Commissioner Owen identified four disastrous business ventures which were critical to
the ultimate collapse of HIH. These instances of poor decision-making were caused by
and reflect a poor corporate governance culture.
The UK operations were established in 1993. HIH board minutes did not disclose any
board consideration of whether the establishment of operations in the UK was
compatible with the broader strategy of the company and there was no evidence
of board participation in any business plan.
Poor quality management information and inadequate accounting systems impaired the
Australian management’s ability to monitor and control the UK operations effectively.
The resultant losses in the UK were estimated at $1.7 billion.
The acquisition of a US business was accepted by the board without analysis of
management’s assertion that entry into the US market would be profitable. No
due diligence was carried out and there appeared to be a complete failure to
appreciate the level of risk involved. Losses attributable to the US acquisition
were estimated at $620 million.
The board meeting convened to discuss the acquisition of FAI was not called until
earlier on the very day of the meeting with five of 12 directors not present. Of the
seven directors present, four participated by video conferencing. It was resolved
at this board meeting that the takeover should proceed.
The directors did not appear to have had the benefit of board p