Baosteel Group - Governance with Chinese Characteristics

In: Business and Management

Submitted By blala
Words 2044
Pages 9

To be able to argue whether the Baosteel Group should consolidate the entire Group’s assets into a single publicly-listed company or remain a two-tiered structure one first needs to review the underlying situation, Baosteel was faced with.
In order to stay competitive on the increasingly fierce global steel market Baosteel was required to not only advance in technology but also to increase its output. To reach its aggressive targets, Baosteel continued its quest for domestic acquisitions. In 2008 Baosteel set up a new company which was authorized to oversee two existing state-owned enterprises: the Shaoguan Iron & Steel Group and the Guangzhou Iron & Steel Group. Each of the two enterprises controlled a listed subsidiary.
By acquiring these two companies Baosteel Group could increase its output as the new company had the permission to build a new 10-million-ton steel-making base in Zhanjiang City. The new base in Zhanjiang City was promising as it would solve the lack of steel-making facilities in Guangdong, save money due to the shorter distance to Australian iron ore sources and face a ready market with Honda’s and Toyota’s manufacturing facilities demanding their flat rolled steel. They needed, however, to modernize the enterprises, eliminate the obsolete capacity and shut down environmentally critical operations.
Besides the favorable effects of the Guangdong project it also raised difficult governance issues. The first issue was how and whether to respond to minority investors in the Baoshan listed subsidiary who were asking why the project was being pursued by the Group and not the listed company. Baosteel officials decided to develop the project under the group in order to not harm the performance of…...

Similar Documents

Corporate Governance

...Volume 15 Issue 1 Special Issue: Comparative Corporate Governance 7-1-2003 Article 13 Corporate Governance in Malaysia Kamini Singam Recommended Citation Singam, Kamini (2003) "Corporate Governance in Malaysia," Bond Law Review: Vol. 15: Iss. 1, Article 13. Available at: This Article is brought to you by the Faculty of Law at ePublications@bond. It has been accepted for inclusion in Bond Law Review by an authorized administrator of ePublications@bond. For more information, please contact Bond University's Repository Coordinator. Corporate Governance in Malaysia Abstract This article examines the corporate governance system in Malaysia. A sound corporate governance system should help create an environment conducive to the efficient and sustainable growth in the Malaysian corporate sector. Since the Southeast Asian financial crisis in 1997 – 98 (‘financial crisis’), corporate governance has become a key policy issue confronting many Southeast Asian countries, including Malaysia. This article considers the distinctive problems of corporate governance in Malaysia, despite several steps for reform that have taken place since the financial crisis. There will be a brief discussion on the meaning of corporate governance and an overview of the present status of corporate governance in Malaysia, in particular after the financial crisis. Keywords corporate governance, Malaysia, Southeast Asian financial......

Words: 13068 - Pages: 53

Recently the Terms "Governance" and "Good Governance"

...Recently the terms "governance" and "good governance" are being increasingly used in development literature. Bad governance is being increasingly regarded as one of the root causes of all evil within our societies. Major donors and international financial institutions are increasingly basing their aid and loans on the condition that reforms that ensure "good governance" are undertaken. The concept of "governance" is not new. It is as old as human civilization. Simply put "governance" means: the process of decision-making and the process by which decisions are implemented (or not implemented). Governance can be used in several contexts such as corporate governance, international governance, national governance and local governance. Since governance is the process of decision-making and the process by which decisions are implemented, an analysis of governance focuses on the formal and informal actors involved in decision-making and implementing the decisions made and the formal and informal structures that have been set in place to arrive at and implement the decision. Government is one of the actors in governance. Other actors involved in governance vary depending on the level of government that is under discussion. In rural areas, for example, other actors may include influential land lords, associations of peasant farmers, cooperatives, NGOs, research institutes, religious leaders, finance institutions political parties, the military etc. The situation in urban areas is......

