As identified by the ASX Corporate Governance Council, corporate governance can be defined as the system as per which the organizations are managed and directed. It has a major impact on achieving and setting the goals and objectives of the organization, while monitoring and assessing risks, and optimizing performance. There is no one- for- all model of best corporate governance. The constitutions of effective corporate governance end up evolving with the changes across organizations, which require additional amendment. Referring to both the cases, there can be identification of several differences. The failure of HIH was triggered by inappropriate consideration of corporate governance and its principles. On the other hand, Leighton, (2005), perceives ten principles of corporate governance that enhances the effectiveness of its business, further supporting the Group for achievement of goals.
In reference with these cases, corporate governance can be identified as a dynamic force leading towards continuous evolution. The respective Council faces the challenge of ensuring that the significance of Principles and their Recommendations stay in accordance with the investment and business communities of Australia. The corporate structure and system has to be categorized by the diffusion of shareholding and ownership, as the percentage of public subscription in the shares is large. Having a well- developed market of capital supports the active participation of shareholder. Organizations have subjectivity to protection of investor and strict norms of disclosure while perceiving the code of best practices in corporate governance.
It is important to state that principles of corporate governance results in the achievement of organizational objectives. This is because effective governance is integral with the existence and survival of an organization. It is responsible for inspiring and strengthening the confidence of investor while ensuring the commitment of the organization to the achievement of higher profits and growth. This is done in certain ways. Good governance helps in structuring the Board appropriately to take objective and independent decision as per the helm of business affairs. Also, it balances the Board to represent accurate number of independent and non- executive directors for taking care of the well- being and interests of each and every stakeholder. The Board further gains the ability of adopting transparent practices and procedures while arriving at decisions with accurate data and facts. The Board can be presented as effective machinery for subserving concerns related to the stakeholders. Finally, the Board becomes effective and efficient in monitoring and controlling the business related activities that further support the achievement of goals.
Hence, it can be stated that the effective principles of corporate governance support the success and achievement of organizational goals and objectives. To support these claims, in his landmark report on the significance of board’s role to set standards and governance, Cadbury (1992) stated that every allegation with regard to corporate governance has a direct impact on the functionality and reputation of the company. In the Royal Commission of Australia for the case of HIH Insurance, it had been noted by Justice Owen that each and every responsibility of the Board of Directors was crucial for setting directors of the organization.