The effectiveness of non-executive directors in Chinese state-owned enterprises

Purpose – The primary aim of this paper is to examine whether boards of directors with independent members function as effective corporate governance mechanisms in Chinese State-Owned Enterprises(SOEs), by analysing four characteristics of non-executive directors (NEDs) that impact on their effectiveness, namely their degree of independence, information, incentive, and competence. Design/methodology/approach – Being exploratory in nature, the research uses qualitative methods for data collection. It is based on an interpretivist perspective of social sciences, analysing and explaining the factors that influence the effectiveness of NEDs. Findings – The findings indicate that the NED system is weak in China as a result of the concentrated ownership structure, unique business culture, intervention of controlling shareholders and the lack of understanding of the benefits brought by NEDs. Research limitations/implications – The paper examines the salient features of and challenges to the system of NEDs of SOEs in present-day China. It provides an understanding of how the various perceptions of the board, gathered from in-depth interviews of corporate directors, leads to new interpretations of board effectiveness. The research, however, is limited owing to a relatively small sample size and the sensitive nature of the information collected. Originality/value – The study aims to fill gaps in the literature and contribute to it by assessing the “real” views and perceptions of NEDs in China in an institutional environment significantly different from that of the USA, the UK and other western economies.

The financial system reform in China: the lesson learnt from the global financial crisis

This paper reviews the impact of the global financial crisis on financial system reform in China. Scholars and practitioners have critically questioned the efficiencies of the Anglo- American principal-agent model of corporate governance which promotes shareholder-value maximisation. Should China continue to follow the U.K.-U.S. path in relation to financial reform? This conceptual paper provides an insightful review of the corporate governance literature, regulatory reports and news articles from the financial press. After examining the fundamental limitations of the laissez-faire philosophy that underpins the neo-liberal model of capitalism, the paper considers the risks in opening up China’s financial markets and relaxing monetary and fiscal policies. The paper outlines a critique of shareholder-capitalism in relation to the German team-production model of corporate governance, promoting a “social market economy” styled capitalism. Through such analysis, the paper explores numerous implications for China to consider in terms of developing a new and sustainable corporate governance model. China needs to follow its own financial reform through understanding its particular economy. The global financial crisis might help China rethink the nature of corporate governance, identify its weakness and assess the current reform agenda.

Mid-term evaluation of African Technology Policy Studies Network Phase VI Strategic Plan: for the period January 1, 2009 to December 31, 2010

