Abstracts

The OECD Guidelines: Overview and 2014 Revision

Fianna Jurdant

The presentation will (1) Highlight the core principles of the OECD Guidelines on Corporate Governance of State Owned Enterprises as well as the OECD Principles of Corporate Governance and (2) Report on the main points of the 2014 draft Guidelines and Principles review and the comments generated. This will include a discussion on the situation of listed SOEs, as this raises issues linked to controlling shareholders.

Putting the OECD Guidelines in Context:

State-Owned Enterprises in China

Li Guo

The State Owned Enterprises (SOEs) in China has proven a controversial issue. On the one hand, SOEs made undeniable contributions to Chinese macro economic development in the past years. On the other hand, many of them were deeply distressed with underperformance and severe debt problems due to the soft budget restraint and other reasons. In order to work out the debt problems and revive those enterprises, several rounds of SOE reform have been initiated by Chinese governments, at the central or local levels. Still, different forms of SOEs are posing challenges or providing evidences to the established corporate governance norms. Taking the large state-controlled financial institutions for example, the typical criticisms include those as follows: the over-concentrated equity ownership by the government which tends to contemplate beyond the commercial considerations and exercise the rights of investor through external supervision; the one single legal person system with multilevel branches so that creating a very long and inefficient principal-agent chain; head officials often politically appointed as quasi civil servants, subject to a variety of external influences; the misplaced roles of controlling shareholder vis a vis industry regulator, such as the common practices of sliding door and top managers' rotation; lack of a relatively sound assessment system for employee performance, etc.. More recently, a wide range of measures has been envisioned or taken to address those concerns. It remains to observe how much differently and successfully the new hybrid/ mixed ownership reform will proceed and result in.

State-Owned Enterprises in India

Umakanth Varottil

State ownership in the corporate sector relates back to the era immediately after India's independence when there was tremendous involvement of the state in industrial activity. Several enterprises set up during that period (and thereafter) continue to operate to date and even constitute some of the leading publicly listed companies in terms of market capitalization. While state capitalism has not been the subject matter of a great deal of academic analysis in the Indian context, anecdotal evidence indicates that state-owned enterprises (SOEs) face governance issues that are different from those experienced by companies with other types of controlling shareholders (such as business families).

SOEs in India are not bereft of political interference and they may often be required to cater to political and populist agenda (such as a grant of subsidies). This causes a significant tension between the interests of the minority shareholders of SOEs (who seek better shareholder value) and other public interest (represented by the interests of the wider populace). Governance norms must adequately address the tension so as to achieve the appropriate balance. While India has gradually tightened corporate governance norms so as to bring it in tune with international standards, there remains a perceptible gap in their implementation to SOEs, which are subject to other institutional factors.

This presentation will begin with the motivation for the growth and prominence of SOEs in India, move on to the underexplored area of corporate governance in SOEs in India, and situate the specific issues faced by Indian SOEs in the broader context of state capitalism on a comparative basis.

State-Owned Enterprises in Singapore

Mak Yuen Teen

How dominant are state-owned enterprises - or government-linked corporations (GLCs) - in Singapore? What industries are they most common in? How does the government exercise its ownership rights in GLCs? How are GLCs governed? What lessons can other countries learn from the GLC model in Singapore?

The Politics of Regulating Controlling Shareholders

Walter Woon

The process of amending of companies legislation has become more consultative over the years. However, often the realities of business and litigation in Singapore are not fully appreciated when drafting the provisions. The speaker will discuss the process of legislative amendment, drawing on his experience over the years as a legislator, director and advocate.

Controlling Shareholders in Germany

Wolf-Georg Ringe

The presentation will focus on the changing role of controlling shareholders in Germany. Evidence suggests that the old "Deutschland AG", a nationwide network of firms, banks, and directors, is eroding, ownership is diffusing and the shareholder body is becoming more international. Reasons for this development are the globalisation of banking and product markets as well as an idiosyncratic taxation reform in 2001, abolishing the taxation of block divestitures.

Against the backdrop of these changing ownership patterns, I show that the legal framework for controlling shareholders in Germany has not kept pace with the developments in business realities, and that German corporate law needs to be modernized.

Regulation of Controlling Shareholders in Japan

Hideki Kanda

The current state of the regulation of controlling shareholders under Japanese corporate law and securities law will be presented with two prototypical situations in mind. One is where a parent company, typically a holding company, is listed on a stock exchange and its shareholders may be negatively affected by the company's operation of its subsidiaries. The other is where a subsidiary is listed and its public shareholders may be harmed by its controlling shareholder's activities.

Controlling the Controlling Shareholders: The Case of Singapore

Lan Luh Luh

Agency problems in controlled companies are different from those in disperse companies. The main corporate governance challenges in controlled companies are how to reduce rent extraction on the firm and prevent exploitation of the minority by the controlling shareholders. In this paper, we argue that there are two specific strategies that may potentially be deployed to address the agency problems in controlled companies, namely, the participative strategy and the controlling strategy. We are of the opinion that the controlling strategy, which focuses on monitoring the actions of the controlling shareholders, may be more effective than the participative strategy in meeting the corporate governance objectives in jurisdictions with good legal system. We use the case of Singapore to illustrate our argument.

Controlling Shareholders in South Korea

Kon Sik Kim

The presentation will be composed of three part. First, the controlling minority shareholder structure currently prevailing among large business firms in Korea will be explained. Second, the principal issues related to controlling shareholders in Korea will be examined. Third, a few possibilities for reform will be discussed.