Strategic Management Report University Essay Example

We can see by this research how this particular company is managing to beat the competition in Europe as Low-cost airline and stay sustainable even in times of recession. The purpose of this report is to evaluate the key for success of Ryanair corporate strategy, using both theories and live case studies. The research paper starts with a brief history of Ryanair and their competitive advantage, and then goes through the main academic models used in the report such as: Porter’s five forces, Environmental PESTEL analysis and Porter’s generic strategies. The last section of the report is summary of the findings with recommendations. 2. Company Background Nowadays Ryanair is placed as the biggest low cost airline in Europe.

The company was founded in 1985, by Ryanair’s family as a small company operating only between Ireland and London with as little as 5 000 passengers a year (ryanair. com, 2011). Since 1994 when Michael O’Leary took over, the company started rapidly expansion reaching today 272 aircrafts and caring more than 73m passengers a year to 160 European destinations, all around the continent. (Ryanair, 2010). The annual passenger traffic grew by 8% in 2010, and the profits rose by 26% to over 401m despite the global recession. (Ryanair, 2010) -3- For the past seventeen years, the company has built respectable brand name and image, for providing high quality products and services.

The company’s future vision goes beyond number one airline in Europe, but to be the biggest airline in the world: “Ryanair could become one of the biggest airlines in the world if chief executive Michael O’Leary’s plans to increase passenger numbers to between 120m and 130m over the next decade come to fruition” (McAteer, O. , 2011) 3. Competitive Advantage Competitive advantage can be defined as a factor allowing one organization to serve better its customers than others. In other words the process is consisted of creation of better understanding the customer values, and gaining exceptional output. (Hao Ma, 1999) Stewart (1997) argues that exist assets which can boost the organization’s performance and build stronger competitive advantage.

Researchers like Porter (1999) argue that the key condition for the company’s success in a rival environment is finding and attracting unique resources which can bring great value to the firm. But if we take that businesses manage to find competitive advantage and increase the level of performance, usually the rivals compete by adjusting or even enhancing the successful strategy as their own initiative, and the consequence of that is loss of competitive advantage. (Zook and Allen, 2001; Ghemawat, 1986; Reed and DeFillippi) -4- 4. Porter’s five Forces The Porter’s five Forces concept, was developed by Michael Porter; it is very plain but powerful tool, usually used to understand where lays the power in a business situation.

Once you understand, where power lies, it is easier to enhance strengths or weaknesses in a particular situation, in other words easily you can evade taking wrong steps. The most common usage of the tool is when it comes to identifying weather new businesses, products or services have the potential to be gainful. Yet it can be very misleading, if it’s used to find the balance of power in different than those situations. The five forces model described by Porter (Figure 1) argues that there are 5 generic drivers shaping rivalry; and can be used to evaluate the congeniality and ability of a market or industry to be profitable. (Hooley G. Piercy N. F, 2008). According to Luthans F. & Davis K, (1993) they are:

Also in Porter’s work (1980, 1985) is analyzed, how the five forces framework can show the structure of an industry and display the extend of deviation industries and the impact -5- on the five forces. The industries can be measured how attractive they are, depending on the power of each of the five forces and the specific strength of company’s position in relation to each of them. How strong the competition is depends on other factors such as investments by competitors bringing new value to the market. 4. 1. Competitive Rivalry Competitive rivalry can be described as a moving power within industries, which can energize companies to be creative and innovative (Porter, 1980). Being an entrepreneur, plays a central role of gaining competitive advantage in today’s business climate.

Traditional thinkers like (Porac et al. , 1995) believe that competition will occur only out of similar businesses. The accent here is on the number and capability of the competitors. If there are many competitors offering similar products and services the organizations have little power, If we have a look on the attempt of Ryanair to acquire Aer Lingus in 2004(see appendix 2), if succeeded what power and control would have had Ryanair upon the Irish air transport? 4. 2. Threats of new entrants There is a high threat of new entrants into the aviation industry, because nowadays the entry barriers have fallen into the form of regulatory controls, technology and purchase.