The African Technology Policy Studies Network (ATPS) is a multidisciplinary network of researchers, private sector actors, policymakers and civil society. ATPS has the vision to become the leading international centre of excellence and reference in science, technology and innovation (STI) systems research, training and capacity building, communication and sensitization, knowledge brokerage, policy advocacy and outreach in Africa. It has a Regional Secretariat in Nairobi Kenya, and operates through national chapters in 29 countries (including 27 in Africa and two Chapters in the United Kingdom and USA for Africans in the Diaspora) with an expansion plan to cover the entire continent by 2015. The ATPS Phase VI Strategic Plan aims to improve the understanding and functioning of STI processes and systems to strengthen the learning capacity, social responses, and governance of STI for addressing Africa's development challenges, with a specific focus on the Millennium Development Goals (MDGs). A team of external evaluators carried out a midterm review to assess the effectiveness and efficiency of the implementation of the Strategic Plan for the period January 1, 2009 to December 31, 2010. The evaluation methodology involved multiple quantitative and qualitative methods to assess the qualitative and quantitative inputs (human resources, financial resources, time, etc.) into ATPS activities (both thematic and facilitative) and their tangible and intangible outputs, outcomes and impacts. Methods included a questionnaire survey of ATPS members and stakeholders, key informant interviews, and focus group discussions (FGDs) with members in six countries. Effectiveness of Programmes Under all six strategic goals, very good progress has been made towards planned outputs and outcomes. This is evidenced by key performance indicators (KPIs) generated from desk review, ratings from the survey respondents, and the themes that run through the FGDs. Institutional and Programme Cost Effectiveness Institutional Effectiveness: assessment of institutional effectiveness suggests that adequate management frameworks are in place and are being used effectively and transparently. Also technical and financial accounting mechanisms are being followed in accordance with grant agreements and with global good practice. This is evidenced by KPIs generated from desk review. Programme Cost Effectiveness: assessment of cost-effectiveness of execution of programmes shows that organisational structure is efficient, delivering high quality, relevant research at relatively low cost by international standards. The evidence includes KPIs from desk review: administrative costs to programme cost ratio has fallen steadily, to around 10%; average size of research grants is modest, without compromising quality. There is high level of pro bono input by ATPS members. ATPS Programmes Strategic Evaluation ATPS research and STI related activities are indeed unique and well aligned with STI issues and needs facing Africa and globally. The multi-disciplinary and trans-boundary nature of the research activities are creating a unique group of research scientists. The ATPS approach to research and STI issues is paving the way for the so called Third Generation University (3GU). Understanding this unique positioning, an increasing number of international multilateral agencies are seeking partnership with ATPS. ATPS is seeing an increasing level of funding commitments by Donor Partners. Recommendations for ATPS Continued Growth and Effectiveness On-going reform of ATPS administrative structure to continue The on-going reforms that have taken place within the Board, Regional Secretariat, and at the National Chapter coordination levels are welcomed. Such reform should continue until fully functional corporate governance policy and practices are fully established and implemented across the ATPS governance structures. This will further strengthen ATPS to achieve the vision of being the leading STI policy brokerage organization in Africa. Although training in corporate governance has been carried out for all sectors of ATPS leadership structure in recent time, there is some evidence that these systems have not yet been fully implemented effectively within all the governance structures of the organization, especially at the Board and National chapter levels. Future training should emphasize practical application with exercises relevant to ATPS leadership structure from the Board to the National Chapter levels. Training on Transformational Leadership - Leading a Change Though a subject of intense debate amongst economists and social scientists, it is generally agreed that cultural mindsets and attitudes could enhance and/or hinder organizational progress. ATPS’s vision demands transformational leadership skills amongst its leaders from the Board members to the National Chapter Coordinators. To lead such a change, ATPS leaders must understand and avoid personal and cultural mindsets and value systems that hinder change, while embracing those that enhance it. It requires deliberate assessment of cultural, behavioural patterns that could hinder progress and the willingness to be recast into cultural and personal habits that make for progress. Improvement of relationship amongst the Board, Secretariat, and National Chapters A large number of ATPS members and stakeholders feel they do not have effective communications and/or access to Board, National Chapter Coordinators and Regional Secretariat activities. Effort should be made to improve the implementation of ATPS communication strategy to improve on information flows amongst the ATPS management and the members. The results of the survey and the FGDs suggest that progress has been made during the past two years in this direction, but more could be done to ensure effective flow of pertinent information to members following ATPS communications channels. Strategies for Increased Funding for National Chapters There is a big gap between the fundraising skills of the Regional Secretariat and those of the National Coordinators. In some cases, funds successfully raised by the Secretariat and disbursed to national chapters were not followed up with timely progress and financial reports by some national chapters. Adequate training in relevant skills required for effective interactions with STI key policy players should be conducted regularly for National Chapter coordinators and ATPS members. The ongoing training in grant writing should continue and be made continent-wide if funding permits. Funding of National Chapters should be strategic such that capacity in a specific area of research is built which, with time, will not only lead to a strong research capacity in that area, but also strengthen academic programmes. For example, a strong climate change programme is emerging at University of Nigeria Nsukka (UNN), with strong collaborations with Universities from neighbouring States. Strategies to Increase National Government buy-in and support for STI Translating STI research outcomes into policies requires a great deal of emotional intelligence, skills which are often lacking in the first and second generation universities. In the epoch of the science-based or 2GUs, governments were content with universities carrying out scientific research and providing scientific education. Now they desire to see universities as incubators of new science- or technology-based commercial activities, whether by existing firms or start-ups. Hence, governments demand that universities take an active and leading role in the exploitation of their knowledge and they are willing to make funds available to support such activities. Thus, for universities to gain the attention of national leadership they must become centres of excellence and explicit instruments of economic development in the knowledge-based economy. The universities must do this while working collaboratively with government departments, parastatals, and institutions and dedicated research establishments. ATPS should anticipate these shifting changes and devise programmes to assist both government and universities to relate effectively. New administrative structures in member organizations to sustain and manage the emerging STI multidisciplinary teams Second Generation universities (2GUs) tend to focus on pure science and often do not regard the application of their know-how as their task. In contrast, Third Generation Universities (3GUs) objectively stimulate techno-starters – students or academics – to pursue the exploitation or commercialisation of the knowledge they generate. They view this as being equal in importance to the objectives of scientific research and education. Administratively, research in the 2GU era was mainly monodisciplinary and departments were structured along disciplines. The emerging interdisciplinary scientific teams with focus on specific research areas functionally work against the current mono-disciplinary faculty-based, administrative structure of 2GUs. For interdisciplinary teams, the current faculty system is an obstacle. There is a need for new organisational forms for university management that can create responsibilities for the task of know-how exploitation. ATPS must anticipate this and begin to strategize solutions for their member institutions to transition to 3Gus administrative structure, otherwise ATPS growth will plateau, and progress achieved so far may be stunted.