Words: 983 - Pages: 4


...assembly new data on dual-class firms in Latin America and analyze the relationship between the largest shareholder characteristics and its decision to leverage voting rights. First, we describe who are the largest shareholders in Latin American firms. Second, we find that both the type and origin of the largest shareholder, together with firm- and country-level characteristics, are important determinants to explain the decision to separate voting from cashflow rights. To tackle the determinants of ownership in Latin American publicly listed firms has both managerial and policy implications because the largest shareholders are those in charge to define business strategies and the allocation of firms’ resources. Key words: Corporate ownership; dual-class shares; voting rights; cash-flow rights; Latin America. 1 INTRODUCTION Most of the analysis of the Modern Corporation has focused on the conflicts of interest between managers and owners. Yet, recent literature, extending the discussion of the classic ownermanager conflict, adds minority versus majority shareholders conflict where more concentrated ownership structures takes place (La Porta, López-de-Silanes, & Shleifer, 1999; Villalonga & Amit, 2009; Young, Peng, Ahlstrom, Bruton, & Jiang, 2008). This new agency problem, socalled, principal-principal, is particularly salient in emerging markets, where weak governance rights and underdeveloped institutions may account for high levels of ownership concentration......

Words: 14854 - Pages: 60

Chinese Foreign Direct Investment in Australia

...DRAFT Chinese Foreign Direct Investment in Australia: Policy Issues for the Resource Sector Peter Drysdale Crawford School of Economics and Government The Australian National University and Christopher Findlay School of Economics University of Adelaide Abstract The last nine months has seen Chinese foreign direct investment in the Australian resource sector become an issue of policy interest. There are two big questions that the prospects of a significant rise in foreign direct investment (FDI) from China into the Australian resources sector have raised. Is the surge of FDI into Australian mining and energy consistent with achieving the traditional gains from foreign investment? And are there any particular problems associated with investment from foreign state-owned enterprises or state managed sovereign wealth funds? These are among the questions addressed in this paper. The paper argues that there are no issues that cannot be dealt with under the umbrella of the established test of ‗national interest‘ in managing the growth of Chinese FDI into the Australian minerals sector. It argues that a confusion has been introduced into policy over the questions of state-ownership and supplier-buyer relations in respect of Chinese investments and that clarifying these issues is likely to be important to Australia‘s capturing the full benefits from the growth of Chinese resources demand and longer term economic and strategic interests in China. Paper for Presentation to......

Words: 15875 - Pages: 64

Sinosteel and Its Governance the Significant Influence of the Government

...Abstract This paper has the aim to deep understand the typical problems of the Corporate Governance of China's State-Owned Enterprises (SOEs) and how, during the years the role of the Chinese government is changed. In particular it will discusses Chinese corporate governance in this narrow sense and attempts to explain the political core function of Party Organization. Moreover it will analyze a real case: “Sinosteel Corporation”. This company was created and projected by the Chinese government with the aim to be the leader in its sector. Its corporate governance is deeply influenced by the party consequently by the Chinese government, which contributed to its establishment and growth through several government-subsidies. Key words: China’s SOEs, Governance Structure, the CCP organization, internal control mechanism, Sinosteel. Abbreviations: CCP, China Communist Party; SOEs, State-Owned Enterprises; CICSC, China Internal Control Standards Committee; SASAC, State-owned Assets Supervision and Administration Commission; PSC, Party Standing Committee; CPCC, China Party Central Committee; Introduction The definition of corporate governance in China refers to the system that regulates the multiple relationships between all the parties with interests in a business organization, typically underlying the shareholders as a predominantly important group. However in practise corporate governance focus mainly on the agency problems in particular within two kinds of firms. The......

Words: 3620 - Pages: 15

Trading Favors Within Chinese Groups

...Paper Title: Trading favors within Chinese groups Discussant: Federica Capriglione Abstract Pyramidal structures is a dominant aspect of ownership in the developing world, which allow shareholders to control corporations with relatively low investments. On the one hand, the mismatch of cash flow and control rights leads to a range of agency problems and resultant resource misallocations, potentially impacting the macro economy. On the other, pyramids are one important mechanism that enables the formation of diversified business groups that are a dominant feature of business organization in much of the world. The paper aims to give an illustration of this within-firm trade-off of costs and benefits in the context of publicly traded firms in China. Moreover, capital investment and firm performance are investigated from the perspective of pyramidal ownership structure. In the last part of paper it is examined why when a listed firm gets into financial trouble and is designated as special treatment (ST) firm by the regulatory authorities, could have generated overwhelmingly favorable market reactions. That will be considered from the perspective of “tunnelling” and “propping up” practice within Chinese listed firms. 1. Introduction A dominant aspect of ownership in the developing world is pyramidal structures, which allow shareholders to control corporations with relatively low investments. The uneasy relationship between these controlling investors and minority shareholders, and...

