Posts Tagged 'Bloomberg'

Corporate Japan Answers to Nobody

by William Pesek for Bloomberg View

It’s been a dreadful week for Japanese corporations. Toshiba is facing questions about its accounting practices, Sharp is asking lenders for another bailout and Takata can’t escape bad news about its airbags.

Each of these problems is bad enough on its own. Together, they raise serious questions about the state of Japan’s corporate governance. And at a time when the Nikkei stock exchange has been rising (it’s up 36 percent over the past year), those questions are in urgent need of answers. If Japan’s leading companies are managed as poorly as this past week’s events suggest, there’s little reason to believe the country’s stock market surge is sustainable.

Prime Minister Shinzo Abe has certainly tried to improve Japan’s corporate governance. Last year, Tokyo introduced a stewardship code encouraging investors to pressure underperforming CEOs, and launched an index of 400 domestic companies that regulators believe use their cash stockpiles well. Next month it will release a national code of conduct for executives: Companies will be asked to include at least two outside directors on their boards or explain why they shouldn’t have to. Abe is also asking companies to invite more women into the executive suite. Diversity in the boardroom, the government hopes, will enhance oversight.

In theory, says Nicholas Smith, Tokyo-based strategist at CLSA, “this should trigger a flurry of fevered business and balance sheet restructuring.” In practice, corporate Japan has barely budged in response to Abe’s reforms — after decades of running their affairs free of outside interference, their inertia has proven too powerful. Read more here.

Funds Learn to Say No as Boardrooms Challenged: Corporate India

by Santanu Chakraborty and Bhuma Shrivastava for Bloomberg

Money managers in India’s $1.7 trillion stock market are no longer giving rubber-stamp approval to the nation’s corporate boards.

Local mutual funds voted to reject 6.6 percent of the proposals presented to shareholders in the nine months ended December, up more than fourfold from the year to March 2013, India’s securities regulator said in an e-mailed response to questions from Bloomberg News. Their participation rate in shareholder votes jumped to 83 percent from 49 percent, spurred by new disclosure rules that require fund managers to provide a rationale for their decisions to investors.

The more assertive stance from minority shareholders prompted United Spirits Ltd. to modify plans to loan money to companies run by its former chairman and led Maruti Suzuki India Ltd. to put on hold a proposal to transfer a new factory to its parent. While India still lacks the type of activist investing personified by U.S. billionaire Carl Icahn, funds’ growing willingness to challenge management may help improve governance in a nation ranked 94th out of 144 countries for the efficacy of its corporate boards by the World Economic Forum. Read more here.

Seeking German Women for Boardrooms as Quotas Near

by Tino Andresen and Birgit Jennen for Bloomberg

Time is running out for Ulrich Lehner, the supervisory board chairman of German steelmaker ThyssenKrupp AG, as lawmakers prepare to enforce female quotas in corporate boardrooms.

The number of women on the board that oversees ThyssenKrupp’s executives is set to rise to four of a total 20 after a shareholder meeting today, short of the 30 percent minimum that will be required. Starting in 2016, more than 100 of the country’s biggest listed companies will be forced to choose women when filling vacant supervisory board seats to reach the threshold. This year, smaller firms must set their own targets and publicize plans to achieve these.

“Good women are a rare commodity” for supervisory boards, Lehner told journalists in Dusseldorf on Jan. 27. “Where will these women come from who are suitable to take up supervisory board positions? They come from the same places as suitable men come from, from occupations that qualify them to supervise companies.” Read more here.

Japan Flirts With Governance Reform

by Noah Smith for Bloomberg

Do you know what a “hostess” is in Japan? If you guessed that it’s a woman who greets you at the entrance of a restaurant, guess again. “Hostess” in Japan refers to a woman who works in a bar or a lounge and is paid to flirt with men. A French journalist once referred to them as “prostitutes who do not think they are prostitutes.”

Japanese corporate employees are the main customers at hostess bars. It’s a tradition in Japan to send (all-male) work teams to hostess clubs after hours, on the company dime. These sessions are often mandatory. Clients are also traditionally taken to hostess clubs by salesmen. Companies pay for these excursions , which  go under the heading of “entertainment expenses.”