The (de)merits of minimum-variance hedging: application to the crack spread

We study the empirical performance of the classical minimum-variance hedging strategy, comparing several econometric models for estimating hedge ratios of crude oil, gasoline and heating oil crack spreads. Given the great variability and large jumps in both spot and futures prices, considerable care is required when processing the relevant data and accounting for the costs of maintaining and re-balancing the hedge position. We find that the variance reduction produced by all models is statistically and economically indistinguishable from the one-for-one “naïve” hedge. However, minimum-variance hedging models, especially those based on GARCH, generate much greater margin and transaction costs than the naïve hedge. Therefore we encourage hedgers to use a naïve hedging strategy on the crack spread bundles now offered by the exchange; this strategy is the cheapest and easiest to implement. Our conclusion contradicts the majority of the existing literature, which favours the implementation of GARCH-based hedging strategies.

A complex system perspective on the emergence and spread of infectious diseases: integrating economic and ecological aspects

The emergence and spread of infectious diseases reflects the interaction of ecological and economic factors within an adaptive complex system. We review studies that address the role of economic factors in the emergence and spread of infectious diseases and identify three broad themes. First, the process of macro-economic growth leads to environmental encroaching, which is related to the emergence of infectious diseases. Second, there are a number of mutually reinforcing processes associated with the emergence/spread of infectious diseases. For example, the emergence and spread of infectious diseases can cause significant economic damages, which in turn may create the conditions for further disease spread. Also, the existence of a mutually reinforcing relationship between global trade and macroeconomic growth amplifies the emergence/spread of infectious diseases. Third, microeconomic approaches to infectious disease point to the adaptivity of human behavior, which simultaneously shapes the course of epidemics and responds to it. Most of the applied research has been focused on the first two aspects, and to a lesser extent on the third aspect. With respect to the latter, there is a lack of empirical research aimed at characterizing the behavioral component following a disease outbreak. Future research should seek to fill this gap and develop hierarchical econometric models capable of integrating both macro and micro-economic processes into disease ecology.

Chronic limitations of neo-liberal capitalism and oligopolistic markets: an urgent case for socialized capital

Purpose – The purpose of this paper is to highlight the serious limitations of neo-liberal capitalism and urge for a shift to socialized capital before further economic deterioration leads to a succession of global conflicts. Design/methodology/approach – This conceptual paper adopts a macro perspective in presenting argument on how global, financial markets integration and capital flow liberalization have led to inadequate market and corporate governance measures. The argument is couched in a selected literature and is preceded by a proposed solution – the requirement for socialized capital. An analysis of the nature of socialized capital is outlined and the questions that require attention identified if a paradigm shift from neo-liberal capitalism is to take place. Findings – The need to urgently shift to a new philosophy of capitalism is overwhelming. Emphasized is that capital needs to adopt a socialised identity and is supported by investment horizons of 30 years or more. It is argued that non-market (e.g. state, NGOs, civil society) intervention is critical in setting appropriate frameworks within which socialized capital can operate. Research limitations/implications – This is a theoretical paper, in which questions are raised which require transparent, public debate. Originality/value – The paper presents the case for a fundamental reconsideration of present day markets, the role of capital and the influence of elites in determining the public good.