International regulations such as “Open Skies” are making the access to the market by foreign interested parties very easy. Also thanks to common technology usage within the industry, renting opportunities are possible too. The most threatened markets are the short-haul. However, usually established operators -6- have the advantage of higher slot presence into the key airports which acts like a barrier for the new airlines- forcing them to operate from smaller ones(FAA, 1999) 4. 3. Threat of substitute offering When we talk about the aviation industry, we should have in mind that the threat of substitution is relatively high. Nowadays advanced technology makes the communication very simple and easy, which reduces the travelling demand for business people.

Sometimes is more convenient the land than air transport- ash cloud in 2010. Thanks to the technology again-fast and comfortable trains, the convenience of this transport grows even higher. (Shaw S, 2007). 4. 4. Purchasing power Airline industry relies on very few supply channels, and as such they have very low negation power. Airplane manufacturers such as: Boeing, Airbus, Comac, General Electric and Irkut Corp. have the trade power and make huge profit out of the civil aviation. This is not the case with Ryanair. The CEO of the company operates by radical autocratic leadership style; “my way or the high way” causing cancellation of big order airplanes from the current supplier- Boeing. (Ryanair. om, 2009) At the moment Ryanair is negotiating with Comac and Irkut Corp. waiting for better deal. (J. Areddy, A. Galbraith, 2011) But changing manufacturers also has big consiquences- also the company has to change: aircrafts, spare parts, training and eqiupment, also maintaning different types of airplanes increases the costs. (Shaw S, 2007). 4. 5. Selling power -7- The high competition and narrowed level of separation within the market suggests us how little is the connection between airlines and customers. Operators try to stimulate customers by offering loyalty memberships, but in the low-cost market, people are willing to be more prices orientated. (Shaw S, 2007). 4. 6. Summary

The Porter’s five forces analysis brings negative impression on the airline industry and evaluates the market as being an unattractive. Porter’s framework asses: strong competition, high entrance threat and substitute offerings, low selling and purchasing power. Trusting Porter’s method beliefs, it is very difficult for a business to succeed in such environment. The conflict here is that Ryanair doesn’t fit in this picture, but in fact strives to grow more from year to year. So this method doesn’t answer our original question why Ryanair is so successful? 5. PESTEL Analysis 5. 1. Political Political factors are playing very important and crucial role into the aviation industry.

The raise of terrorist attacks since 2001, led the establishment of so tight security measures that we use today (M. Maynard and L. Robbins, 2009). There has also been a change from controlled and regulated network to deregulated, “open skies” and privatisation, which has empowered Ryanair to enter more markets and open competition. There’re also government subsidies meant to support the national carriers (P. De Man, 2004). Such benefits count 22% of Ryanair’s annual revenue (ryanair. com, 2009). However the political influence upon Ryanair is very lowregarding the stability in EU. The company must bare in mind for future EU -8- regulations- like the increasing of Air passenger duty (D.

Jonas, 2011) and the EU expansion which bring more opportunities. 5. 2. Economical The demand for air transportation is closely related with the world’s economy, if the economy grows the air travel demand also increases. Currently Ryanair is experiencing average revenue growth rate of 20 percent a year. (Ryanair,2010). Fuel represent 40% of the total operating costs of Ryanair for 2010. For a comparison the fuel cost has risen by 42% from 2009 where the fuel was 35% of the total operating cost and 666. 4m and in 2010 the cost was 943. 9m (ryanair, 2011). The increase price of fuel per gallon also plays crucial role in determining the ticket price in the aviation industry.

So the economical impact upon Ryanair is high, because of the constant fuel price increase and current economic instability in EU. 5. 3. Social When it comes to air transportation, consumers are usually price orientated and often has a priority over quality. The current economic instability resulted in a fall of industry sales, but surprisingly in fact the percentage of people travelling in economy class raised (Euromonitor, 2010). Furthermore social changes affecting the company are the new EU members. The EU membership opens opportunities for migrant workers, the trend is people from Eastern Europe to move west, and are likely to return home via cheap flights(S. Drinkwater, 2003).

