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Issues In Corporate Governance Essay

3524 words - 14 pages

Title Page NumberExecutive Summary ...........2Introduction..............3What is corporate governance...............4Overview of CLERP 9............6Brief Overview of case..........6Decision on the case............8Recommendations for possible reforms.........10Directors duties............15Conclusion...............18References .............19Executive Summary:HIH corp. was going through a major crisis and directors tried to manipulate the market and tried several last ditch efforts to avoid the crisis, but because of several reasons crashed and resulted into a loss of billions of dollars of small investors and resulted into various businesses shutting shop to avoid litigation because their insurance provider had collapsed, thus resulting in many more billions of combined loss of the stake holders. The resulting evolution in corporate governance principles governing corporate have made disclosures and managing companies by directors more effective and legal reforms like CLERP 9 and many changes in directors duties and the way courts see the actions of directors have undergone a change. The directors who were responsible were punished and rightly so as to set a deterrent for other directors managing corporate of dire consequences if they fail to effectively install proper corporate governance principles in their companies.Introduction:In the recent history all over the world there have been many corporate collapses all around the world. The most famous of these corporate collapses were of Enron Corporation in US, One Tel and HIH insurance in Australia. The company taken for this case study is HIH insurance this case is famous as ASIC v Adler. The three directors of HIH Insurance Ltd were found to have breached section 180(1). Until its collapse HIH insurance Ltd was the second largest general insurance company. ASIC instituted proceedings against three directors of HIH insurance Ltd these directors were Rodney Adler, Raymond Williams and Dominic Fodera. ASIC alleged these three directors for breaching directors' duties including the breach of the duty of care in section 180(1). Adler was non-executive director of HIH and it was found by court that he was also an officer of a subsidiary of HIH, HIH Casualty & General Insurance Co Ltd (HIHC). Fodera was executive director and finance director of HIH and HIHC. Williams was chief executive officer of HIH and a director in both HIH and HIHC. The breach of directors duties by these directors lead to collapse of HIH. This was the biggest corporate collapse in the history of Australia. Collapse of this corporation proves that there were some loop holes in the system and there was need to improve the whole system. In this essay first I have discussed the meaning of corporate governance and its importance then the brief introduction of case, the description of directors' duties that were breached remedies available in general. At the end there are few recommendations for the possible reforms that...

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