Words: 6206 - Pages: 25

Chinese Fdi in Latam 2010

...levels in Latin America in 2010, when it is estimated they surpassed US$ 15 billion. Chinese companies have in fact burst on the scene in the region so recently that several of the biggest projects were still being finalized in early 2011, or had only just been put into operation. Most investments have been made in natural resource extraction, but over the medium term this is expected to diversify into other sectors such as manufacturing and infrastructure construction. Paradoxically, there is a lack of data on this extremely important phenomenon, which poses a constant problem for policymakers and analysts studying Chinese foreign direct investment (FDI). Appraisals of the possible opportunities and challenges presented by this increased investment flow therefore tend to lack supporting empirical evidence. The aim of this chapter is to make some progress on this issue, at least as far as investment in the region is concerned. A variety of sources have been consulted, including investment announcements in the media and interviews with Chinese company managers and Latin American and Caribbean government authorities. Despite the evident limitations of this kind of material in terms of data quality and reliability, this course of action does provide some data to work with. From a substantive viewpoint, the main contention is that China’s FDI is governed by the level of development of the Chinese economy, its production structure, internal market conditions (which explain......

Words: 20527 - Pages: 83

Corporate Governance

...Corporate governance Two definitions: 1. ASX CGC: rules, relationship, systems and processes help a company to monitor and assess risk, optimize performance, create value and provide accountability. a) A narrow definition which consistent with agency theory focuses on relationship between company and shareholders. 2. OECD: a system a company can be directed and controlled, specify rights, responsibilities and rules; set and achieve objectives and monitor performance. b) A board definition consider relationship between company and stakeholders 3. Agency theory c) A contract under which one or more person engage another person or persons to perform some service on their behalf d) Agency problem rise because of the conflict of interest between principle and agent e) Three specific problems: i. Managers try to maximize their wealth at the expense of shareholders ii. Tendency for management to focus on short-term performance iii. Different attitude of managers and shareholders towards risk f) Corporate governance structures, policies and relationships can help to overcome these three related agency problems iv. Independent board of directors v. Independent board chair vi. Independent board subcommittees such as audit, remuneration and nomination 4. Stakeholder theory g) Reject the only important relationship is shareholders and managers, but......

Words: 1869 - Pages: 8

It Governance

...Global Technology Audit Guide Auditing IT Governance Global Technology Audit Guide (GTAG®) 17 Auditing IT Governance July 2012 GTAG — Table of Contents Executive Summary......................................................................................................................................... 1 1. Introduction................................................................................................................................................ 2 2. IT Governance Risks................................................................................................................................... 7 3. Aligning the Organization and IT — Key Considerations................................................................ 12 4. The Role of Internal Audit in IT Governance............................................................................ 15 Conclusion....................................................................................................................................................... 18 Authors and Reviewers.............................................................................................................................. 18 Appendix — IT Governance Risk Assessment/Engagement Planning Considerations............................................. 19 iv GTAG — Executive Summary Executive Summary To support the heightened importance of IT governance and the mandatory nature of the International......

Words: 10762 - Pages: 44


...Best Practices: Nonprofit Corporate Governance One of the most significant and valuable developments of the post-Sarbanes-Oxley Act environment has been the emergence of governance “Best Practices” proposals designed to enhance and improve corporate responsibility and governance. These proposals have come from a wide variety of sources, ranging from self-regulatory agencies (e.g., NYSE, NASDAQ) and business groups (e.g., The Business Roundtable, The Conference Board, National Association of Corporate Directors) to professional associations (e.g., the American Bar Association) and major corporations (e.g., General Electric, WorldCom, TIAA/CREF). While most of these Best Practices proposals have been recommended for adoption by public companies, their relevance as an aspirational goal for nonprofit corporations and non-public companies is widely recognized. From these and other resources, we have developed the following set of guidelines as “food for thought” concerning governance “Best Practices” to assist nonprofit corporations in responding to the current “corporate responsibility” environment. To set the proper perspective, a few important caveats are in order. First, these are Best Practices guidelines, and do not in most instances, reflect current legal requirements. Instead, the guidelines reflect our perspective on evolving trends in nonprofit governance and law. In many circumstances, adoption of, and adherence to, “Best Practices” may reduce a nonprofit corporation’s...