We place the social impact high because of the changing consumer demographics and varying consumer’s preferences. 5. 4. Technological -9- The aviation industry has experienced significant technology progress throughout the years. The main tools which are used from Ryanair to gain competitive advantages are: internet booking system, which increases the quality of the booking process and improves the contact with its clients. The company operates with identical airplane fleet, which lowers the maintaining costs (C. Marcou, G. Cros, 2011). Although the recent development of low fuel consumption cars and highspeed trains, the technology impact on Ryanair is considered low. 5. 5.

Environmental The Airline industry felt significant problem in 2010 due to natural adversity. The Volcanic ash cloud situation, which spread all over Europe is estimated to have caused loses to Ryanair of about 50m (Ryanair, 2010). There are also few things that the company must consider nowadays regarding the environment and they are: noise level controls and Green house carbon emissions. 5. 6. Legal Ryanair must follow various legal obligations such as: wheelchair chargers, safety standards, misleading advertising, air traffic regulations and etc. The company got involved in numerous allegations of law suits for illegal subsidies in the past few years.

It is accused of using its dominant position at small, regional airports forcing them to reduce the fees, Lufthansa, Air Berlin and KLM-France are claiming that the Irish company must repay all the “illegal subsidies” (W. Lyffy, 2011) 5. 7. Summary – 10 – The PESTEL analysis, has demonstrated that is good analytical tool which can be used for environment analyses of Ryanair. It evaluates very well the main external factors and the important here are: supporting social demands and expectations, threat of alternative transportation and future regulations. As a reaction to the alternative land transport, Ryanair have to think about how can improve its services to make the air transport more convenient and attractive to people.

Ryanair has proven as very innovative and determinant company, which make it very reliable in case of future challenges. Times like the current economic recession, make it clear who are the big names in the business and why! – 11 – 6. Porter’s generic strategies Porter’s generic strategy framework allows the organization to find appropriate and appetizing rival position in a market. Further devotion can enhance customer delight; breaking down the risk and gaining benefits to their reputation, approaching skills and technology, enhances fully the visibility of controlled infrastructure, avoiding capital investments. Porter argued that at some time, company strengths go into either cost advantage or differentiation.

By using those, appear 3 generic strategies: cost leadership, differentiation and focus. The low cost leadership strategy doesn’t mean cheap selling price for goods and services. As the pricing environment is very sensitive, Ryanair has clearly set reinforcement of its strategic position in the market over temporary profit maximization. Ryanair manages to push prices even lower by using its cost leadership position, so as to increase the fiscal pain on higher cost competition and most likely for as long as it takes to push a market streaming that would contribute a return to a more normal pricing environment. The constant change of customer decision frames has a crucial role in imrpving the differentiation strategies.

Each company no matter the industry is dealing with various ways of product differentiation. Ryanair makes price big differentiator and compensate the fact that flies from and to secondary airports. This shows the importance of understanding the supply chain and the hidden potential by seeing things in different – 12 – way. Furthermore Ryanair understand that at some point customers will exchange benefits for cheaper price. Porter’s generic model evaluates that a business can be winning even in less attractive market, depending how position itself. Known weakness of the model is that cannot fully identify the forms of competitive advantage and evaluate the firm’s action (Wilson R. M. S & Gilligan C, 2005). 6. 1. SWOT Analysis

The SWOT analysis is the most known analytical tool used for making complete strategic placing of the business and its environment. The focus of the model is to create successful strategy upon organization’s internal strengths and weaknesses, and external opportunities and threats. (Faulkner D. O & Campbell A, 2003, p 250). 6. 2. Strengths • • • • • Low Cost Leader(U. Nwagbara, 2011) Innovative Cost Reductions First-mover Advantage Established Market Share Substantial Growth(ryanair. com,2011) – 13 – • • • • • High Load Factor(ryanair. com,2011) Strong Public Image Established Routes/Network Range of Ancillary Services Safety Committee(ryanair. com, 2011) 6. 3. Weaknesses • • • Still refuses to recognize trade unions(B. Sheehan & C.

