Allphones CEO gets the chop

Summary:The Allphones board has sacked long-time CEO Matthew Donnellan almost a year after a Federal Court found that he was knowingly concerned in unconscionable conduct in the retailer's dealings with franchisees.

The Allphones board has sacked long-time CEO Matthew Donnellan almost a year after a Federal Court found that he was knowingly concerned in unconscionable conduct in the retailer's dealings with franchisees.

The news was revealed in an email sent yesterday from Allphones director Shaun Colligan, but there was no explanation as to why Donnellan was sacked or when he would be replaced.

"As at the 14 April 2011 — the Board of Directors made the decision to remove Matthew Donnellan as the CEO, Matthew remains a shareholder of the business," Colligan wrote in the email, which has been obtained by ZDNet Australia.

"The Board will advise on the appointment of a new CEO as soon as the information becomes available."

Allphones declined to comment.

The move comes almost a year after judge Lindsay Graeme Foster of the Federal Court found that Allphones had engaged in unconscionable dealings with franchisees and ordered it to pay $3 million in damages to 55 franchisees, represented by the Australian Competition and Consumer Commission (ACCC) in a class action.

The behaviour started in 2004 when Allphones commenced a national expansion plan at the direction of its board and newly appointed CEO, Matthew Donnellan.

Allphones structured its franchise system to give it control over both the stock and income of franchisees. The retailer assured franchisees it would use this bargaining power to their benefit.

However, Allphones did not disclose commissions and bonuses that it had negotiated with suppliers. It also altered documents from carriers, disguising charges.

The court ordered by consent that in both instances, withholding this income was unconscionable.

In 2006, a group of franchisees were referred to as "dickhead franchisees" in Allphones' management reports. Allphones targeted franchisees that did not meet unilaterally adopted performance criteria, or who were not "loyal", and used a number of tactics to pressure them to sell, transfer or otherwise terminate their franchise.

These tactics included: withholding stock; stopping a franchisee's income while simultaneously requiring that they bank daily takings and pay rent and wages; and threatening franchisees with "breach" notices.

By consent, Justice Foster of the Federal Court declared that these tactics were unconscionable and that Donnellan, Tony Baker and Ian Harkin were knowingly concerned in the unconscionable conduct.

Justice Foster also ordered Allphones, Donnellan and Baker pay the ACCC's costs.

Colligan wrote in the email that all "high level" matters concerning the business, including distribution, should be directed to chief operating officer Tony Baker, another Allphones executive also found to have been knowingly concerned in the unconscionable conduct.

Topics: IT Employment

About

Mahesh Sharma earned his pen licence in his homeland, where he covered the technology industry for ZDNet, SMH, Sky Business News, and The Australian--first as an FTE, and later as a freelancer. The latter fueled his passion for startups and empowered a unique perspective on entrepreneurs' passion to solve problems using technology. Armed... Full Bio

zdnet_core.socialButton.googleLabel Contact Disclosure

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Related Stories

The best of ZDNet, delivered

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
Subscription failed.