HIH Company - Failures in corporate governance
Category : Business Essay Samples, Corporate Governance Examples
The study gives emphasis that the HIH Company did not fail because they were having bad business context but the company had failed because of such assaults done to core principles pointing towards the utilization of good corporate governance and by committing certain mistakes within the business don’t necessary indicate that, there lacks execution and realization of best practices but, due to inappropriate realization of better corporate framework such as relating to possible finance benefits. The study has lessons as well as reflections to learn in order for some business firms to be aware of such failures within the company and basically not to repeat whatsoever mistakes as created by HIH. The companies indicated that having good corporate governance, in its practices must be sustained well. There has from the HIH failure case as mentioned in the article written by Amerta Mardjono last 2005 discussing the fact that there was suffering as experienced by public stakeholders and resulted conflicting interest of the business and stimulation of private choice and becoming a burden. Moreover, where the principles of good corporate governance are advocated and properly executed several stakeholders are expecting to secure sustainable future for the business with the idea that HIH, if not late from good governance structure, taking account resources and the traits in which business was in, such factors can possibly remain to be equipped for to maintenance.
Introduction and Aims
There explore studies and theories about governance principles and corporate sustainability through determining by approaches as enriched by the case situation regarding HIH corporate failure that has been associated with deviation of pinnacle practices. Aside, corporate scandals revealed the wrong doing of some kind as it can be good to separate evident issues that have emerged and there continuation of political issues of apparent focal point such as industrial issues of accounting as well as auditor liability and Board accountability. Moreover, there were professional arguments regarding interests and corporate lucidity as reflected by the regulatory institution and of cautious responsibility of the roles played through assets in attention, authority and government. Lastly, understanding of such morale ideals of culture values supporting ways of corporate governance and its respected ethical assumptions as promulgated by the law. Furthermore, there was then exploration of findings concerning corporate governance to obtain business understanding of how risks of managing the business are being orchestrated in a comprehensive approach in supporting apprehensions of firms like the HIH as the understanding was synthesize from prior research within information of market proof through providing case study examples pointing the corporate governance failure respectively.
The aim for the study then is to provide understanding and assimilate the needed value of awareness in determining risk management issues as found in the case, to acquire good benefit implications in terms of separating the issues for facilitating case analysis. The aim that such matters can be defined precisely in minimizing certain room available for disputes. It follows that it can be possible to achieve improvement by means of relevant definitions. Thus, politics issues are less amenable to precise definition but, despite, can be regulated in a consistent and satisfactory way. Improvement is here more difficult because broader judgment is required; making consistency more difficult, but improvement is still possible through upgrading of regulatory institutions. The difficulty comes with the issues about culture. The aim to realize and improve risk assessment for effectiveness stance knowing the truth that improved legislation and regulation can provide only part of the solution to the situation of foreseen corporate failure that need to be recognized and underlined. The essence of adopting imperative part of solutions to failures that lies within such personal standards of honesty and ethics being followed by members of business community. Although, points deemed for the case might be of unconsolidated usage involving unusual entity. Aside, even if there is room for legitimate disagreement as to when and where changes are to be rather than having intentional confusion for business circumstances, applying to the improved rules should be given enough chance in influencing business ethics positively.
There was really the implication of such corporate mishap that brought uncertainties as well as uncovered misfortunes for the company employees, their customers as well as shareholders to amicably learn from whatever problems and issues arising the company avoiding serious matters of business and management failures (2004 ). The noted case example having to experienced corporate upheaval due to some mistreatment of the business governance being one source of problems within the Australian region as denoted in HIH Insurance Case ( 2003) and giving attempt to respond schemes of:
- Attributing failure
- Prevailing governance agenda and practice
- Areas of violation
There explains how business sustainability will depend on execution of good corporate governance philosophy, governance perspectives can possibly be intercepted with the proposition. According to, (2004), corporate governance deal with duties and responsibilities of the Board of Directors in managing the corporation reflected by the relationships with shareholders as well as the exclusive stakeholder groups that are helping HIH to be in shape such as in operations. The effective work needs to be presided and regulated to achieve reinforcement and motivation as despite the growing materialization of corporate failure within the role of corporate governance by providing platform for the business to continue rolling high. According to (2002), some of the companies are exposed with such organization problems and the pursuance to develop action planning for dealing with the situation as such measure of control of agent actions also the monitoring of it along with financial incentive to encourage the interest of applying risks functioning as compared to the control functioning ( 2002).