Higgins, 2010) Antagonistic Relationship with Competitors. The secondary airports used by ryanair, could become less attractive because of the long distances from city centers. • • • Uncharacteristic Management Expansion(A. Brohan, 2010) Dependence on Michael O’Leary(McAteer, O. , 2011) Shareholders- dividend policy(Ryanair. com, 2011) 6. 4. Opportunities • • • • • • Further Growth of the company Adding more tourism routes Advanced Cost Reduction Offering child free flights(Ryanair. com, 2011) New EU member countries. Expansion of ELFAA 6. 5. Threats • Increasing Competition within the industry: New Low Cost Entrants Competitor Alliances ¦ Industry Criticism – 14 – Strict politic of EU Commission ¦ No further expansion of EU ¦ The syndicalism ¦ Alternative Transportation: Cars, Buses Speed Trains 6. 6. Summary Apparently Ryanair has enviable portfolio of strengths and opportunities, rising by the current fleet and route expansion. Innovative low cost leader, with strong public image and pioneer in cost reductions, are key success factors of the company making it sustainable in today’s uncertainty. However other crucial aspects that need consideration are the constant increase of fuel prices, the investments into the alternative land transport and the new entrants into the low cost aviation market. 7. Conclusion

It is evident from these strategic analyses that regardless of the intensive competition, Ryanair has succeeded to become the biggest low cost airline in Europe. The reported unseen levels of sustained growth, predict the company to become with the biggest and youngest fleet in the world, building it strong and respected name in the industry. As a contrariety to Porters theory, that an industry’s structural characteristics define the attractiveness and profitability of a market or industry Ryanair went beyond it. – 15 – Apparently the factors which made the organization so successful are in three main areas: the investment into rapid growth, clear corporate vision and financial backing.

Ryanair”s strategic advantage comes from its know-how to position itself as no-frills and suitable low cost airline. Since the company appeared in the industry, maintained the vision of cheap but reliable service. Ryanair’s success has reached the point where its airplanes, work force and financial assets contribute to its unquestionable strengths. The Environmental change place many problems to the resistance of the airline market, where in many occasions Ryanair has no control. However Ryanair shows tendency for nimble change and have adapted, risk management practices on to external forces, which determines flexibility and ease of finding temporary advantages.

Ryanair’s fleet is among the youngest with goal to become one of the largest in the world, providing consumers with the best technology at convenient cost. The increasing movement of labour force and political deregulations facilitate Ryanair’s expansion plans. In today’s uncertain climate of increasing terrorism threats and economic crises, the aviation industry faces difficult times. Ryanair’s unbeaten cost reduction strategy and heavy commitment to its customers has managed to place the company where it is today. A key challenge for Ryanair in the next few years would be not only to keep winning the low cost segment but to expand in new non- European markets. – 16 – 8. Bibliography 1. Clark, Pilita. Lunch withe the FT: Michael O’ Leary. Document] s. l. : Financial Times Limited 2010, 2009. 2. http://www. ryanair. com/en/about. http://www. ryanair. com. [Online] Ryanair, 2011. [Cited: November 26, 2011. ] 3. Creation and preemption for competitive advantage. Ma, Hao. 3, Smithfield, Rhode Island, USA : MCB University Press, (1999), Vol. Vol. 37 . 0025-1747. 4. B, Hooley G. Piercy N. F. & Nicoulaud. Marketing Strategy and Competitive Positioning, 4th Edition. London : Prentice Hall Europe, (2008). 5. K, Luthans F. & Davis. Strategic Management. USA : Published McGraw-Hill inc, (1993). 6. Porter, M. E. “Creating advantage”, Executive Excellence. (1999). pp. 13- 14. 7. Stewart, T. A.

Intellectual Capital: The New Wealth of Organizations. New York : Bantam Doubleday Dell Publishing Group,, (1997). 8. “Sustainable Advantage”. P. , Ghewamat. 5, s. l. : Harward Business Review, (1986), Vol. Vol. 64. pp. 53-59. 9. ” Casual ambiguity, barriers to imitation, and sustainable competitive advantage”. Reed, R. and Defillippii, R. No. 1, s. l. : Academy of Management Review , (1990), Vol. Vol. 15. pp. 88102. 10. “Profit from the core: Growth Strategy in an Era of Turbulance”. Zook, C and Allen, J. Boston, MA. : Harvard Business school publishing, (2001). 11. “Development of customer value in a supply chain: managerial thinking about strategic marketing”. Rundh, Bo.

