Pioneer Group Pioneer Group

Naqash AhmadNaqash Ahmad BB11042BB11042Umar Idrees Umar Idrees BB11056BB11056Syed Faisal HussainSyed Faisal Hussain BB11061BB11061Majid SohailMajid Sohail BB11064BB11064Mutaher EjazMutaher Ejaz BB11055BB11055

DefinitionDefinition

Corporate failure refers to companies Corporate failure refers to companies operations following its inability to make profit operations following its inability to make profit

or bring in enough revenue to cover its or bring in enough revenue to cover its expenses. This can occur as a result of poor expenses. This can occur as a result of poor

management skills, inability to compete or management skills, inability to compete or even insufficient marketing.even insufficient marketing.

Causes Causes Technological causes.Technological causes. Working capital problems.Working capital problems. Mismanagement. Mismanagement. Fraud by management.Fraud by management.

Loss of RevenueLoss of Revenue Damage to CredibilityDamage to Credibility Increased in Operating ExpensesIncreased in Operating Expenses

Poorly structured Board.Poorly structured Board. Financial distress.Financial distress. Wrong financial management.Wrong financial management. Over-Expansion and Diversification. Over-Expansion and Diversification. Failure to react competition. Failure to react competition. Rely on few major customers.Rely on few major customers. Dishonest Audit committees.Dishonest Audit committees.

IntroductionIntroduction

American energy company based in Houston, American energy company based in Houston, Texas.Texas.

Formed in 1985Formed in 1985 One of the world's leading electricity, natural One of the world's leading electricity, natural

gas, pulp and paper, and communications gas, pulp and paper, and communications companiescompanies

Employees were around 21,000 Employees were around 21,000 Claimed revenues of $111 billion in 2000Claimed revenues of $111 billion in 2000 "America's Most Innovative Company" for 6 "America's Most Innovative Company" for 6

consecutive years.consecutive years.

Causes of FailureCauses of Failure Complex financial statements.Complex financial statements. Complex business model.Complex business model. Unethical practices.Unethical practices. Special purpose entities.Special purpose entities. Wrong Wrong FinancialFinancial auditaudit.. Investors' confidence decreases.Investors' confidence decreases. Illegal Loans & Debt Burden.Illegal Loans & Debt Burden. Shareholders’ Loss.Shareholders’ Loss.

IntroductionIntroduction Founded in 1996Founded in 1996 Steven F. Herbert (CEO)Steven F. Herbert (CEO) Head Quarter: Alpharetta, Georgia, USA.Head Quarter: Alpharetta, Georgia, USA. Financing Industry.Financing Industry. Products: Mortgage banking and Products: Mortgage banking and

business finance.business finance. Pioneer of internet banking industry.Pioneer of internet banking industry.

HistoryHistory Initially NetBank offered “Sign on” bonus of $50.Initially NetBank offered “Sign on” bonus of $50. In 2000, NetBank added the following products:In 2000, NetBank added the following products:

Online safe deposit boxes.Online safe deposit boxes. Individual retirement account.Individual retirement account. Expended customer support.Expended customer support.

In 2001, Bank acquired “resource bancshares mortgage In 2001, Bank acquired “resource bancshares mortgage group”, A leading provider of mortgage banking services.group”, A leading provider of mortgage banking services.

In 2003, Bank added a number of product lines i.e., In 2003, Bank added a number of product lines i.e., Leasing, ATM, Merchant processing services.Leasing, ATM, Merchant processing services.

Bank reached the peak of operation at the end of 2004 Bank reached the peak of operation at the end of 2004 through 2005.through 2005.

In 2006, restructured company.In 2006, restructured company. In 2007, NetBank was closed.In 2007, NetBank was closed.

Causes of FailureCauses of Failure Restructuring attempt.Restructuring attempt. ATMs were sold.ATMs were sold. Loans from financial institutes were rejected.Loans from financial institutes were rejected. Received deficiency notice from the NASDAQ Received deficiency notice from the NASDAQ

stock market.stock market. No physical branches.No physical branches. Encountered several complaints (freezing Encountered several complaints (freezing

customers accounts).customers accounts). NetBank’s CEO sold NetBank.NetBank’s CEO sold NetBank.

IntroductionIntroduction ZARCO group of companies is providing financial ZARCO group of companies is providing financial

services. e.g. money transfers, currency services. e.g. money transfers, currency exchange, bank drafts, traveler cheques etc.exchange, bank drafts, traveler cheques etc.

