The Collapse of HIH Insurance Ltd - Case Study Example

HIH INSURANCE LTD Introduction HIH Insurance ltd together with its group companies was the second largest insurance company within Australia. HIH insurance ltd consisted of 217 subsidiaries together with its operation in a number of countries. However, HIH group collapsed in March 2001. These resulted to the HIH Insurance Limited and a number of its leaders to be put in liquidation. Consequently, in August 2001, the companies that were in provisional were been placed into liquidation. These has resulted to the schemes of arrangement been put in place for these insurance companies (Romans, pp67). What were the unethical behaviors of HIH senior management, including Rodney Adler and Ray Williams, founder of HIH, which resulted in their collapse? The manner in which the senior management including Rodney Adler and Ray Williams, founder of HIH, is regulated in the insurance industry, therefore, is commendable reason of inquiry into light of the recent collapse of Heath International Holdings (HIH) that is currently recorded as the biggest corporate collapse in the history of Australia (Henry, pp138). Rodney Adler and Ray Williams, together with the founder of HIH, result to suing by ASIC in the court of Wale in New South. ASIC was successful in finding the unethical behavior in that all these officers had broken the responsibilities in HIH insurance limited (Henry, pp139). Rodner Adler was guilty of breaking the manager responsibility found in section 180 in the responsibilities of care as well as diligence within section 181 performing duties in good faith as well as skill. Under this section, members were required to devote the time that was necessary in the need of preparing the meeting as well activates participating in the duties of the board along with having adequate level of knowledge. Rodner found to have made statements that seemed to be not true and this had effect on the market place. Due to his dishonesty, was found under this criminal offence. He was also found in failure of not of using well the position of the director as shown in section 182. Under this section, he was required to respect the confidentiality of the meetings of the board. He was required not to use the skill acquired in the company to put within his personal interest. He was sued in breaking the act of not using proper information in his duties in section 180. Under this section, he was required not to use information in causing harm to the corporation (Henry, pp152). Ray Williams who was the Founder Chairman failed in his duties by failing to exercise his duties and power for a good purpose. He signed a letter in the annual report, which he was aware it was misleading. These sections linked in compensation in HIH auxiliary of $10m, Causality of HIH as well as the broad Insurance Ltd through which Rodner Adler the Manager. Additional offences were in connection to these crimes. These include; failure to deliver the property of the company that led to the company collapsing that prevented the company from been reproductive. There was loss of confidence due to the concerns that were brought in accounting practices that resulted to the market been fully informed (Henry, pp156). Who were the ‘gatekeepers’ of HIH, what roles did they play, and what were their unethical behaviors that resulted in the HIH collapse? The gatekeepers of the HIH were the management tools. These included the leadership team that included Manager and the leadership team in general. The gatekeeper played the role of representing the HIH. They served to put together the entire company as well as having the efficiency that depended on their strong point. They played the role of showing the personal consideration for the employees. Been the representatives they provided guidance in undertaking the performance as well as dealing with cases of indiscipline within HIH. They also carried recruitment in conjunction with other team leaders of HIH (Clarke, pp39). There were however corrupt behaviors that resulted in the HIH collapse that was as result of not carrying their responsibilities. HIH illustrated that higher-ranking management as well as the board had watched over the underprivileged selection of administration personnel, in addition to their lack of skills with competencies to supervise, what grew to be a multi national enterprise. It was noted in Ray William's personal weaknesses that included a paternalistic self-importance as well as failure to see his own faults, and the suspending to his ruling by many found in the board within an unsuspecting behavior. This contributed to HIH collapse (Clarke, pp41). The leadership team of HIH overlooked the caution signs of HIH, the group's that was involved with the public's risk. The customs of apparent lack of concern or else conscious ignore on their role of been in charge for the welfare of the corporation set into coach a sequence of events that terminated into the disaster of enormous extent. The main reasons for the collapse of HIH were poor management caused by the management tools of HIH along with greediness. These were set apart by means of lack of awareness to detail of HIH as well as capability, short of responsibility for performance along with lack of truth within the company's internal course with systems (Clarke, pp45). What role did the ‘regulators’ play in the HIH collapse and what were the reforms that were introduced to integrate a regulatory body for the financial industries? The main role that regulators played in HIH was to administer an emission-trading permit in moving assets from the balance sheet to various facets of transactions. Regulators were the ones who were giving reports on the quality aspect of HIH. This was not the case in HIH for Swiss Winterthur sold 51.1% stake in July 1998. Within the same month the newly reforms were introduced in Prudential Regulation power in Australia. They began to come with the responsibility of regulating the insurance industry that was included within HIH (Justin, pp30). In the year 2000 in July the routine audit made by Arthur Andersen failed to raise the terror regulators as well as others believe within the company affirmation that it contained $939 million of assets. This made the HIH reform in selling partially of its trade all-purpose cover within the trade. This resulted to HIH shares declining from A$1.05 in the direction of a figure of A$0.45 after declarations that were completed of losses as well as report within the marketplace about the fundamental economic state of the company. Regulators reformed in choosing not to send in a supervisor as the outwardly audited accounts that appear to explain the corporation health (Justin, pp35). The December economic statements of HIH were behind schedule within February 2001 at APRA. This made the regulators to think in the act of that period. The Securities of Australia with the savings commission develop into concern that HIH appeared to be in capability of setting very wide bounds in opposition to its likely insurance losses found in that the period. In the period of September 2001, the liquidators made a reform in amending the losses that estimated to A$3.6 billion with A$5.3 billion (Justin, pp37) HIH showed failure in financial statement in that the regulatory system was been restored in the year 1998 into line with the walls of investigation commendations. The reforms established an incorporated regulatory body in the financial industries, APPA that took more the duties for the administration of banks, life as well as broad insurance companies along with the resources of excellent innovation. New Zealand supported risk in credit ranking firm, prompt ratings, published in the year 1996 that gave a warning of the struggle experienced in HIH with a huge burden of money owing and along with suggested of the firm been nearby liquidation. Consequently, he showed the resolute in rating the pattern of weakening of HIH (Justin, pp52). Conclusion There are a number of ethical lessons learnt from this collapse. The HIH collapses based in Australia, have given into suggestion that there are major universal troubles expressing the means in which businesses along with company governance function. The conduct shown in this paper of association of HIH collapses has shown crime in character of different individuals such as the actions of HIH firm such as Ray Williams who failed in his duties of not exercising his duties and power for a good purpose. He signed a letter in the annual report, which he was aware it was misleading. These sections linked him into compensation in HIH auxiliary of $10m, Causality of HIH as well as the broad Insurance Ltd. Rodner Adler was also guilty of breaking the manager responsibility. He was found to have made statements that seemed to be not true and this had effect on the market place. After a regulatory inquiry into HIH collapse, there was announcement in the making use of structures of balance sheets as a way of avoiding sufficient disclosure or else clearness. These have offered some of the necessary corporate governance with ideas. Some behaviors that are associated with the collapse of HIH have lead to the ineligibility of directors along with the disappearance the world's great corporative firms (Frank, pp152). Recent corporate collapses that have occurred have as well hit the basis of investor in addition to public assurance within HIH have led to calls for a reconsideration of ethical principles, auditing performance, managerial recompense structures, domination practices along with exposé principles. This paper reviews some of the factors that have led to the collapse of HIH in his history (Frank, pp179). References Clarke, B. Roles that Regulator played in HIH Collapse. New York: Taylor Publishers, 2007pp 39 David C, Causes of Managing of HIH Collapse in Senior Management. New York: Cambridge Scholars Press 2006pp170 Frank, L. Ethics Lessons made in HIH collapse .Washington .Cambridge Press 2000pp152 Henry, N. HIH Collapse caused by Management Tools: Washington Publishers, 2002 pp152 Justin, O. Reforms made in HIH collapse. California. Harvard University Publishers 2002pp37 Roman, A. HIH collapse crime. New York: New York University Publishers, 2002 pp 67 Read More