Iss: 4, Karlstad ,Sweden : Emerald Group Publishing Limited, (2009), Vol. Vol. 26. ISSN 0885-8624. 12. Understanding managers’ marketing strategy choice in a collaborative competition industry . Layton, Jie Meng and Roger A. No. 5, Sydney, Australia : Emerald Group Publishing Limited, (2010), Vol. Vol. 23. 0955-534X. 13. Shaw S, 2007, , 6thed, Ash gate Edition, UK. Airline Marketing and Management, 6th. UK : Ash gate Edition, (2007). 14. Ryanair. com. Ryanair Confirms Boeing Negotiations Have Terminated Unsuccessfully. [article] Dublin : Ryanair News, (2009). 15. James T. Areddy, Andrew Galbraith. Ryanair Trumpets Planes From China. [Article] s. l. : Wall Street Journal, (2011). 16.

Man, Ard-Pieter De. The Network Economy. Glos, UK : Edward Elgar Publishing Limited, (2004). 1 84376 494 6. – 17 – 17. C. Marcou, G. Cros. Airline Maintenance Cost Executive Commentary. s. l. : MCTF, (2011). 18. Ryanair. Annual Report of Ryanair. Dublin : Ryanair, (2010). 19. Lyffy, Wilhelmina. Step back for Ryanair in subsidy battle with German airlines. [Article] Berlin : Reuters, AP, (2011). 20. Robbins, M. Maynard and L. New Restrictions Quickly Added for Air Passengers . [Article] New York : New York Times, (2009). 21. U. K. Confirms Air Passenger Duty Increase, Maintains Structure . [Article] UK : www. businesstravelnews. com, (2011). 22.

International, Euromonitor. Global Airline Alliances – Safety in Numbers. [Article] s. l. : ww. portal. euromonitor. com, (2010). 23. Drinkwater, Stephen. Go West? Assessing the willingness to move from central and eastern European countries. Surrey : Hamburg Institute of International Economics, (2003). 1616-4814. 24. C, Wilson R. M. S & Gilligan. Strategic Marketing Management Planning Implementation and control. USA : Published Elsevier Butterworth-Heinemann, (2005),third edition. 25. A, Faulkner D. O & Campbell. The Oxford Handbook of Strategy. UK : Oxford University Press, (2003). 26. Higgins, Brian Sheehan and Colman. Representativeness of thea

The Pyramid Of Corporate Social Responsibility


In Archie B. Carroll’s article “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders”, Carroll touches on the four key components of corporate social responsibility (CSR) within a pyramid called Pyramid of Corporate Social Responsibility. The article demonstrates how CSR would benefit the executives and their relationship with their shareholders and ultimately, the stakeholders.

In addition, he also separates the moral or ethical components of CSR and how it relates to the three major ethical approaches. I think Carroll’s idea of corporate social responsibility is decent and executives should follow his ideas but on the other hand, the expectations for management are unrealistic. Background Information Carroll expresses in his article what a firm’s social responsibility is and how they deal with some new changes. For many years, corporate executives were not aware of how important firms were to its society.

Many argued that the main responsibility for a corporation was to deliver the greatest return to its shareholders. No actions for social responsibility were taken until many years later where the government established regulations that came into play for corporations. Instead of delivering the greatest returns to only the shareholders, corporations had to also balance their stakeholders as well. Summary Since social responsibility has progressed from delivering the greatest returns to attempting to claim ethical and legal rights, Carroll’s Corporate Pyramid of Corporate Social Responsibility plays an important role in the changes.

In the pyramid, there are four key components for CSR, which are: economic, legal, ethical, and philanthropic. First, at the base of the pyramid, are economic responsibilities. Businesses were generally created for economic reasons to supply goods and services to members. Furthermore, the idea of making profit turned into maximizing profit. The second level in the pyramid is legal responsibilities. Businesses are supposed to obey the laws on how they operate. Next is the third level, which are ethical responsibilities for the corporation.

