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.

Trade credit linkages along the supply chain: evidence for the Italian textile sector

We examine the trade credit linkages among firms within a supply chain to reckon the effect of such linkages on the propagation of liquidity shocks from downstream to upstream firms. We choose a sample appropriate for this task, consisting of a large data set of Italian firms from the textile industry, a well known example of a comprehensive manufacturing cluster featuring a large number of small and specialized firms at each level of the supply chain. The results of the analysis indicate that the level of trade credit that firms provide to their suppliers is positively related to the level of trade credit granted to their clients: when the level of trade credit granted to clients divided by sales goes up by 1, the level of trade credit provided to suppliers divided by cost-of goods-sold goes up by an amount that varies between 0,22 and 0,52. Since all firms along the chain are linked by trade credit relationships, an increase in the level of trade credit granted by wholesalers generates a liquidity cascade throughout the chain. We designate the overall increase in the level of trade credit among all firms in the chain as a result of a unitary impulse in the level of trade credit granted by wholesalers as the multiplier effect of trade credit for the industry chain. We estimate such multiplier to vary between 1.28 and 2.04. We also investigate the effect of final demand on the level of trade credit sourced by firms at various levels of the chain and, in particular, whether such effect is amplified for firms further up in the chain as a result of liquidity propagation via trade credit linkages. We uncover evidence of such amplification when the links of liquidity transmission along the chain are individually modeled and estimated. An unitary increase in wholesalers’ sales is found to produce an effect on trade payables among firms at the top of the chain (i.e., Preparers and Spinners) that is more than twice as big as the corresponding effect among firms at the bottom of the chain (i.e., Wholesalers).

The illusions of competition in the water sector: a response to the OFWAT/Cave consultations on introducing competition in the water sector in England and Wales

The paper provides a critical review of the role of liberalisation and competition in the water sector, based on empirical evidence from the UK and internationally. The paper is submitted as evidence to the official reviews of competition in water sector in England and Wales.

The comparative advantage of the public sector in the development of urban water supply

This paper addresses the potential of public water operations in achieving developmental goals such as the Millennium Development Goals, and argues that the public sector has a comparative advantage in developing water services. The global importance of the public sector in urban water supply is examined through a review of current practice in the world's largest cities, including operational presence and distribution and ongoing trends. Empirical evidence shows that, in transition and developing countries, public operators are capable of undergoing successful reform. One explanatory factor is proposed to be the creation through the public sphere of highly interconnected networks among stakeholders. Such accountability networks act as vehicles for the generation and distribution of public knowledge among stakeholders, which in turn inform rational decision making on the reform and management of operations.

Strategies for water pollution control in Dhaka, Bangladesh: an institutional and economic analysis

This paper presents primary data based on research carried out as part of a large World Bank project. Results from our survey show that water pollution in Dhaka watershed has reached alarming levels and is posing significant threats to health and economic activity, particularly among the poor and vulnerable. Rice productivity in the watershed area, for example, has declined by 40% in recent years and vegetable cultivation in the riverbeds has been severely damaged. We also found significant correlation between water pollution and diseases such as jaundice, diarrhoea and skin problems. It was reported that the cost of treatment of skin diseases for one episode could be as high as 29% of the weekly earnings of poor households. Given the magnitude of the contamination problem, a multi-agent stakeholder approach was necessary to analyse the institutional and economic constraints that would need to be addressed in order to improve environmental management. This approach, in turn, enabled core strategies to be developed. The strategies were better understood around three types of actors in industrial pollution, i.e. (1) principal actors, who contribute directly to industrial pollution; (2) stakeholders, who exacerbate the situation by inaction; and (3) the potential actors in mitigation of water contamination. Within a carrot-and-stick framework, nine strategies leading to the strengthening of environmental management were explored. They aim at improving governance and transparency within public agencies and private industry through the setting up of incentive structures to advance compliance and enforcement of environmental standards. Civil society and the population at large are, on the other hand, encouraged to contribute actively to the mitigation of water pollution by improving the management of environmental information and by raising public awareness.

Public sector pay in the UK: has the historic pattern of public/private sector pay movements been broken?

The historic pattern of public sector pay movements in the UK has been counter-cyclical with private sector pay growth. Periods of relative decline in public sector pay against private sector movements have been followed by periods of ‘catch-up’ as Government controls are eased to remedy skill shortages or deal with industrial unrest among public servants. Public sector ‘catch up’ increases have therefore come at awkward times for Government, often coinciding with economic downturn in the private sector (Trinder 1994, White 1996, Bach 2002). Several such epochs of public sector pay policy can be identified since the 1970s. The question is whether the current limits on public sector pay being imposed by the UK Government fit this historic pattern or whether the pattern has been broken and, if so, how and why? This paper takes a historical approach in considering the context to public sector pay determination in the UK. In particular the paper seeks to review the period since Labour came into office (White and Hatchett 2003) and the various pay ‘modernisation’ exercises that have been in process over the last decade (White 2004). The paper draws on national statistics on public sector employment and pay levels to chart changes in public sector pay policy and draws on secondary literature to consider both Government policy intentions and the impact of these policies for public servants.

