Analysis of the Issue from Corporate Governance Perspective

Purpose of the assignment

The Sandpapergate scandal was one of the threatening events in the history of International Cricket. The scandal occurred during the third test match between Australia and South Africa in Cape Town, South Africa (Sessions, 2020). Three perpetrators, the then Captain of Australia Steve Smith Vice-captain avid Warner and the main culprit Cameron Bancroft were suspended for 12 months and 9 months respectively (Chiu, 2018). However, the cricket experts raised a question about the role and efficiency of the Cricket Australia management and its existing corporate governance practice that created a bad culture within the Australian cricket environment. Therefore, the current report is going to analyse the importance of the corporate governance process in Australia and its role in the Sandpapergate scandal.

The key concepts of the report focus on the efficacy and degree of importance of corporate governance in managing an organisation. Accountability of the failure in leadership practice is also a pertinent aspect of corporate governance along with its transparency in business.

The report is going to describe the issue from the point of corporate governance at first then critically analyse the theoretical perspective associated with the issue. Finally, a discussion with the help of the relevant theories and case description will be explained.

The Sandpapergate Scandal had a great impact on the Cricket Australia management as well. The news media and the authorities were started questioning the transparency of the corporate governance management of the Australian cricket board. In an interview with ABC News, legendary Australian cricketer Ian Chappell stated that the situation was unacceptable, but at the same time, accusing the cricketers would be a joke and impartial if people did not recognize the misdeeds of the Australian cricket council (Abc.net.au, 2018). After the incident, an independent review of Cricket Australia management was conducted on the culture of the organisation. The report concluded its investigation by stating that the behaviour of the Cricket Australia management was ignorant and controlling the consensus without having any values (Murphy, 2018). The report also identified that CA pushed the cricketer with win-at-all-costs mentality and cheating became one of the forms of playing hard to win. It was expected from the board management to take entire responsibility to the scandal and the lack of ethical culture that CA management purposefully injected in the cricketers mind. However, there was no such intention or initiation that Cricket Australia management had taken to acknowledge the problem and resolve it. On the contrary, the senior management team resigned without preparing any mitigation strategy. Due to the staunch allegation against the CA management and compelled the CA Chairman David Peever to resign from his designation (Chiu, 2018). The resignation of Peever set a trend of resignation where Director of CA, former Australian captain Mark Taylor, also stepped off from his position (Abc.net.au., 2018). Earl Eddings replaced Peever but it was not the solution to follow the Longstaff review. Eddings was the vice-chairman during the Sandpapergate scandal and he also held accountable to the bad culture persisted in CA. It raised a question regarding the example of leadership that the corporate governance practice in Cricket Australia has been set by appointing Eddings as the new Chairman (Wu, 2019).

Theoretical analysis of the issue

The stewardship theory of corporate governance is relevant in the concept where the managers are acted like stewards to meet the objectives and interests of the shareholders only. It is true that in the stewardship model of corporate governance, the management is highly loyal to the organisation and has a deep focus on enhancing the performance of the organisation (Subramanian, 2018). Agency theory is also a relevant concept in this regard where it can be found that the board members are taking all the important decisions irrespective of other interest parties. A sense of distrust among the executives for good governance is considered to be one of the major characteristics of the agency theory. Moreover, the implementation of the Stakeholder theory is very relevant in the context of procuring a better organisational practice. The focal point of the stakeholder theory of corporate governance is vested in the practice of meeting the interests of different stakeholders and bring a collaborative approach to facilitate better organisational culture.

The core approach of the corporate governance theories is to focus on the organisational performance and enhance the performance to a great extent so that it will generate more profitability and success for the organisation. According to the research of Madhani (2017), it can be argued that the board and the executives are often taking great risks to achieve the high performance of the organisation. As a result of that, the organisation does not care about the other external stakeholders.

As per the research of Zhang et al. (2018), it can be argued that the trust-building among the executives is a pertinent aspect for the board so that they can easily meet the interests of the shareholders. In response to this, the board of directors provides enough support to the executives to maintain high performance and push them hard to meet the goals and objectives of the organisation to a great extent. As a result of that, it becomes useful for enhancing the success rates of the company.

It can be argued that the performance and the focus of the executives are aligned with the interests of the stakeholders and the board of directions provides immense support to the executives to execute their creativity for the benefit of the stakeholders (Schillemans and Bjurstrøm, 2019). It is a top-down decision making where the board controls the future of the organisation and the executives are entitled to follow the vision of the board members.

Stewardship Theory of Corporate Governance

Zhang et al. (2018) articulated that in the stewardship theory of corporate governance, the managers must acquire the ability of self-motivation. The purpose of self-motivation is to gain achievement, responsibility, recognition and respect from the authority. Therefore, it can be stated that the purpose of the self-motivation of the employees is also measured by their performance as it is within the core objective of the stewardship theory of corporate governance.

Subramanian (2018) opined that the performance of the employees is also a crucial aspect of the theories of corporate governance. The entire success of the organisation depends on the performance of the employees as they are in the front line to execute the strategies and conform to the objectives of the organisation.

