VIPsight International
VIPsight America - Mexico
24 Novermeber 2013
Corporate Governance in the State-owned Enterprises
In private companies, the objectives of the managers and shareholders can enter in conflict due to the fact that shareholders have as main goal the maximize the value of their investment in the company, while for the administrators, the objectives are others, such as the satisfy their own desires in terms of their salary, recognition, power, the thrill to the challenge, and the opportunity to make a difference in the world, among others, that translates into control over the company in addition to that they are responsible for the handling of the financial and corporate information. The above leads to the fact that the mechanisms of Corporate Governance. Therefore I am a question arises, the Corporate Governance may also apply for public companies?
Private companies have a goal of securing profits while in state-owned enterprises are not pursuing profits but the common good of society. In private companies the decisions are taken by few people, which make it more efficient the decision-making process, while in public enterprises, the decisions are taken by many people and the process is obviously very bureaucratic. In the private companies, the administrators are either elected or kept in their charges through the correct performance that each person has in their management, while in state-owned enterprises generally administrators are elected or retained in their charges through the or nepotism and cronyism that each one of them, which would mean that are probably not the best people to lead the public companies in which they come to be, and finally, when it have situations of crisis, private companies could reach to break or deal with complicated financial situations in exchange for public companies the state can never go to break, in case that this were to happen, the state injected Cash flows to maintain the operations of this type of companies.
Due to the above we returned to the question, as it could be the Corporate Governance in public enterprises? By what I set the task of investigating how the Corporate Government arrives to work in public enterprises. Fortunately I found that if there are codes of Corporate Governance practices that also apply to public companies. One of them emits the Organization for Economic Cooperation and Development (OECD), calls the OECD Guidelines on Corporate Governance of State-owned Enterprises (2011), which as mentioned the same OECD in that document, is an “extension” of the OECD Principles of Corporate Governance issued in 2004 for private companies. Likewise, the consulting company Deloitte issued Corporate Governance Practices in entities of the Public Sector (2010). This means that it is possible that public companies may have the inside their codes of Corporate Governance.
The two documents agree that State-owned Enterprises have a leading role for the society, are the companies that could generate higher economic growth in a country even greater than the private sector companies, because of this, it is very important to take into account the guidelines that have Corporate Governance for the correct operation of that.
Likewise, we might well ask another question, why is it necessary that the State-owned Enterprises have good Corporate Governance mechanisms? The answer would seem obvious, as was mentioned above, public companies are more complex than the private companies, in addition to the administrators of that is possible that lack the skills, abilities and attitudes to be able to carry out good management in a matter of planning and control. In accordance with the document of the consulting firm Deloitte, identified some factors that make the administrative process in the private firms is very inefficient: A. There are a lack for a competitive market by what lack of need for effective and efficient processes; B. public enterprises have greater ease of access to financial resources, this allows you to generate an economic waste eloquent; C. The State fully supports public enterprises, which affects the responsibility that in other circumstances should assume their administrators before the scarcity of resources; D. electoral cycles make the objectives are not carried out at the time in which they were in place, the current administration as well as the political interests that each one of the administrators could have; E. personal interests and party favor that the management of the resources generates the high-level corruption and inefficiency of regulators that could avoid this corruption.
The OECD Guidelines on Corporate Governance of State-owned Enterprises, are the following (taken from the official document of the OECD website):
I. How to Ensure a Legal and Regulatory Framework effective for State-owned Enterprises. The legal and regulatory framework for public enterprises should ensure the equality of conditions in the markets in which companies compete the public sector and private sector enterprises, in order to avoid market distortions. The framework should be based on and be fully compatible with the OECD Principles of Corporate Governance.
II. The State acting as Owner. The State should act as an owner informed and active, and establish a property policy clear and consistent, ensuring that the Corporate Governance of State-owned Enterprises is done in a transparent and accountable manner, with the required level of professionalism and effectiveness.
