33(1)$: $163-170.$

Discuss the economic and social dimension of the triple bottom line and, using evidence from the case, indicate whether Steinhoff succeeded in addressing these dimensions fairly, ethically and correctly to ensure responsible leadership.

The King IV code identifies $16$ principles that guide aspirations in terms of governance practices, Identify eight principles and discuss whether the MTN Group has substantially applied the King IV principles.

Consider the seven signs of ethical collapse and identify where these signs were evident for Steinhoff to have been able to avoid the company's near$-$total financial demise.