To have ethical responsibilities is to be an ethical person, therefore “to do what is right, just, and fair and to avoid harm. ”Lastly, at the top of the pyramid, are philanthropic responsibilities. Businesses are expected to be good corporate citizens and to act upon goodness to promote quality of life for the society. Next, the author brings up the ethical aspect of CSR. There are three major ethical approaches to CSR: immoral management, amoral management, and moral management. Immoral management is when a manager’s actions, decisions, and behaviors oppose what is considered right or ethical.

Amoral management is when managers are classified in the middle, neither immoral nor moral. In addition, there are two types of amoral managers: unintentional and intentional. Unintentional managers are careless to their actions and they are unaware that their actions may be hurting those that they interact with on a business level. Intentional managers, on the other hand, believe that being ethical is appropriate to their personal life and not for business. As for moral management, “moral managers not only conform to accepted and high levels of professional conduct, they also commonly exemplify leadership on ethical issues.Furthermore, Carroll explains the stakeholders’ orientation toward the five stakeholder groups: owners (shareholders), employees, customers, local communities, and the society-at-large. It appears that immoral management is only concerned with their own self-interest for the executive groups and manipulating employees. Amoral management is good because they obey the laws toward the groups, but they do not care about their shareholders. Lastly, moral management thinks about the employee’s best interest and respect.

I believe that Carroll’s article proposed great ideas by taking economic, ethical, legal, and philanthropic responsibilities into consideration for corporate social responsibility. Managers play a vital role in a corporation to its stakeholders. Mangers have to take others into consideration and the article has listed many improvements, but it is unrealistic because there are managers that only care about themselves. I believe that corporations have the right to maximize their profits because that is their intention, but it does not necessarily mean that they cannot apply good social responsibilities.

Similarly, in the Pyramid of Corporate Social Responsibility, corporate executives have to remain profitable because they own a business and they also have to abide by the laws. Being ethical is a decision that a manager has to ultimately make. Participating in philanthropy may take up some time, but it is a beneficial factor because people love to cooperate with organizations that benefit the community. On the other hand, it is tough to attempt to achieve good social responsibility because most businessmen inhabit the quality of self-interest. Because the business landscape is replete with immoral and amoral managers, moral managers may sometimes be hard to find. ”  I agree because it appears that managers only tend to care about themselves along with their gains that they tend to overlook their customers and even employees. Carroll mentioned, “Leadership by example is the most effective way to improve business ethics. I agree to a certain extent because the majority of people tend to be followers than leaders, and by seeing action taken by a moral manager, an immoral manager may take moral actions into consideration.

Moral management is the ideal model that managers should imitate but unfortunately, there are not many managers that follow this model. However, most managers are leaders therefore it may not be such an effective way to improve business ethics because they may already be setting a bad example. All in all, “if the “good society” is to become a realization, such a high expectation only naturally becomes the aspiration and preoccupation of management. ”

Corporate Law Notes Short Summary

Chapter 4 – Constituting Companies (Mini summary relevant for Chapter 22 – Transacting by Companies 1) Legal effect of the internal governance rules s140 states that: “a company’s constitution (if any) and any replaceable rules that apply to the company have effect as a contract: a) Between the company and each member b) Between the company and each director and company secretary c) Between a member and each other member Under which each person agrees to observe and perform … the rules so fas as they apply to that person”.

Enforcing the internal governance rules First, s140 is limited in that it provides for the internal governance rules to have effect as a contract only between certain persons. So: • The internal governance rules to not operate as a contract between a member and officer. • The internal governance rules cannot be enforced by outsiders: Eley v Positive Government Security Life Insurance Co Ltd Second, to the extent that s140 confers rights or obligations on a member, it does so only if (and while) the person is a member and only in their capacity as a member.