III. Equitable treatment of shareholders. Both the State and public companies should recognize the rights of all the shareholders, and according to the principles of the OECD on Corporate Governance, ensure a fair treatment and equal access to corporate information.
IV. Relations with interested Parties. The property policy of the State should fully recognize the responsibilities of public enterprises with interested parties and request to report on their relations with these.
V. Transparency and Disclosure. Public enterprises should maintain a high level of transparency in accordance with the OECD Principles of Corporate Governance.
VI. The responsibilities of the Boards of State-owned Enterprises. The boards of public enterprises should be sufficient authority, competence and objectivity to perform its function of strategic guidance and oversight of the administration. Should act with integrity and take responsibility for their actions.
The Corporate Governance Practices in entities of the Public Sector, which emits Deloitte give the pattern using a few basic principles that would lead to public enterprises to effective governance. To the effect that State-owned Enterprises are able to identify some elements of Corporate Governance which can contribute to its operation, in accordance with the official document, then presented these Corporate Governance principles:
1. Leadership and commitment of the government bodies. To create a system of effective government, the composition of the governing council and other bodies of government, whether ad hoc committees or other similar support to the Council, they must have clarity about the responsibilities that are assumed and the commitment that exists with regard to the citizens.
2. Communication. One of the current opportunities of the public sector is placed on communication between their areas and all those fields that are connected to their operations and services. Such failure in the communication limited fluency in the operations of the entities, and impedes the flow of information in the times and with the opportunity that is required toward the corresponding filters, affecting with this capacity for an adequate and efficient decision-making process.
3. Accountability. To correctly identify when there must be accountability, it must define who is responsible, by which it is responsible for which it is responsible and when is responsible. The lack of these threat criteria compliance with organizational objectives. When accountability is adequate is familiar with the functions of each of the members and it optimizes the response to any contingency.
4. Transparency. Perhaps the transparency in all its aspects is the most important element that should be in the public sector in our country. The lack of clarity in the information undermines confidence in public institutions by the third parties involved. Show how resources are obtained, the expenditure of the same and the management of operations, shows that public entities are reliable, responsible and with a good governance, in addition to providing the optimal public image.
After all the above, I now another question arises, how is it possible that in the Energy Reform that introduced the federal government last August 12nd 2013, does not include these practices of Corporate Governance for State-owned Enterprises? In fact, the major public enterprises of Mexico are precisely those that are in the energy sector this is, Mexican Oil Company (PEMEX, by its Spanish acronym for PEtroleos MEXicanos) and the Federal Electricity Commission (CFE, by its Spanish acronym for Comisión Federal de Electricidad), which are the larger State-owned Enterprises in whole Latin America.
Perhaps I am very ingenuous to think that the current Mexican government could get to do things well, this is, with transparency, without partisan interests or personal, trying to decrease or why not eliminate the corruption that much damage has been done to Mexico. It is clear that what you are most interested in the Mexican political class is to get rich at the expense of the people, continue to get high returns because of their links with the entrepreneurs elected to serve the government as parapet and continue with corruption so excruciating for the natural resources that has Mexico. The oil is and will continue to be the “black gold” for the politicians of Mexico. Perhaps some day in Mexico there will be a government fair, equitable, efficient, transparent and without corruption? Perhaps I do not live to see it, just as it happened with my father, which he never saw in its 62 years of life to a Mexico fair and honest, by the ones who fought until the last day of his death, in memoriam for Juan Dâvila, Requiescat In Pacem (November 12nd 1998). Only hope that my children if they live in a Mexico other than the current. We will have to see…
VIPsight Europe - France
15 December 2013
French banks prefer conflicts of interests and shame than reforms
While the Governor of the Bank of France boasted in July 2012 that no French bank was involved in the interest rates manipulation scandal, Société Générale has just been fined for 446 million euros by the E.C. Competition Authorities. In the same inquiry a procedure has been initiated against Crédit Agricole.
Yet the dispute chapter page 259-261 of the Annual Report of Société Générale! for the 2012 General provisionnait € 300 million in other cases , said not a word of this investigation by the competition services of the European Commission ( nor folders educated by the AMF and since then has given conviction) ...