Accelerating innovation in the social housing sector in UK

The UK government has been promoting innovation in the construction sector to improve the sustainability of the built environment. It has the potential and strength in developing construction research in design and engineering, but the impact of these processes seems to be slow in reaching the residential sector. While funding remains a major constraint research show that a number of detrimental issues including; organisation, risk, mind sets of the stakeholders, planning constraints,reluctance to accept change and the unexploited markets are major contributing factors. Most of these barriers can be overcome with research, development and information and knowledge transfer techniques. Educating all stakeholders can act as an accelerator for innovation. Given the large stock of existing dwellings, the situation is compounded, by issues related to climate change, to the point that this problem can no longer be ignored and requires an urgent response from all sectors involved. This paper attempts to highlight some of the key issues that are important in accelerating innovation in the housing sector. It briefly looks at the process of innovation in housing and presents lessons learnt from two research projects. The drivers and barriers and the role played by the government are examined in relation to the housing context.

Bridging the gap with teamwork: collaborative leadership for communities of practice in the learning and skills sector

Collaborative approaches in leadership and management are increasingly acknowledged to play a key role in successful institutions in the learning and skills sector (LSS) (Ofsted, 2004). Such approaches may be important in bridging the potential 'distance' (psychological, cultural, interactional and geographical) (Collinson, 2005) that may exist between 'leaders' and 'followers', fostering more democratic communal solidarity. This paper reports on a 2006-07 research project funded by the Centre for Excellence in Leadership (CEL) that aimed to collect and analyse data on 'collaborative leadership' (CL) in the learning and skills sector. The project investigated collaborative leadership and its potential for benefiting staff through trust and knowledge-sharing in communities of practice (CoPs). The project forms part of longer-term educational research investigating leadership in a collaborative inquiry process (Jameson et al., 2006). The research examined the potential for CL to benefit institutions, analysing respondents' understanding of and resistance to collaborative practices. Quantitative and qualitative data from senior managers and lecturers was analysed using electronic data in SPSS and Tropes Zoom. The project aimed to recommend systems and practices for more inclusive, diverse leadership (Lumby et al., 2005). Collaborative leadership has increasingly gained international prominence as emphasis shifted towards team leadership beyond zero-sum 'leadership'/ 'followership' polarities into more mature conceptions of shared leadership spaces, within which synergistic leadership spaces can be mediated. The relevance of collaboration within the LSS has been highlighted following a spate of recent government-driven policy developments in FE. The promotion of CL addresses concerns about the apparent 'remoteness' of some senior managers, and the 'neo-management' control of professionals which can increase 'distance' between leaders and 'followers' and may de-professionalise staff in an already disempowered sector. Positive benefit from 'collaborative advantage' tends to be assumed in idealistic interpretations of CL, but potential 'collaborative inertia' may be problematic in a sector characterised by rapid top-down policy changes and continuous external audit and surveillance. Constant pressure for achievement against goals leaves little time for democratic group negotiations, despite the desires of leaders to create a more collaborative ethos. Yet prior models of intentional communities of practice potentially offer promise for CL practice to improve group performance despite multiple constraints. The CAMEL CoP model (JISC infoNet, 2006) was linked to the project, providing one practical way of implementing CL within situated professional networks.The project found that a good understanding of CL was demonstrated by most respondents, who thought it could enable staff to share power and work in partnership to build trust and conjoin skills, abilities and experience to achieve common goals for the good of the sector. However, although most respondents expressed agreement with the concept and ideals of CL, many thought this was currently an idealistically democratic, unachievable pipe dream in the LSS. Many respondents expressed concerns with the 'audit culture' and authoritarian management structures in FE. While there was a strong desire to see greater levels of implementation of CL, and 'collaborative advantage' from the 'knowledge sharing benefit potential' of team leadership, respondents also strongly advised against the pitfalls of 'collaborative inertia'. A 'distance' between senior leadership views and those of staff lower down the hierarchy regarding aspects of leadership performance in the sector was reported. Finally, the project found that more research is needed to investigate CL and develop innovative methods of practical implementation within autonomous communities of professional practice.

