carpe annum

China is home to twenty of Fortune’s Global 500 companies. Not unlike their global brethren, resource extraction, transportation and banking companies comprise the bulk of China’s large firms. But are these companies world-class? Hardly. Many of these companies are state-owned and make the list not because of any inherent economic efficiencies, but rather they are simply big. With further economic liberalization and the threat of foreign entrants, domestic firms are beginning to realize that they will no longer have easy access to government capital and protected markets. They will have to become internationally competitive and require modern and effective Chinese management systems. Since the late 1990s, many firms are turning to stock exchanges not only for their capital requirements, but also as a means to improve governance, management, and reputation.

However, as in the case of Legend-cum-Lenovo, there are alternative mechanisms to go global, such as an acquisition of and strategic partnership with a major international player. Lenovo completed the purchase of IBM’s personal computing division in 2005. Acquisitions have long been in the toolbelt of companies looking to get bigger, but what makes the Lenovo case unique is that it is the first Chinese company to acquire such a high-profile international business. It may also mark the beginning of a wave of Chinese companies searching for similar advantages in the international M&A arena in their quest to go global. In doing so, the world be watching how Lenovo executes its integration and how it plays the global game. Will Lenovo be China’s Sony; the country’s emblematic example of economic prowess and modernization? Or will it be just another unknown Chinese brand? With the world watching, will the stigma of partial state-ownership be a continual nuisance to China’s new global giants? If so, how will the state respond? The lessons learned from Lenovo’s may be the most important ones China can learn in the next decades.
Download–> Big Red: Can China go Global? A case study of Lenovo

Comments(0)

“Traditional Anglo-American notions of the firm and corporate governance have served quite well in lubricating economies and building societies’ wealth and prosperity. However, as the nature of business seems to be changing to increasingly value the contribution of human assets, there is room for labour in firm governance. This phenomenon along with globalization should encourage countries and firms to be different, to look for distinctive ways to govern themselves inline with their circumstances and environment rather than converging on a best model. The proposals outlined in this essay highlight a few of the convincing mechanisms for including suppliers of labour in the control systems of the firms for which they work.”

The past 15 years have witnessed the rise of shareholder primacy arguably to the detriment to other stakeholders in the firm. What is the theoretical basis for such a phenomenon and are there alternative theoretical frameworks which can create a more balanced structure from the persective of fairness? Here is a recent essay I wrote about corporate governance regarding whether there can be a more optimal role for employees in controlling the companies they work for.  It also includes a summary of the basic theories of corporate governance in general.  Enjoy!

Link (pdf): Inherit the Firm

Comments(0)

The transformation of China’s once socialist planned economy into the modern, capitalist one seen today has been a great ongoing experiment. Like many of the other economic developments in China�s growth, it is a story of incremental liberalization and relaxation of centralized power. The stock market is one of those highly symbolic institutions that is the ultimate shrine of capitalism, and its existence in China would be shocking to any communist ideologue. Yet, Chinese leadership will continue to reform the entire economy as firms increasingly turn to markets, and not government bureaus for their capital requirements.

This paper outlines the development of China’s stock markets and three main structural obstacles to its further effective evolution. To date, it’s been kind of a mess, and most respectible companies choose to list on foreign exchanges, but there is hope for China’s domestic capital markets!

Boring? Perhaps, but meh, here it is –> Red Bull Rising.pdf

Comments(0)