In: Business and Management

Submitted By Aly1818
Words 8128
Pages 33
American International Journal of Contemporary Research

Vol. 2 No. 2; February 2012

CLICO’s Collapse: Poor Corporate Governance
Wayne Soverall1 Abstract
The corporate collapse on January 30, 2009 of CLICO, the largest conglomerate in Trinidad and Tobago and the Caribbean, is the worst financial shock experienced by the region to date. Today, more than two years later, its devastating effects are still being felt as the government continues to struggle with the bailout to stabilize the financial system, mitigate contagion risk, and resolve the CLICO crisis. Even one year after the bailout, there was still no resolution of the crisis. In view of the intractable nature of the CLICO collapse, the People’s Partnership government that came to power on May 24, 2010 established a commission of enquiry to investigate the causes of CLICO’s collapse, the scope of the MOU, the cost of the bailout, and the failure to provide a bailout to the Hindu Credit Union (HCU) that collapsed in 2008. There are many questions that are still unanswered. What were the root causes of CLICO’s collapse? What corporate governance structures and practices precipitated the collapse? Did the bailout create moral hazard? Who or what was to blame for the collapse? What action has the government taken to date? What lessons have been learnt and, more importantly, how can this situation be prevented from being repeated in the future? This concept paper examines these questions, analyzes the evidence to find answers, and in the conclusion, suggests ways to improve corporate governance and the empowerment of regulators to provide competent regulatory oversight and enforcement.

Key words: financial collapse, bailout, corporate governance, moral hazard, political influence, risk management Introduction
The devastating effects of the corporate collapse of Colonial Life Insurance Company…...

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