According to (2005) that, business governance research team have then exposed how performance behavior play crucial role in sustaining the company through lucidity promotion as well as the value of responsibility, honesty and competence ( 2002 , 2002 , 2002). The study of corporate governance had unveil main corporate failures along with problems that stem from indecent realization of superior domination philosophy ( 2003 , 2004, 2002). From (2005), in Australia, as cited from (2003) there was revelation that for the business firms to sustain continuously, the past of terrible corporate behavior should not be repetitive as the belief of materialism need to be in recognition and be addressed fully to make certain of some business supremacy reforms as proposed for having an effective as well as successful business future. Furthermore, the proponent, ( 1998), mentions that corporate governance issue was dated back when limited liability corporations started to emerge during nineteenth century and have triggered the ample need for appropriate legislation and regulation making and realization (1998).
The core issues of imposing preeminent business practice stay put in place of such domain that holds forth prime duty and perform omission and enforcement function of enacting standard of practice as well as monitoring execution and enforcing rewards punishment system for complying’ certain process of accomplishment. Thus, the corporate governance system has been formed by authoritarian and societal milieu and business management combination as to where determination of most favorable composition of latter is to be seen ( 2000). Henceforth, there implies from (2000) as furthermore outlined that such changes in politics and economics force from within the market has drive in possible universal business domination that evolve into the cycles of reality that has came from possible alteration of business governance arrangement to the structurally changing forces as mentioned. In the case of HIH, it appears to be that the company did not fail because of being powerless in terms of generating adequate sales and revenue and or because the business operations of the company were awfully failed because better business and management practice were being abandoned ( 2003 , 2002 ), even if the company was aware of their stand for standard scaling.
There has been triggering such fissure in lieu of appraising crucial perspective of high end corporate domination structure in reflecting with accountability stance, integrity valuation as well as efficiency pointing and clearness of ideas as to describing how the occurrence were sensibly absent at the HIH company as it drives the executives down the industry prominence.
HIH Case Situation ((2005). A tale of corporate governance: lessons why firms fail,
Furthermore, (2003) disclose that HIH was the biggest insurance underwriter in Australia, comprising of several insurance companies within company failure, HIH Royal Commission (2003), as of last March 15, 2001, the major companies in HIH Insurance group were placed in insolvency. The liquidators were employing scale of HIH group obligations and flight towards forgetfulness and if ultimate shortfall, collapse of HIH will be corporate failure that Australian region endured as HIH Royal Commission ( 2003) disclosed: the lack of attention, accountability for performance as well as integrity in company process and systems. The HIH Royal Commission disclose that HIH board had no sufficient ability and independence to see what had to be done, an issue of absence of competence of business.
The presence of integrity as such decisions were not made on the basis of fair judgment like, when it comes to provide adequately for future claim to acquire innovative business as HIH recognized the importance of advocating integrity and smoothly padded profits as businesses eroded. Thus, HIH Royal Commission ( 2003) reveals, money in HIH was wasted and questionable transactions as no efficiency framework in place at HIH, looking at the way the board committed to ill-fated business for future claims. There was no transparency as the public shareholders and customers were misled by facts that HIH had suffered from failure after failure in the UK and US operations and was not released in public as transparency as part of corporate governance model being assumed by HIH.
In conclusion, the essence to good business governance perspective serving as critical factors for the HIH company to sustain as well as encompass all the issues and failures in identifying certain factors contribution to the company's sustainability power by means of checking with the incidence of failure through the HIH case situation. Therefore, presence of management risk embodies HIH ability to obtain better financing in times of anguish as unlikely that HIH are capable of recovering as operation risks address the ability to utilize assets and endure poor performance. In addition, study discovers as reflected proceeding to such upheaval then, HIH recognized the need for better business authority frame in keeping up stable services and prices for benefits of the Board and the company’s management. Then, as duly stated in HIH Insurance Report (2003), policies are ineffective without successful practice and critical ways to understand roles and requirement of better business governance respectively.
Business is one of unpredictable instability that can lead a business into rapid decline if its management does understand the signals of business decline. Businesses that were growth or technology driven find themselves in a declining market where capital is scarce and venture capitalists are retrenching. When they finally do acknowledge something is wrong, some managers will treat the problem as temporary phenomenon putting out the fire but not remedying the hazard. Therefore, business failure is marked by early signals of decline that often ignored as the management team should be aware of potential difficulties or signs of trouble and should deal with them accordingly.
There have been diagrams explaining such HIH's condition in which the company appears to acknowledge accountability, integrity and transparency as prevailing framework to sustain the business. However, HIH failed to comply with them, as indicated by the failures attributes and area of violations.
Cross-check model of corporate governance principles (2005)
Source of diagram: (2005), ‘’A tale of corporate governance: lessons why firms fail’’,
Corporate governance perspective: HIH case
Source of diagram: (2005), ‘’A tale of corporate governance: lessons why firms fail’’,