In India promoters – or controlling shareholders – can borrow money using their stock as collateral. It’s not a new practice – but what is surprising is that the value of these pledged shares as a proportion of market capital fell to its lowest level in over four years in the quarter ended this September.
With corporate debt climbing and putting the spotlight on banks’ nonperforming assets, what’s going on? Read more
By Amit Tandon
The role of institutional investors in Indian corporate governance is evolving as shareholders realize that they don’t just have the right, but a duty to engage with their portfolio companies.
This newfound role has helped outside shareholders declare their displeasure with promoter control and management-proposed resolutions to which minority investors do not stand to gain. In India, this dynamic must grow to create balance in the corporate governance hierarchy, which company boards are responsible for in developed markets. Read more
By Pavel Morozov of State Solutions
Russia’s heavily trailed privatisation programme, the scale of which has not been seen since the controversial loans-for-shares privatisations of the 1990s, has so far not delivered on expectations. Assets worth $13bn were set to be sold in this year alone, but now it looks like the Federal Treasury will be receiving $1bn at most. And according to treasury figures, just 4 per cent of privatisations planned for the first half of 2013 were implemented, with only $500m in assets sold.
Officials have blamed recent global market conditions. But the reality is more complex. Read more
By Bruce Misamore
Ten years ago this month my friend and business colleague, Mikhail Khodorkovsky, was arrested at gunpoint in Novosibirsk – the start of a chain of state-sponsored intimidation and corruption in Russia. There is no doubt that the hand of Vladimir Putin and the Kremlin was very much at the steering wheel for this very public and televised event. The shock of this political act reverberated around the world – no more so than in the boardroom at Yukos Oil Company headquarters. Read more
From probes into a $750m AgustaWestland helicopter contract to an alleged land grab involving relations of Sonia Gandhi, leader of the ruling Congress party, corruption in India comes from the top down.
A new report from the Economist Intelligence Unit and Kroll, a US risk consultancy, has found that 69 per cent of India’s companies were affected by fraud in the last year with an average cost of 1.4 per cent of revenues. Read more
The Hindu, established in 1878, is one of the most respected newspapers in India. But a boardroom tussle has brought its family owners back into key editorial positions, raising questions about the quality of the press and governance in the world’s largest democracy. Read more
Transparency International’s latest report on emerging markets companies has slammed Chinese companies for their lax reporting standards, comparing them unfavourably with the relatively more open Indian corporate scene.
Faring little better than their Chinese counterparts were a handful of Middle Eastern companies included in the report. Read more
Normally carousels are for children but in Poland they are enjoyed by grown-ups, particularly when it comes to top jobs in companies where the state treasury has a significant stake.
It has become a hallowed tradition in Poland for every new minister to clear out senior executives installed by his predecessor and put in his own people. Although Poland’s Civic Platform government promised to tone down the practice when it came to power six years ago,it is still going strong – as evidenced by a purge at copper miner KGHM. Read more
By William Wilson
In recent years, both Chinese and Russian stocks have sold at astonishingly low discounts relative to other emerging markets. While the price-earnings multiple (PE) for the MSCI Emerging Stock Index is hovering around twelve, Chinese and Russian stock multiples have collapsed toward mid-single digits. For the other Brics, India and Brazil, investors have been willing to fork out twice as much money for each dollar of earnings. Read more
Good news for the economy, good news for investors; bad news for anyone looking to make a quick buck scamming corporate India. India’s upper house of parliament has passed the Companies Bill 2012, which will now go to the president for approval.
In a country where an estimated 80 per cent of businesses are in the hands of ‘promoters’ – founders and their families – governance and control are big issues. The Companies Bill introduces new rules on boards, auditing and fraud that are expected to improve transparency and draw investment into India’s beleaguered economy. Read more
Rana Kapoor, CEO of Yes Bank
When the Hay Group teamed up with the Economic Times, the Indian newspaper, to indentify the best company boards in India, they assembled a panel headed by Kumar Birla, the head of the Aditya Birla Group, and asked them to select a list of ten. Lots of contenders, you would think.
But the committee could only find five boards that made the cut. What’s the problem? Read more
Compromise is often seen as a sign of weakness in Russia so it’s encouraging to see one of the country’s most powerful men giving ground in a high profile conflict over corporate governance. Six months after denying that Rosneft had any obligations to minority shareholders in TNK-BP’s listed unit, Igor Sechin, the chief executive of Russia’s state oil company, appears to be backing down. Read more
By George Dallas of F&C Investments
Reeling from the shock of the $2bn accounting scandal at Satyam Computer Services in 2009, Indian regulators have responded with a plethora of initiatives to rebuild investor confidence in the country’s capital markets.
These were welcome developments but have resulted in a somewhat disjointed governance regime. In January, the Securities & Exchange Board of India (SEBI) published a public consultation paper on proposed revisions to the corporate governance requirements for listed companies in India. The idea is to create a more coherent and progressive corporate governance framework, with the aim of re-establishing India as a destination of choice for international investors. Read more
Regulations introduced last week obliging Russian state companies to pay at least 25 per cent of their profits in dividends look like a step in the right direction for long suffering minority shareholders.
But it appears that state utilities are simultaneously taking an even bigger step backwards, launching yet another round of state-funded secondary share issues that raise questions about the government’s commitment to corporate governance. Read more
Indonesia should consider revamping its corporate governance standards in the wake of the Bumi affair.
Even though the case involves a dispute among private shareholders, the government must tread carefully because the affair is seen as “a bad precedent” for the country.
That’s the view of Chatib Basri, chairman of the government’s investment coordinating board, (pictured) who told beyondbrics of his concern about Bumi’s impact on the investment climate. Read more
By Steven Williams of CEB
The multi-million dollar discrepancy between asset valuations in London and Indonesia, which has wiped around 50 per cent off the value of the coal miner Bumi’s shares in the past week, is a stark demonstration of the dangers faced by companies expanding their global operations.
Bumi is not the only company which faces the risk of losses from compliance failures. In research we conducted with 125 of CEB‘s member companies around the world, we found 15 per cent of employees had observed some form of corporate misconduct but only a fifth of that information was reported to executives. Corporate centres are effectively flying blind on compliance – and the problem is particularly serious in emerging markets. Read more
Samsung, South Korea’s biggest conglomerate, could do with some tips from Sweden’s Wallenberg family about how to become a loved company.
Marcus Wallenberg, chairman of Skandinaviska Enskilda Banken and a member of the powerful Wallenberg family, visited Seoul this week with a large business delegation and met Lee Jae-yong, the chief operating officer at Samsung Electronics and the group’s heir apparent. Read more
Facing the dilemma of reporting an act of wrongdoing in the workplace? Indian employees, whose attempts to report workplace misconduct often end up jeopardising their jobs, need fret no more: companies are outsourcing whistle-blowing services to third-party consultancies. Read more
By Alfredo Behrens of the FIA business school in São Paulo
Which is the best way to run a business: paternalism or meritocracy? It depends what kind of society you are operating in. Here is a tale of video production in Brazil. Read more
The trial of Boris Berezovsky vs Roman Abramovich has highlighted Russia’s political and corporate governance issues. But will the case impact foreign investor appetite in the country? Daniel Garrahan reports.
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