Ten years ago this month, Australia saw its largest corporate collapse when insurer HIH was placed into liquidation with losses of $5.3 billion. It was once considered Australia’s largest insurer with $7.8 billion in assets.
There was a Royal Commission, numerous articles were written on it and most of the protagonists are now out of their government-provided exclusive accommodation units so, on this anniversary, I wondered what we can learn from the coal- raking to apply to our businesses?
HIH Royal Commissioner Justice Neville Owen’s three-volume report found HIH’s “board had 13 directors of whom five were executive . . . and eight were non- executive . . . only [Alexander] Gorrie and [Neville] Head would be considered independent”.
Owens found HIH’s Ray Williams was a “dominating chief executive” and “any attempt to oppose [him] was ineffective”. “For the most part the board accepted what Williams had put to them,” Owens said.
I get the feeling that Williams, who was long at the head of the business he founded, was used to being in control.
I know regular readers of this column may beg to differ, but no one person can be the fountain of all knowledge and no one person knows the best way to run a business. It is a lesson for all of us. In a large company environment, it is recommended to have a board that is mainly independent and non-executive. What a CEO really wants is a bunch of no men. A great CEO should have to justify his decisions to a group of people who are more likely to say no.
Sure – it makes the job a bit harder but if the idea is such a great idea, then the no men will have to say yes.