After this wave of spectacular turbulence and corporate collapses, typified by Bond and Skase, there was a quieter phase, with recessions hitting the majority of businesses and tycoons consolidating. In the
Amidst this relative calm, the demise of HIH stood out as a timely shock to investors and the community as a whole, for the scales of its impact and financial losses. HIH Insurance Limited, as the second largest general insurer in
The HIH is described as the largest corporate failure in
A more significant aspect is the exposure of routine malpractices by business corporations and a lack of proper regulatory mechanisms. The likelihood of a market failure is shown clearly in this case after years of deregulation, refuting the proposition from those who only envisioned government failures and hindrance in the economy. The founder of HIH received court sentences of four and half years of jail term, for falsified company accounts and blatant mismanagement. These are perhaps the right penalties imposed on the company executives concerned; for the demise of a multi-billion dollar company, these are small prices to pay. The issue of wide implications is corporate governance under market conditions. One major cause to troubles is the decisions made by top executives to over-extend, to make unrealistically ambitious deals on acquisitions, and to spend on excesses. These conducts usually break no clear legal restraints, but would lead to unforeseen consequences as executives lose their head and attempt to realise fantasies. The route to failure and self-destruction is more or less the same, in
In a post-Enron era, when people have deeper suspicion of business strategies and governance, Macquarie Bank of
The Australian corporate world has retained its distinctive trait of integrity in business doing and treaded the path carefully in a traditional, prudent fashion. Economic failures in this market setting of
It is interesting to note that Enron Australia, set up by the
Australians are slow followers of American business and management practices, but many have recently caught up with the trends in international markets. This proves a double-edged sword for the learner. Efficiency and productivity level were raised, with new technology and enterprise management, and Australian businesses found ways to venture out. In an economy of easy money and reduced regulatory pressures, frauds and scandals emerged more widely, producing examples of aggressive business chiefs and spectacular collapses with massive losses. Learning the practice also creates potential bubbles in the economy, in inflated figures and an urgency to satisfy investors. With or without dreaded lessons of Enron and others, these fallacies indicate an inherent vulnerability in corporate governance and a powerful tendency towards taking risky approaches in the market. Scandals and collapses of the past serve to remind Australian businesses, even those well run businesses, of their extensive exposure to unpredictable market forces and to temptation of expanding.