Natural iron fertilization of the Atlantic sector of the Southern Ocean by continental shelf sources of the Antarctic Peninsula

In large parts of the Southern Ocean, primary production is limited due to shortage of iron (Fe). We measured vertical Fe profiles in the western Weddell Sea, Weddell-Scotia Confluence, and Antarctic Circumpolar Current (ACC), showing that Fe is derived from benthic Fe diffusion and sediment resuspension in areas characterized by high turbulence due to rugged bottom topography. Our data together with literature data reveal an exponential decrease of dissolved Fe (DFe) concentrations with increasing distance from the continental shelves of the Antarctic Peninsula and the western Weddell Sea. This decrease can be observed 3500 km eastward of the Antarctic Peninsula area, downstream the ACC. We estimated DFe summer fluxes into the upper mixed layer of the Atlantic sector of the Southern Ocean and found that horizontal advection dominates DFe supply, representing 54 ± 15% of the total flux, with significant vertical advection second most important at 29 ± 13%. Horizontal and vertical diffusion are weak with 1 ± 2% and 1 ± 1%, respectively. The atmospheric contribution is insignificant close to the Antarctic continent but increases to 15 ± 10% in the remotest waters (>1500 km offshore) of the ACC. Translating Southern Ocean carbon fixation by primary producers into biogenic Fe fixation shows a twofold excess of new DFe input close to the Antarctic continent and a one-third shortage in the open ocean. Fe recycling, with an estimated “fe” ratio of 0.59, is the likely pathway to balance new DFe supply and Fe fixation.

Los pastizales anuales semiáridos del sector Almeriense: Spergulo fallacis-Plantaginetum ovatae, una nueva comunidad endémica

Tras estudiar los pastizales de ambientes semitiridos de Almería, creemos que es conveniente designar una nueva asociación: Spergulo fallacis-Plantaginetum ovatae, que se presenta sobre suelos nitriticados y limosos de ombroclimna semiárido en el piso termomediterráneo.La comunidad se encuadra dentro de la alianza Stipion retortae Br.-BI. ex O. Bolós 1956 (Trachynietalia distachyae Rivas-Martínez 1978; Thero-Brachypodietea Br-BI. ex A. De Bolòs y Vayreda 1950) y se distingue de las demás por la presencia constante deSpergula fallax, taxon distribuido por zonas áridas desde el Norte de Africa hasta el centro de Asia, cuyas únicas poblaciones europeas se dan en la provincia de Almería.

Aproximación a la biogeografía del sector Setabense (provincia Catalano-Valenciano-Provenzal)

Se realiza una propuesta de división en subsectores del sector Setabense (Provincia biogeográfica Catalano- Valenciano-Provenzal). Las unidades reconocidas son: 1 subsector Valenciano;2 subseetor Enguerina-Cofrentino; 3 subsector Ayorano-Villenense; 4 subsector Alcoyano-Diánico. Para cada uno de ellos se aporta una breve descripción y caracterización de su flora, vegetación, paisaje vegetal, suelos, bioclimatología, usos del territorio, etc. Además se proponen dos nuevas combinaciones taxonómicas: Asperula paui Font Quer subsp. dianensis (Font Quer) de la Torre, Alcaraz & Crespo y Linaria depauperata Leresehe ex Lange subsp. hegelmaieri (Lange) de la Torre, Alcaraz & Crespo, y se valida la combinación Arctostaphyllos uva-ursi (L.) Sprengel subsp. crassifol¡a (Br.-Bl.) Rivas-Martínez ex de la Torre, Alcaraz & Crespo.

Estudio del Cheilanthion hispanicae Rivas Goday 1955 em. Sáenz de Rivas & Rivas-Martínez 1979 y comunidades afines, en el Sector Orensano-Sanabriense (Provincia Carpetano-Ibérico-Leonesa)

Se analiza el comportamiento fitosociológico de las comunidades vegetales caracterizadas por la presencia de los taxones Cheilanthes tinaei Todaro y Ch. hispanica Mett. en el Sector Orensano-Sanabriense (Provincia Carpetano-lbérico-Leonesa), proponiendo para ellas la asociación Linario glabrescentis-Cheilanthetum tinaei y las subasociaciones: Linario glabrescentis-Cheilanthetum tinaei cheilanthetosum hispanicae nova y Linario glabrescentis-Cheilanthetum tinaei cheilanthetosum guanchicae nova.Comentamos brevemente la asociación Phagnalo saxatile-Rumicetum indurati Rivas-Martínez inéd, que contacta topográficamente con la asociación anteriormente propuesta.Se aportan datos sobre el comportamiento fitosociológico de Cheilanthes pteridioides (Reichard) C. Chr.