Based on the stewardship theory of corporate governance, it can be stated that Cricket Australia also followed the same practice as it was important for the administrative board to win the matches in every situation. As a result of that, the board encouraged the cricketers to use different techniques and strategies without the consequences. A negative culture has been developed within the organisation where the cricketers got the free license to use different techniques, whether it was against cricket ethics or violating the ICC code of conduct. The agency theory suggests that there is a culture of distrust among the executives in Cricket Australia. The resignation of Peever as the Chairman of the committee created an opportunity for Eddings to become the Chairman of CA. However, he was the deputy chairman at the time of the scandal. Therefore, he was equally responsible for damaging the reputation and corporate governance practice of Cricket Australia. The appointment of Eddings as the Chairman never resolve the issue. In course of understanding the drawbacks of the corporate governance theories, Madhani (2017) advocated that organisations generally emphasise on the interests of shareholders and less initiative is taken for social and environmental responsibilities. The same practice has been followed by the Cricket Australia board, where they did not consider the regulations and ethics of playing cricket. Therefore, it can be considered that there was a lack of accountability that the CA board followed. The resignation of the board members was not enough to resolve the issue; rather, it supplemented the process by creating instability within the organisation. In response to this, the stakeholder theory of corporate governance can help Cricket Australia to resolve the matter. The focus of the stakeholder theory is to put a great deal of emphasis on different stakeholders and ensure security to the interests of different stakeholders. Therefore, it should be the approach of CA to maintain a good organisational culture that guides the players to follow the right way. 

Agency Theory

Conclusion

Based on the understanding, it can be argued that the Sandpapergate scandal was an obvious outcome of the bad culture that had been created by Cricket Australia management. The cricketers were used as pawns to execute the strategies and interests of the board members successfully. The management also had a collaboration with the board members as they followed the same path that the board asked them to follow. As a result of that, it was impartial to accuse and punish the cricketers as the board members failed to maintain a positive environment within the organisation. Therefore, it can be concluded that the report projects the role of the CA board members to damage the corporate governance practice and destroyed the image of Australian cricket in the international forum.

References

Abc.net.au. (2018). Mark Taylor becomes latest Cricket Australia figure to stand down following Longstaff Review – ABC News. Abc.net.au. Retrieved 17 May 2020, from https://www.abc.net.au/news/2018-11-05/mark-taylor-becomes-latest-cricket-australia-figure-stand-down/10466020.

Abc.net.au. (2020). Cricket Australia chairman David Peever resigns in wake of Longstaff Review – ABC News. Abc.net.au. Retrieved 17 May 2020, from https://www.abc.net.au/news/2018-11-01/cricket-australia-chairman-david-peever-resigns/10456840.

bbc.com. (2018). Cricket Australia ‘shares blame’ in scandal. BBC News. Retrieved 17 May 2020, from https://www.bbc.com/news/world-australia-46013631.

Chiu, A. (2018). ‘Sandpapergate’ cheating scandal rocks Australian cricket: ‘It beggars belief,’ says prime minister. Washington Post. Retrieved 17 May 2020, from https://www.washingtonpost.com/news/morning-mix/wp/2018/03/28/sandpapergate-cheating-scandal-rocks-australian-cricket-it-beggars-belief-says-prime-minister/.

Holmes, T. (2018). Ball-tampering scandal: Cricket Australia under mounting scrutiny over team culture – ABC News. Abc.net.au. Retrieved 17 May 2020, from https://www.abc.net.au/news/2018-04-01/cricket-australia-under-mounting-scrutiny/9608638.

Madhani, P.M., 2017. Diverse roles of corporate board: Review of various corporate governance theories. The IUP Journal of Corporate Governance, 16(2), pp.7-28.

Murphy, C. (2018). Cricket Australia contributed to circumstances surrounding ball-tampering scandal, review finds – ABC News. Abc.net.au. Retrieved 17 May 2020, from https://www.abc.net.au/news/2018-10-29/scathing-report-released-into-cricket-australia-culture/10440972.

Schillemans, T. and Bjurstrøm, K.H., 2019. Trust and Verification: Balancing Agency and Stewardship Theory in the Governance of Agencies. International Public Management Journal, pp.1-35.

Sessions, G. (2020). Sandpaper and sobbing: Two years on from Australian cricket’s darkest hour. The Independent. Retrieved 17 May 2020, from https://www.independent.co.uk/sport/cricket/australia-ball-tampering-scandal-sandpaper-smith-warner-bancroft-a9419166.html.

Subramanian, S., 2018. Stewardship Theory of Corporate Governance and Value System: The Case of a Family-owned Business Group in India. Indian Journal of Corporate Governance, 11(1), pp.88-102.

Wu, A. (2019). Vics to consider all options in blow for Cricket Australia chairman. The Sydney Morning Herald. Retrieved 17 May 2020, from https://www.smh.com.au/sport/cricket/vics-to-consider-all-options-in-blow-for-cricket-australia-chairman-20190403-p51agb.html.

Zhang, F., Wei, L., Yang, J. and Zhu, L., 2018. Roles of relationships between large shareholders and managers in radical innovation: A stewardship theory perspective. Journal of Product Innovation Management, 35(1), pp.88-105.