Creative leadership & communities of practice

This Second Wave presentation focused on 'Creative Leadership and Communities of Practice', with particular reference to issues of trust affecting young people, unemployment and wider uncertainties in an economic recession when people were facing job cuts and in a social environment characterised by cynicism and a downturn in trust. Young people who join Second Wave are brought into a community of practice (CoP) (Lave and Wenger, 1991; Wenger, 1999) involving a dynamic, fluid process which is distinctive in its transformative power to change people's lives. The philosophy behind this involves Dewey's notion of the 'active self' (Dewey, 1916) and the theories of 'social constructivism' (Vygotsky, 1978). The process fosters trust, confidence and social learning (Bandura, 1977; Vygotsky, 1978) in which young people join in with a dialogue involving participation in the youth-centred creative space. The 'border zone' (Heath, 1994) in that creative space enables young people to connect with each other in the specialist field of youth arts. The youth-centred partnerships involved lead to greater confidence and development in a range of important artistic, social, cognitive and emotional skills and opportunities. Ultimately, the young person may become engaged in multi-agency working with Second Wave's external partners. Throughout all of these processes, young people are encouraged progressively to develop a more 'active self' to engage proactively with many different beneficial opportunities relating to the performing arts. In an era in which there has been a loss of trust in public life this is particularly important. If trust is defined in part as a belief in the honesty, competence and benevolence of others, it tends to act like 'social glue', cushioning difficult situations and enabling actions to take place easily that otherwise would not be permissible. The Edelman Trust Barometer for 2009 has recorded a marked diminution of trust in corporations, businesses and government, as a result of the credit crunch. While the US and parts of Europe were showing recovery from a generalised loss of trust by mid-year 2009, the UK had not. Social attitudes in Britain may be hardening - from being a nation of sceptics we may be becoming a nation of cynics: for example, only 13% of the population surveyed by Edelman trust politicians to tell the truth. In this situation, there is a need to promote positive measures to build trust. The presentation aims described key aspects of Second Wave's approach to identify and disseminate its model of good practice to make this more explicit and accessible to others. It is with awareness of the profoundly challenging circumstances facing young people, particularly but not exclusively in inner city urban areas such as Deptford, and the valuable contribution youth arts work can make to their well-being and development, that the presentation was carried out. In an era of generalised mistrust, the work done at Second Wave is crucial in empowering and supporting young people to find a positive and creative direction as part of the community.

Relational dimensions of corporate governance in translation: networked governance in China and India

The effectiveness of corporate governance mechanisms has been a subject of academic research for many decades. Although the large majority of corporate governance studies prior to mid 1990s were based on data from developed market economies such as the U.S., U.K. and Japan, in recent years researchers have begun examining corporate governance in transition economies. A comparison of China and India offers a unique environment for analyzing the effectiveness of corporate governance. First, both countries state-owned enterprise (SOE) reform strategies hinges on the Modern Enterprise System characterized by the separation of ownership and control. Ownership of an SOE’s assets is distributed among the government, institutional investors, managers, employees, and private investors. Effective control rights are assigned to management, which generally has a very small, or even nonexistent ownership stake. This distinctive shareholding structure creates conflict of interest not only between management (insiders) and outside investors but also between large shareholders and minority investors. Moreover, because both governments desire to retain some control—in part through partial retained ownership of commercialized SOEs, further conflicts arise between politicians and firms. Second, directors in publicly listed firms in both countries are predominantly drawn from institutions with significant non-market objectives: the government and other state enterprises, particularly in China, and extended families, particularly in India. As a result, the effectiveness of internal governance mechanisms, such as the number of independent directors on the board and the number of independent supervisors on the supervisory committee, are likely to be quiet limited, although this has yet to be fully evaluated. Third, because of the political nature of the privatization process itself, typical external governance mechanisms, such as debt (in conjunction with appropriate bankruptcy procedures), takeover threats, legal protection of investors, product market competition, etc., have not been effective. Bank loans have traditionally been viewed as grants from the state designed to bail out failing firms. State-owned banks retain monopoly or quasi-monopoly positions in the banking sector and profit is not their overriding objective. If political favor is deemed appropriate, subsidized loans, rescheduling of overdue debt or even outright transfer of funds can be arranged with SOEs (soft budget constraints). In addition, a market for private, non-bank debt is limited in India and has yet to be established China. There is no active merger or takeover activity in Chinese stock markets to discipline management. Information available in the capital markets is insufficient to keep at arm’s length of the corporate decisions. In light of the above peculiarities, China and India share many of the typical institutional characteristics as a transition economy, including poor legal protection of creditors and investors, the absence of an effective takeover market, an underdeveloped capital market, a relative inefficient banking system and significant interference of politicians in firm management. Su (2005) finds that the extent of political interference, managerial entrenchment and institutional control can help explain corporate dividend policies and post-IPO financing choices in this situation. Allen et al. (2005) demonstrate that standard corporate governance mechanisms are weak and ineffective for publicly listed firms while alternative governance mechanisms based on reputation and relationship have been remarkably effective in the private sector. Because the peculiarities are significant in this context, the differences in the political-economies of the two countries are likely to be evident in such relational terms. In this paper we explore the peculiarities of corporate governance in this transitional environment through a systematic examination of certain aspects of these reputational and relationship dimensions. Utilising the methods of social network analysis we identify the inter-organisational relationships at board level formed by equity holdings and by shared directors. Using data drawn from the Orbis database we map these relations among the 3700 largest firms in India and China respectively and identify the roles played in these relational networks by the particularly characteristic institutions in each case. We find greatly different social network structures in each case with some support in these relational dimensions for their distinctive features of governance. Further, the social network metrics allow us to considerably refine proxies for political interference, managerial entrenchment and institutional control used in earlier econometric analysis.