Rethinking the ontology of the shareholder model of the corporation

Purpose – The purpose of this paper is to examine the critical assumptions lying behind the Anglo American model of corporate governance. Design/methodology/approach – Literature review examining the concept of a nexus of contracts underpinning agency theory which, it is argued, act as the platform for neo-liberal corporate governance focusing on shareholder wealth creation. Findings – The paper highlights the unaddressed critical challenge of why eighteenth century ownership structures are readily adopted in the twenty-first century. Social implications – A re-examination of wealth creation and wealth redistribution. Originality/value – The paper is highly original due to the fact that few contributions have been made in the area of rethinking shareholder value.

Spiritual capital: the co-evolution of an ethical framework based on Abrahamic religious values in the Islamic tradition

Purpose – The aim of this paper is to investigate how values from within Abrahamic religions could be adopted to improve liberal market economies’ (LMEs’) corporate governance business practices. Design/methodology/approach – The concept of spiritual capitalism is explained from an Islamic perspective by adopting three universal Abrahamic values to critically analyse LMEs and offer an ethical alternative to current capitalism concerns. Findings – It is found that LMEs can be improved by considering all stakeholders, putting ethics before economics, and introducing shared risk/reward plus lower debt. Originality/value – The paper compares LMEs/Co-ordinated market economies (CMEs)/Islamic countries economies (ICEs) within an ethical framework for LMEs.

Progress report on longitudinal and cross-sectional study of carbon disclosure strategies: evidence from UK listed companies

Global warming has attracted attention from all over the world and led to the concern about carbon emission. Kyoto Protocol, as the first major international regulatory emission trading scheme, was introduced in 1997 and outlined the strategies for reducing carbon emission (Ratnatunga et al., 2011). As the increased interest in carbon reduction the Protocol came into force in 2005, currently there are already 191 nations ratifying the Protocol(UNFCCC, 2012). Under the cap-and-trade schemes, each company has its carbon emission target. When company’s carbon emission exceeds the target the company will either face fines or buy emission allowance from other companies. Thus unlike most of the other social and environmental issues carbon emission could trigger cost for companies in introducing low-emission equipment and systems and also emission allowance cost when they emit more than their targets. Despite the importance of carbon emission to companies, carbon emission reporting is still operating under unregulated environment and companies are only required to disclose when it is material either in value or in substances (Miller, 2005, Deegan and Rankin, 1997). Even though there is still an increase in the volume of carbon emission disclosures in company’s financial reports and stand-alone social and environmental reports to show their concern of the environment and also their social responsibility (Peters and Romi, 2009), the motivations behind corporate carbon emission disclosures and whether carbon disclosures have impact on corporate environmental reputation and financial performance have not yet to explore. The problems with carbon emission lie on both the financial side and non-financial side of corporate governance. On one hand corporate needs to spend money in reducing carbon emission or paying penalties when they emit more than allowed. On the other hand as the public are more interested in environmental issues than before carbon emission could also impact on the image of corporate regarding to its environmental performance. The importance of carbon emission issue are beginning to be recognized by companies from different industries as one of the critical issues in supply chain management (Lee, 2011) and 80% of companies analysed are facing carbon risks resulting from emissions in the companies’ supply chain as shown in a study conducted by the Investor Responsibility Research Centre Institute for Corporate Responsibility (IRRCI) and over 80% of the companies analysed found that the majority of greenhouse gas (GHG) emission are from electricity and other direct suppliers (Trucost, 2009). The review of extant literature shows the increased importance of carbon emission issues and the gap in the study of carbon reporting and disclosures and also the study which links corporate environmental reputation and corporate financial performance with carbon reporting (Lohmann, 2009a, Ratnatunga and Balachandran, 2009, Bebbington and Larrinaga-Gonzalez, 2008). This study would focus on investigating the current status of UK carbon emission disclosures, the determinant factors of corporate carbon disclosure, and the relationship between carbon emission disclosures and corporate environmental reputation and financial performance of UK listed companies from 2004-2012 and explore the explanatory power of classical disclosure theories.

