ALTERNATIVES AND DECISION CRITERIA

One- Tel has become the fourth largest telecommunication company, collapsed 2001
and left the industry in Australia in crisis. Main reason is that Corporate Good Governance was
not properly followed. It includes board composition, board committees, internal control, audit
and executive remuneration. The company having millions of customers and operating in eight
different countries, shocked the corporate world for its fall.

By 1998, the company has four members on the board. It includes, two managing
directors, and two non-executive directors. By 1999, the company increased the size of its
board to eight members. All of them were subjected to election each year, except for one, Jodee
Rich, the Chief Executive Officer, to ensure that he will not be able to be removed by the
shareholders. It was also known that Rodney Adler, one of the non-executive directors, was a
high school classmate of Jodee Rich. The Finance and Audit Committee, Remuneration
Committee, and the Corporate Governance Committee consisted only two members, which
were also part of the non-executive directors, and who had close links with the CEO. This
resulted to the problem of having no independent management structure. To promote balance in
the board, non-executive directors must be independent, which means, one should not have
any connection in any of the other members or he must be free from any business or other
relationship. The members of the board and the CEO must not be holding more than one
position in the company. For the election of the directors, everyone must be given an equal
opportunity to be elected in the subsequent meetings of the stockholders, to cut it short, there
should be no exception. Lastly, every committees, the Finance and Audit Committee,
Remuneration Committee, and the Corporate Governance Committee, must be composed of at
least three of the board of directors, and the majority must be of independent directors.

In 1999, the executive directors and chairman of the board received $2.3 million, which
is one-third of the operating profit after tax. On the same year, PBL and News Limited
respectively, agreed to invest a $430 million and another $280 million in the future, in exchange
for 40% of the company’s shares. By 2000, executives were paid $14.2 million bonuses which
were tied to share prices, despite of incurring loss amounting to $291 million and these were
treated as deferred expenditure and setup costs. The company’s executives were also granted
8.2 million options valued at 15.9 million. Remuneration shall be based on the achievement of
their objectives and shall be independent of the business lines which they oversee. It should be
also monitored to ensure that it operates and achieves the objectives as intended.