He was sued in breaking the act of not using proper information in his duties in section 180. Under this section, he was required not to use information in causing harm to the corporation (Henry, pp152). Ray Williams who was the Founder Chairman failed in his duties by failing to exercise his duties and power for a good purpose. He signed a letter in the annual report, which he was aware it was misleading. These sections linked in compensation in HIH auxiliary of $10m, Causality of HIH as well as the broad Insurance Ltd through which Rodner Adler the Manager.

Additional offences were in connection to these crimes. These include; failure to deliver the property of the company that led to the company collapsing that prevented the company from been reproductive. There was loss of confidence due to the concerns that were brought in accounting practices that resulted to the market been fully informed (Henry, pp156). Who were the ‘gatekeepers’ of HIH, what roles did they play, and what were their unethical behaviors that resulted in the HIH collapse?

The gatekeepers of the HIH were the management tools. These included the leadership team that included Manager and the leadership team in general. The gatekeeper played the role of representing the HIH. They served to put together the entire company as well as having the efficiency that depended on their strong point. They played the role of showing the personal consideration for the employees. Been the representatives they provided guidance in undertaking the performance as well as dealing with cases of indiscipline within HIH.

They also carried recruitment in conjunction with other team leaders of HIH (Clarke, pp39). There were however corrupt behaviors that resulted in the HIH collapse that was as result of not carrying their responsibilities. HIH illustrated that higher-ranking management as well as the board had watched over the underprivileged selection of administration personnel, in addition to their lack of skills with competencies to supervise, what grew to be a multi national enterprise. It was noted in Ray William's personal weaknesses that included a paternalistic self-importance as well as failure to see his own faults, and the suspending to his ruling by many found in the board within an unsuspecting behavior.

This contributed to HIH collapse (Clarke, pp41). The leadership team of HIH overlooked the caution signs of HIH, the group's that was involved with the public's risk. The customs of apparent lack of concern or else conscious ignore on their role of been in charge for the welfare of the corporation set into coach a sequence of events that terminated into the disaster of enormous extent. The main reasons for the collapse of HIH were poor management caused by the management tools of HIH along with greediness.

These were set apart by means of lack of awareness to detail of HIH as well as capability, short of responsibility for performance along with lack of truth within the company's internal course with systems (Clarke, pp45). What role did the ‘regulators’ play in the HIH collapse and what were the reforms that were introduced to integrate a regulatory body for the financial industries? The main role that regulators played in HIH was to administer an emission-trading permit in moving assets from the balance sheet to various facets of transactions.

Regulators were the ones who were giving reports on the quality aspect of HIH. This was not the case in HIH for Swiss Winterthur sold 51.1% stake in July 1998. Within the same month the newly reforms were introduced in Prudential Regulation power in Australia. They began to come with the responsibility of regulating the insurance industry that was included within HIH (Justin, pp30). In the year 2000 in July the routine audit made by Arthur Andersen failed to raise the terror regulators as well as others believe within the company affirmation that it contained $939 million of assets.

This made the HIH reform in selling partially of its trade all-purpose cover within the trade.

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