The determinants and effects of board nomination committees

This article assesses the corporate governance-related antecedents of nomination committee adoption, and the impact of nomination committees’ existence and their composition on board independence and board demographic diversity. We conducted a longitudinal study of board composition amongst 210 Swiss public companies from January 2001 through December 2003, a period during which the Swiss (Stock) Exchange (SWX) introduced new corporate governance-related disclosure guidelines. We find firms with nomination committees are more likely to have a higher number of independent and foreign directors, but not more likely to have a higher number of female board members. Further, the existence of nomination committees is associated with a higher degree of nationality diversity but is not related to board educational diversity. We also find that nomination committee composition matters in the nomination of independent and foreign, but not of female directors. Our results suggest that understanding different board roles and composition require a multi-theoretical approach, and that agency theory, resource-dependence theory and group effectiveness theory help to explain different aspects of board composition and effectiveness. Finally, the article discusses the concept of diversity and appropriate ways to study diversity in a boardroom context.

Investigation of institutional investors’ responsible investment practices in UK

The focus of Corporate Governance is shifting from the role of directors to active ownership. Based on their fiduciary duty to other shareholders, it is believed that institutional investors have an important role to play in this regard. However, the Pension Funds and the Sovereign Wealth Organisations are not driven by the same set of objectives. In addition, Environmental Social and Governance (ESG) issues in investment decision-making are now becoming more important and they are capable of becoming the mainstream in the future. However, there are widespread variations in perception of fiduciary responsibilities, ESG issues appraisal, as well as the strategies adopted by institutional investors on shareholder engagement as responsible investors. Responsible Investment market is largely driven by institutional investors and they are expected to continue to lead the way. This research work investigates the role of the main asset owners and their advisors in responsible investment practices in the UK. It adopts a qualitative approach using semi-structured interviews, questionnaire and meetings observations. Gathered data is analysed using grounded theory and the findings highlight the perception of the various investor groups to corporate governance. The research work contributes to the body of knowledge by assessing the corporate governance perspectives of the various classes of institutional investors which may have practical implications for other countries.

Impact of externalities on sustainable development: evidence from public-private partnerships in Kazakhstan and Russia

Purpose – This paper aims to investigate the influence of public-private partnerships (PPPs) on social and economic conditions in Kazakhstan and Russia from a public economics perspective, namely, through the lens of a market failure and PPPs’ negative externalities. Design/methodology/approach – Drawing on the concept of a market failure and using the externalities perspective, the paper investigates whether partnerships are instrumental in solving market problems, which is illustrated by the evidence from ongoing PPP projects in Kazakhstan and Russia. Findings – Results show that citizens face expansion of monopolistic trends in the service provision and decreased availability of public services. Additionally, the government support to partnerships recreates a negative externality in the form of a higher risk premium on loan interest rates that banks use to finance PPPs. The partnerships’ impact on sustainable development often appears detrimental, as they significantly intensify the struggle between sub-national governments for increased transfers from the national budget. Practical implications – The government agencies must incorporate the appraisal of the PPP externalities and their effects on the society in the decision-making regarding the PPP formation. Originality/value – The authors suggest that, although government is interested in PPPs’ positive externalities, in reality many negative externalities may offset the positive spillover effects. As a result, the partnerships’ contributions to economic and social sustainability remain controversial. Extending the value-for-money concept to incorporate the assessment of PPP externalities might significantly enhance the partnership conceptualisation by more comprehensive and accurate assessment of PPPs’ economic and social value.