A CASE STUDY FOR THE HIH INSURANCE

Running head: A CASE STUDY FOR THE HIH INSURANCE
A Case Study for the HIH Insurance
Name of the Student
Name of the University
Author Note

A CASE STUDY FOR THE HIH INSURANCE2
Table of Contents
Introduction................................................................................................................................3
ASX Corporate Governance Principles.....................................................................................3
Duties and Responsibilities of the Board of Directors...............................................................5
A Reflection on the cognitive levels of the directors of HIH as per Kohlberg’s Model of
Cognitive Moral Development...................................................................................................6
A Reflection on whether to repeat the inactions of the Directors..............................................7
Conclusion..................................................................................................................................8
References..................................................................................................................................9
Appendix..................................................................................................................................10
A Reflection on the Characteristics of Cognitive Moral Development...............................10

A CASE STUDY FOR THE HIH INSURANCE3
Introduction
As appointed to be the Chair of the board of directors of JR Services Pty Ltd, it would
be of utmost importance to abide by the ASX Corporate Governance Best Practice Principles
along with following the provisions of Corporation Law. The management needs to steer
clear from the mistakes and wrongdoings that most companies have committed and for that
reason the case study of the collapse of HIH Insurance shall be discussed in the following
report. The board of directors shall be made aware of their duties that they shall be bound to
follow as per the Corporations Act 2001(Cth). Personal opinion on Ray William, Rodney
Adler and Dominic Fodera’s approach in HIH Insurance in terms of the Kohlberg’s Model of
Cognitive Moral Development shall be shared in order to provide a guideline for the
appropriate behaviour of the company executives and board members. Lastly, certain
reflections about the critical analyses of the case study on HIH, the inactions of its directors,
the overall characteristics of Cognitive Moral Development and an opinion on the position of
Chair of the board of directors of JR Services Pty Ltd.
ASX Corporate Governance Principles
The ASX corporate governance principles (4th edition) acts as a guideline of values,
culture and trust for the listed corporations on the Australian Securities Exchange, which is
recommended by the ASX Corporate Governance Council. It strives to guide the listed
companies so that they achieve good governance outcome and thereby meet the expectations
of the investors. The eight principles of ASX Corporate Governance revolves around
(Corporate Governance Principles and Recommendations 4th Edition, 2020):
 Clearly mentioning the duties and responsibilities of the board of directors and non-
executive members along with a regular scrutiny of their performance.

A CASE STUDY FOR THE HIH INSURANCE4
 Structuring the board as per an appropriate size, which should comprise of
committing and skilful people having knowledge about the corporation and the
industry.
 Instilling and enforcing a notion of ethics, lawfulness and responsibility in the
organisation.
 Verifying and safeguarding the integrity of the reports of the corporation.
 Disclosing certain matters of the corporation in order to give a clear notion of its
internal situation to any reasonable person who may be associated or interested to
know.
 Furnishing facilities and information to the security holders so that they could
exercise their rights in the corporation.
 Establishing a sound risk management system and keep a check on the effectiveness
of such system.
 Paying fair remuneration to the directors and senior executives in order to retain and
align their interest with the best interest of the corporation and its security holders.
In this regard, it is recommended that along with the overall corporate governance
principles, as the Chair of the board of directors of JR Services Pty Ltd, it is recommended
that the corporation should emphasise on scrutinising the activities of the directors so that
they do not dominate over the company in bad faith and divulge sensitive information to
outside sources as per the ASX corporate governance principle.
Given the example of the collapse of HIH Insurance, the directors has been responsible
for the fall of the company. The CEO has been the strongest influence over the company who
brought over his friends on board who have been supportive of his decisions without raising
any question on his actions and performances, which is a clear violation of the ASX corporate
governance principles (Lipton 2003). The company’s fund was intertwined with the CEO’s