These entertainment expenses are quite high. Decades of slow economic growth have squeezed corporate expense accounts, so in 2013, Shinzo Abe’s government introduced a plan to make “entertainment expenses” partially tax-deductible for large businesses (as they already are for small companies).

Needless to say, this is probably not a step in the right direction for Abe’s “Womenomics” initiative. But even more importantly, it illustrates one of Japan’s biggest structural problems: poor corporate governance. Fortunately, thanks to a new set of guidelines being introduced by Abe’s administration, governance may be about to experience a revolution. Read more here.

From One Woman Board Member in Emerging Markets to 1,500

by Natasha Doff, Zahra Hankir and Adi Narayan for Bloomberg

When Kiran Mazumdar-Shaw set up Indian biotechnology company Biocon Ltd. (BIOS) in 1978, female entrepreneurs were so rare that she said a bank offered her credit under a special program meant mostly for the disabled and the country’s poorest castes.

“They had a very patronizing attitude toward women,” Mazumdar-Shaw said. “There was a cap on the amount of loans they were giving to women. I didn’t take it, of course.”

A lot has changed in the last 36 years. Today, there are 22 female chief executive officers of publicly traded companies in India, the developing country with the second-most women holding CEO or equivalent posts, according to data compiled by Bloomberg.China is No. 1, the data show.

Buoyed by wider educational opportunities, laws mandating female participation in corporate governance and government support for children and families, businesswomen in emerging nations are narrowing the gap with their more developed counterparts. Ten years ago, there was just one female director of an emerging-market-based company. Now there are more than 1,500, according to data compiled by Bloomberg. Read more here.

AIG Bailout Trial Turns to Whether U.S. or CEO in Charge

by Andrew Zajac and Christine Smythe for Bloomberg Businessweek

Former American International Group Inc. (AIG:US) Chief Executive Officer Edward Liddy will face a key question on the witness stand in a trial over claims shareholders were cheated of at least $25 billion in the insurer’s bailout: was he or the government running the show?

The U.S. had a hand in everything from press releases to selection of board members after the Federal Reserve Bank of New York loaned the company $85 billion and took most of its stock, according to testimony and documents in the case brought by Maurice “Hank” Greenberg’s Starr International Co.

With Liddy’s testimony set for today, Starr’s lawyer, David Boies, has confronted witnesses this week with documents to bolster his case that the government illegally took control of the company rather than acting as a detached steward. Read more here.

Indonesia Plans Scorecards to Boost Corporate Governance

By Berni Moestafa & Novrida Manurung, Bloomberg, 21 January 2013

Indonesia’s Financial Services Authority plans to publish scorecards rating companies on the quality of their corporate governance as it begins supervising capital markets in Southeast Asia’s biggest economy.

The agency plans to rate the nation’s 50 biggest listed companies this year, said Muliaman Hadad, chairman of the newly minted regulator known by its Indonesian acronym of OJK. How companies treat minority shareholders and the roles played by board directors are among the criteria, he said in an interview in Jakarta on Jan. 15. OJK will consolidate supervision of capital markets, banks and non-bank financial institutions.

Hadad, a former central bank deputy governor, wants companies to improve practices to lure investors and broaden the pool of capital to fund growth. Indonesia’s economic recovery since the Asian financial crisis in 1997-1998, when the nation had to seek an International Monetary Fund bailout, has prompted Fitch Ratings and Moody’s Investors Service to raise their sovereign debt scores to investment grade.

“The market has high hopes with the establishment of OJK,” said Fadlul Imansyah, a Jakarta-based fund manager at CIMB-Principal Asset Management, which oversees about 2.1 trillion rupiah ($215 million) of assets. “The financial system cannot be divided into parts because what’s out there in the market is connected with one another.”Continue reading…

Investors Propose Requiring Sustainability Data Disclosure

Avery Fellow, Bloomberg, 9th April 2013

A group of investors April 8 proposed a standard requiring companies to disclose environmental and social data in annual financial filings in order to be listed on global stock exchanges.

