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Steinhoff - A Case Study of KingIV failures
- 22 August 2018
- Accounting
- News 24
In a series of in-depth features, the University of Stellenbosch Business School sheds light on Steinhoff's remarkable growth – and spectacular collapse. This forms the backdrop to our event "KIngIV and Steinhoff - a Case Study". Click here to book for the event.
The article was first published in News24 by Prof Piet Naude et al.
The Steinhoff saga, possibly the biggest case of corporate fraud in South African business history, has dominated financial and general news since the company’s share price collapsed on December 5, 2017. Part of our role as the University of Stellenbosch Business School is to reflect on real-life business cases and to extract general lessons to be learnt. Much can be gleaned from business success stories, but even more revealing, sometimes, are business failures.
In presenting this mini case study on Steinhoff International, we find no joy in knowing that significant financial losses have been incurred not only by institutional investors and leading business personalities, but also by millions of ordinary people. Living and working in close proximity to Stellenbosch, we see the painful effects of the company’s reputational loss on friends, employees, pensioners and families; not to mention the misery caused to people around the world by the swift financial decline and uncertain future of this once-revered global retail giant.
In offering an academic perspective on the Steinhoff case, a certain objective distance is required. However, we are perhaps still too close to events to provide a full interpretation. We have also had to rely on information in the public domain, which is limited in depth and scope.
As the financial affairs of Steinhoff were still not clear at the time of writing, we could not, for example, compile a section on the accounting and corporate finance practices or tax structures of Steinhoff in different parts of the world. Nonetheless, we provide readers with important insights into how a supposedly indestructible corporate brand can be practically annihilated in (what appeared to be) unethical conduct.
This mini case study comprises four sections:
In section one , we tell the remarkable story of Steinhoff, from its humble beginnings in Germany to its transformation into a massive global holding company, epitomising the spirit of entrepreneurship and business expansion at its best. To assist readers, we provide two tables: one with a list of the most significant mergers and acquisitions concluded, and one with the time-line of events leading up to the collapse of the share price in late 2017 and beyond.
In section two, we analyse Steinhoff’s governance structure and practices in the light of relevant rules and guidelines at different times. We also comment on matters like director independence and the impact of a two-tier board on the critical and discriminating mind-set required of directors.
In section three, we reflect on business leadership and two aspects in particular, namely the ambiguity of charismatic leadership and the rationalisation strategy typically adopted by leaders who lose their moral compass.
In section four, we conclude the case study by looking back at earlier sections and extracting the main business lessons to take away. We also leave the discussion open for additional interpretations, particularly as events continue to unfold.
The overall aim of this mini case study is not to further discredit Steinhoff or any specific individuals, but rather to distil business lessons that might alert people to new Steinhoffs in the making. As a business school, we understand and value the enormous contribution that entrepreneurs and private corporations make to society. In this regard one of our passions is providing the type of education and guidance that will help breed a new generation of ethical and socially minded business leaders.
Leanne Koukeas
October 18, 2018 I enjoyed this article, as it gives you insight into the real business world.