Applicants for membership may be unable to enforce the statutory contract until they are registered as members: Bailey v NSW Medical Defence Union Ltd Third, a member cannot enforce compliance by the company with a procedural requirement in the internal governance rules where failure to comply with that requirement can validly be excused by member majority in general meeting. (See Ratification in Chapter 14) Fourth, a members rights to enforce the internal governance rules under s140 may be limited to those of the rules that confer rights that are personal to the member in its capacity as such. Eg. The right conferred under the replaceable rules in s250E would be an example of such a right) Consequences of not observing the internal governance rules (Relevant Part to Chapter 22) Part 2B. 4 is drafted so that the replaceable rules act as contractual terms binding on a company, its members and officers only by operation of s140 and not by force of law. • Failure to comply with the replaceable rules that apply to a company is not of itself a contravention of the Corporations Act. This means that criminal liability, civil liability and injunctions do not apply: s135(3) If a provision of a company’s internal governance rules (either RR or constitution) have not been observed, the following may result: • In the case of non-compliance by the company, a member may be able to obtain a declaration or injunction requiring the company to comply, provided the rule is one that a member can enforce on the principles set out above. o A director or secretary may also be able to enforce the internal governance rules on this basis. In the case of non-compliance by a member, another member or the company may be able to obtain declaratory ot injunctive relief, or damages • In the case of non-compliance by a director or secretary, the company may be able to obtain declaratory or injunctive relief, or damages.

A company’s constitution may include restrictions on its objects If a company acts outside its stated objects, or breaches a restriction or prohibition on the exercise of its powers contained in the constitution, • THEN THE ACT IS NOT INVALID But those participants that caused the company to breach its constitution may be liable to other participants in the coy. Non-compliance with the internal governance rules may amount to procedural irregularity In cases of procedural irregularity, s1322 applies. s1322 has the effect that a proceeding under the Corporations Act is not invalidated because or any procedural irregularity unless: • The court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the court, AND • The court by order declares the proceeding to be invalid (see Chapter 7 for more info! Case Eley v Positive Government Security Life Insurance Co Ltd – the company’s articles of association (constitution) stated that Mr Eley should be the company’s solicitor. When the company ceased to employ him as its solicitor, he sued to enforce the relevant article under the predecessor to s140. • He failed, as the statutory contract is a deemed contract only as between the parties referred to in the section ???? Chapter 5 – Managing Companies Definitions

Organic theory of the company – recognition that the company acts through the board with respect to some matters and through members in general meeting with respect to others. Ordinary resolution – votes cast to accept of the resolution represent >50% of all votes cast by members present and voting (proxy) Special resolution – s9 motion passed by at least 75% of votes cast by members entitled to vote (in person and by proxy) Corporate Governance an expression used to describe a company’s management practices that encourage transparency, accountability and allow for effective use of membership rights. important contributor to investor protection) • Rise to authority as: company’s internal governance (IG) rules set out in constitution or RR in CA 2001 Rules Directors’ power of management Also, under common law (p 109-111) • Members cannot override decisions of the board; Automatic Self-Cleansing Filter Syndicate Co Ltd v Cunninghame (p109). o Also in John Shaw & Sons (Salford) Ltd v Shaw (p110) • Members cannot call/requisition meetings of members to pass resolution relating to a matter within the power of the board, even where the intention of the resolution is to merely express a non-binding opinion/request; NRMA Ltd v Parker (p111). Directors, within their management powers, may take decisions against the wishes of the majority of shareholders, and … the majority of shareholders cannot control them in the exercise of these powers while they remain in office: Howard Smith Ltd v Ampol Petroleum Ltd If members disagree with a decision of the board, they may (p111) • Remove the directors from office in all public co. s (s203D) • Remove the directors from office in a proprietary company if the RR in s203C hasn’t been replaced in the constitution • Where they have the power to appoint new directors (RR s201G) members may replace directors with those who are amenable to the members’ wishes o s249D – directors must call meeting is requested by atleast 5% of votes or 100 members o RR s249F – member may call and arrange to hold a meeting. Member must pay (see Chapter 7) • Alter the company’s IG rules (by special resolution: s9) to restrict the directors’ power to act without first obtaining member consent: s136(2).

Member’s decision-making powers Generally member approval is most likely required for constitutional decisions/decisions that impact differently on different catagories of members. Members’ residual decision-making powers (p 112-114) • Where the board is unable to act. Eg: o Deadlocked or below quorum: ie appoint additional directors (Barron v Potter). o Where the board falls below quorum, the general meeting is given power deal with the matter; s195(4)

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