Length: 10 Pages 2456 Words

BUSINESS ETHICS REPORT AN INVESTIGATION OF THE ETHICAL ISSUES THAT ARISE IN THE OPERATION OF A FREE MARKET SYSTEM IN THE HIH COLLAPSE Word count: 2115 THE SCOPE OF ETHICS AND THE NATURE OF ETHICAL OBLIGATIONS THE HIH COLLAPSE BACKGROUND There are few surprises when it comes to insurance, but when they do come they nearly always bring bad news. Such was the demise of HIH Insurance Limited (HIH): both a surprise (to many) and very bad news for many policyholders. On Thursday, 15 March 2001, HIH received approval from the NSW Supreme Court to place HIH into provisional liquidation. Tony McGrath of KPMG was appointed as provisional liquidator to HIH and 17 of its controlled entities. Provisional liquidation is a temporary form of administration that gives HIH time for the provisional liquidators to review HIH operations and assess the financial position. HIH insurance is now in run?off, which means it is managing its outstanding claims and not writing any new business. This could take several years to complete; some have suggested as long as 10 years. THE FACTS ABOUT HIH HIH comprised several separate government?licensed insurance companies, including HIH Casualty and General Insurance Limited, FAI General Continue...

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This offence carries a maximum sentence of 20 years under the Crimes Act. Lawyers for ASIC told Judge Kim Santow that there was evidence the men would offload their assets to avoid compensating HIH if ASIC investigations proved they had acted negligently. These are numerous and include: Insolvent trading; Insider trading; Directors' share trading activities; Accuracy of financial statements; and The accuracy of disclosures made to the stock market Like APRA, ASIC has no power to ensure that all policyholders have their claims met in the event of insolvency. ASIC alleges that Rodney Adler has already moved money overseas, including the Philippines and Monaco, and that up to 1 million may already have been removed from his companies. While this sort of reaction might be viewed as extreme to some, it really depends on the individual and their belief in the importance of ethics. The Australian Securities and Investments Commission has alleged that the three men - HIH founder and former chief executive Raymond Williams, chief financial officer Domenic Fodera and former director Rodney Adler - breached their duties by showing a lack of good faith, care and diligence for HIH's assets. Counsel assisting the commission, Wayne Martin QC, told the hearing that there is an inference from documents collected by an inspector for the Australia Prudential Regulatory Authority, that the auditors signed a report that significantly overstated or incorrectly stated, the company's financial position as at June 2000. The auditors may have knowingly involved themselves in verifying accounts, which they knew to be false, and may have acted in conjunction with the company. APRA's role is to monitor insurance companies under the Insurance Act 1973. The saddest part of the whole debacle is that up to now, no one has come forward to take responsibility for running the organization into the ground and sending it bankrupt. The triple bottom line has become an important indicator of quality and integrity within an organization and is part of the growing implicit responsibility that business has in general to the world around them. That same survey showed that 35 percent felt that ethical and moral behaviour in business was the most important and highly valued attribute of tomorrows business leaders. One of APRAs major roles following the collapse of HIH appears to be explaining its role, and whether it made full use of its powers prior to the collapse.


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