A global sustainability listing standard would allow investors to compare companies on their environmental, social, and governance performance, Gwen Le Berre, vice president of corporate governance and responsible investment at BlackRock, said in a statement. BlackRock is one of the investment companies participating in the development of a sustainability listing standard.

The other investors working on the standard are Rockefeller & Co., Boston Common Asset Management, Pax World Management, Domini Social Investments, F&C Management Ltd., British Columbia Investment Management Corp., and the AFL-CIO Office of Investment. The investors are part of the Ceres Investor Network on Climate Risk.

The proposed listing standard would require companies to discuss how they determine which environmental and social issues are material to the company, to provide a link in their annual financial filings to a list of sustainability data, and to disclose information on eight specific sustainability issues or explain why they do not.

The eight specific issues on which companies would be required to disclose information are climate change, diversity, employee relations, environmental impact, government relations, human rights, product impact and safety, and supply chain.

Creating a standard for reporting across exchanges will encourage sound business practices and responsible investing, said Meyer Frucher, vice chairman at NASDAQ, in a statement April 8… Continue reading

Gulf Market Regulators Must Ensure Transparency, Hawkamah’s Saidi Says

By Zahra Hankir for Bloomberg, October 31, 2010.

Market regulators in the Persian Gulf must share information and enhance transparency as bourses take steps to be promoted to emerging-market status, according to the executive director of the Hawkamah Institute for Corporate Governance.

“We need to have an arrangement in place between regulators so that there’s much more sharing of information,” Nasser Saidi said at the Fifth Annual Regional Corporate Governance Conference in Muscat, Oman today. Promotions to emerging market status at index providerMSCI Inc. would ensure “better interaction between companies, investors markets and regulators; it would mean we’d be recognized internationally.”

Tightened credit, coupled with an exodus of speculators from the Dubai real-estate market, resulted in a collapse of the region’s property industry and lower trading volumes. Police investigations of senior business officials, including executives of Nakheel PJSC, Damas International Ltd. and Tamweel PJSC, tainted the emirate’s image as Dubai’s benchmark index tumbled 80 percent to 1,764.54 from its peak in 2005.

Gulf equity markets are taking steps to improve their chances of being promoted to emerging market status at MSCI, with Qatar and the United Arab Emirates signaling that they will soon implement short selling to meet the index provider’s requirements.

MSCI classifies six of the Gulf’s seven bourses as frontier markets, a designation that typically applies to economies and financial markets that are less developed than emerging markets and that have more restrictions on foreign stock ownership. (read more)


Organizational Culture: An Overlooked Internal Risk

by Michael Griffin and Tracy Davis Bradley for Bloomberg Business Week, October 1st, 2010.

Companies that encourage and support open communications outperform their peers, according to research from the Corporate Executive Board.

Nearly half of executive teams lack the information they need to manage effectively because employees withhold vital input out of fear that doing otherwise will reflect poorly on them. This restricted information flow can cripple a company’s ability to identify and respond to internal and external threats. A recent survey by the Corporate Executive Board of more than 400,000 employees across various industries reveals that companies that break down two key barriers to honest feedback not only reduce fraud and misconduct, but also deliver peer-beating shareholder returns by a substantial margin.

Imagine that the chief executive of your company recently launched a strategy aimed at taking advantage of a megatrend affecting customers: environmentally friendly widgets. You’re a senior executive tasked with communicating to your largest shareholders how this strategy will drive better corporate performance. You believe in this strategy, and of course you want the meeting to go well. You go to Boston and New York to meet with your five largest shareholders. The first three meetings go great, but the last two portfolio managers you meet with are not convinced. They don’t come right out and say so, but you sense that they believe environmentally friendly widgets are a fad and thus they are skeptical of the long-term viability of your strategy. When you get back to the office, you bump into your CEO, who asks how the meetings went. What do you tell her? Do you mention the skepticism?

There is no right or wrong answer. Many individuals, however, will instinctively emphasize the positive (e.g., “The meetings went very well; there is some genuine excitement about the direction we are taking”).(continue reading… )

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