Note that the more transparent Crédit Agricole who has not been convicted to date, recognized him having " received requests for information from various authorities in the context of investigations concerning both the determining of intereste rates on several currencies and an certain other market indices, and other operations related to these rates and indices. "
To our knowledge the Financial Markets Authority (AMF) instrcuted no inuqiry in this area and the French government is so addicted to debt that he is quite far to meet its legal obligations as a supervisor of French banks.
But there is not always bad news , the appointment by the Chairman of the National Assembly, Claude Bartolone (PS ) of Thierry Philipponnat, CEO of the Finance Watch NGO, to serve on the panel of the AMF, is clearly good news for investors and shareholders.
This former manager of Amnesty International, also a former banker of BFCE, Exane Paris, UBS and BNP Paribas is General Secretary of Finance Watch, a non -governmental organization specializing in "financial regulation for the service of companies and the real economy, not speculation."
The AMF College is the main decision-making body of the french markets authority AMF. It comprises 16 members (including the chairman , Gérard Rameix, a former member of Proxinvest Consulative Committte. The members of the College term of office is of five years, renewable once. The AMF College is renewed by half every thirty months.
4 December 2013
Bernard Charlès, Proxinvest Top 2012 CEO pay, is quite right...
Bernard Charlès, the CEO of software champion Dassault Systèmes and the champion of our French 2012 CEO pay survey is quite right to alarm in an interview in Le Monde about the mad French taxation on equity investments.
"If I can not distribute plots of land, that is to say, a share capital of the company, I will leave. " Without specifying if he speaks of him or his firm ...
It belongs not only to the CEO but mosttly to the shareholders who distribute these "plots" if the form of bonus shares or options. But Bernard Charles rightly points " the extremely high French taxes on capital, stock options and free shares ." For a free share of the capital remitted to en employee, inn addditionto the purchase cost or the dilution, " the company and the employee will have to pay in taxes and taxes up to 80 % of its value , it is not bearable ."
Not only our socialists Ministers have done this, the Sarkozy era contributed as well. " Cease fire ! " already cried Jean-Claude Sobel in an excellent in Les Echos of November 2012 .
For the remittance of such share related advantages the employer's contribution tripled in two years to 30% against 10% and the employee contribution was quadrupled from 2.5% to 10 % ( a "social" contribution without any social compensation for the contributors ) .
At the end of 2014 , the collection of the State's =taxation on share related plans has become such that these could be considered by Proxinvest as abnormal management act .
Bernard Charles is possibly overpaid with his € 15 million package, but he is clearly right to emphasize the danger to overtax the French digital secgment. Our entire economy is in danger when government and officials ignore the risk attached to any equity investment, the engagement of its shareholders and wehn they sabotage the fair involvement of employees in the companies capital.
VIPsight Europe - Switzerland
10 December 2013
Ethos and the Committee on Workers Capital have launched Global Proxy Review 2013
Ethos and the Global Unions Committee on Workers Capital (CWC) announce the launch of Global Proxy Review 2013, a report and interactive website that encourages investors to take an active role in proxy voting oversight for global equity portfolios.
The votes profiled in the report encompass ESG issues at companies in 15 economic sectors. They include votes held at multinational corporations such as: Wal-Mart, News Corporation, Barrick Gold, Heineken, Standard Bank, Telefonica, UBS and Glencore-Xstrata. Approximately one third of the votes selected related to executive compensation, reflecting a continued preoccupation toward excessive executive pay one year after the ‘shareholder spring’ of 2012. National regulatory contexts are also evolving to facilitate active ownership by shareholders; ‘say-on-pay’ votes are now mandatory in all countries featured in the report except Canada and the results are binding in Australia, the Netherlands, the UK (starting in October 2013) and will become binding by 2015 in Switzerland. In addition to governance issues, the votes profiled also include significant social issues such as reporting on human rights related risks.