Offices in USA, UK, Pakistan and Canada.Offices in USA, UK, Pakistan and Canada. Formed in June 2003 by Mr. Lakhte Hasnain.Formed in June 2003 by Mr. Lakhte Hasnain. Within two years, acquired one million customers.Within two years, acquired one million customers. Achieved Best Performance Award in 2006, Achieved Best Performance Award in 2006,

Businessman of the Year Award 2007 and Businessman of the Year Award 2007 and Western Union Agent of the Year Award in 2008.Western Union Agent of the Year Award in 2008.

Fraud at ZARCOFraud at ZARCO Violated the rules set out by SBP.Violated the rules set out by SBP. CEO illegally transferred Rs. 1,870/- million to CEO illegally transferred Rs. 1,870/- million to

his bank accounts abroad. (FIA Report)his bank accounts abroad. (FIA Report) Company’s employees embezzled Rs. 1.25/- Company’s employees embezzled Rs. 1.25/-

billion.billion. Deceived Customers.Deceived Customers.

ConsequencesConsequences SBP suspended license for a limited period in August SBP suspended license for a limited period in August

2009.2009. Head office, branches, franchises were barred from Head office, branches, franchises were barred from

undertaking any kind of business activity.undertaking any kind of business activity. ZARCO owed $6 million to the Western Union and Rs. ZARCO owed $6 million to the Western Union and Rs.

90.048 million to its local business associates.90.048 million to its local business associates. Court dismissed the pre-arrest bail of CEO.Court dismissed the pre-arrest bail of CEO. CEO was arrested from outside the courtroom by FIA.CEO was arrested from outside the courtroom by FIA. Became second Forex Company to be bankrupted after Became second Forex Company to be bankrupted after

Khanani and Kalia in August 2009.Khanani and Kalia in August 2009. 727 branches were closed. 727 branches were closed. 7000 of its employees had to sit home.7000 of its employees had to sit home.

IntroductionIntroduction Air Line Company.Air Line Company. Founding Fathers: Walter Mittelholzer and Founding Fathers: Walter Mittelholzer and

Balz Zimmermann.Balz Zimmermann. Parent Company: SAir Group.Parent Company: SAir Group. CEO was Mario Corti.CEO was Mario Corti. Headquarter: Kloten, Switzerland.Headquarter: Kloten, Switzerland. Fleet size: 76 (2002)Fleet size: 76 (2002) Website: www.swissair.comWebsite: www.swissair.com

HistoryHistory Was Founded in 21 March,1931Was Founded in 21 March,1931 1932-1933: Owned the fastest plane of 1932-1933: Owned the fastest plane of

that time known as “Orion”.that time known as “Orion”. 1937: Both the founders died.1937: Both the founders died. 1944: An aircraft was destroyed by 1944: An aircraft was destroyed by

American bombing raid.American bombing raid. 1951-1977: Company progressed a lot 1951-1977: Company progressed a lot

and increased its fleet size.and increased its fleet size. Ceased its operations on 31 March,2002Ceased its operations on 31 March,2002

Causes of failureCauses of failure The “Hunter Strategy”…..The “Hunter Strategy”….. In mid-2000 : 3.25-4.45 Billion dollar loss.In mid-2000 : 3.25-4.45 Billion dollar loss. A Million dollar loss per day due to various investments.A Million dollar loss per day due to various investments. Terrorist attacks made the situation exacerbate.Terrorist attacks made the situation exacerbate. Unable to pay the debts to “UBS”.Unable to pay the debts to “UBS”. Sabena Airways and German LTU were taken despite the Sabena Airways and German LTU were taken despite the

heavy capital requirement.heavy capital requirement. Increasing competition from low-cost carriers. (Easyjet and Increasing competition from low-cost carriers. (Easyjet and

Ryanair). Ryanair). 22ndnd October, 2001. October, 2001. Share price.Share price.

Preventing corporate Preventing corporate failuresfailures

Appointment of non-executive Appointment of non-executive directorsdirectors

Audit CommitteesAudit Committees Development of environment learning Development of environment learning

mechanismmechanism Focus on research & DevelopmentFocus on research & Development

ConclusionConclusion Directors should be responsible.Directors should be responsible. Proper planning is critical to the success Proper planning is critical to the success

of a business.of a business. Sincere audit committees should be Sincere audit committees should be

appointed.appointed. Management’s first and foremost duty is Management’s first and foremost duty is

to struggle for the company’s main to struggle for the company’s main objective.objective.