Words: 4165 - Pages: 17

The Impact of Chinese Investments in Africa

...of property rights and rule of law, whereas Western investment favors the better governance environments. As a result, Chinese investment in strong and weak governance environments is about the same, but its share of foreign investment is higher in the weak governance states. The micro data that we use is MOFCOM’s database on all Chinese firms investing in Africa between 1998 and 2012. We use key words in project descriptions to code the investments into 25 sectors. This database captures the small and medium private firms investing in Africa. Contrary to common perceptions, there are few projects in natural resource sectors. Most projects are in services, with a significant number in manufacturing as well. In our country-sector-level regressions based on firms’ transaction-level data, we find that Chinese ODI is profit-driven, just like investors from other countries. In particular, our regressions show that Chinese ODI is relatively more concentrated in skillintensive sectors in skill-abundant countries, but in capital-intensive sectors in capital-scarce countries. These patterns are mostly observed in politically unstable countries, suggesting stronger incentives to seek profits in tougher environments. Finally, the predominance of Chinese ODI in services appears to be related to the recipient countries’ natural resource abundance, which is also consistent with the profit-driven nature of Chinese ODI. 1 Affiliations: Chen, George Washington University and International......

Words: 7801 - Pages: 32

It Governance

...ScienceDirect Information & Management journal homepage: IT governance for enterprise resource planning supported by the DeLone–McLean model of information systems success Edward W.N. Bernroider * Vienna University of Economics and Business Administration, Department for Information Business, Augasse 2-6, 1090 Vienna, Austria A R T I C L E I N F O A B S T R A C T Article history: Received 18 May 2005 Received in revised form 24 August 2007 Accepted 11 November 2007 Available online 1 May 2008 I investigated the role of IT governance in driving the success of ERP projects. The tool for assessing ERP value was a comprehensive, multivariate and validated model adapted from the widely used Delone and McLean model of IS success. This showed that ERP investments were more effective in organizations having an IT governance domain consisting of proactive strategic guidance and participatory team building. Large enterprises, however, under-performed compared to SMEs and needed specific performance drivers, such as top management commitment to become effective. ß 2008 Elsevier B.V. All rights reserved. Keywords: ERP IT governance IT success IT value delivery Empirical survey 1. Introduction Today’s business requirements have moved IT governance into the focus of attention. The core processes underlying effective and comprehensive IT governance are the same as those for an enterprise. IT activities are critically......

Words: 6323 - Pages: 26


...Koito Case Study Submitted by Weichao on March 12, 2011 Category: Business and Economics Words: 7841 | Pages: 32 Views: 160 Report this Essay 1. The Japanese corporate governance system differs vastly from the US system. Discuss corporate governance issues that may arise under the Japanese keiretsu system from the perspective of a) financiers b) owners c) suppliers and d) employees. A Japanese keiretsu is effectively a system of cooperation among various stakeholders. From the Japanese point of view, corporate governance includes maximization of long-term corporate value for shareholders and accountability to all the stakeholders, particularly shareholders (Corporate Governance Committee of Japan 1997). This model appears more attractive than the Anglo-Saxon corporate governance model since it takes social benefits into account. However, it must be noticed that the workability of this model relies on a flawless functioning of the market economy, which is not always the case in Japan (ibid). The later paragraphs will discuss in detail the corporate governance issues related to the Japanese keiretsu system in relation with financiers, owners, suppliers and employees. a) Financiers As shown in Exhibit 8 – Ownership Structure of Major Japanese Automotive Assemblers (1989), banks in Japan usually hold a substantial portion of equity in borrowing companies. The Japanese model is often perceived as efficient since it encourages information flow between firms and their......

Words: 7863 - Pages: 32

It Governance

...IT Governance A summary of “Ten Principles of IT Governance” (2004, Peter Weill, Jeanne W. Ross) and “IT Governance Framework” (2005, Craig Symons)  Coming up with new governance mechanisms and policies should not be reactive (patching up problems), but proactive – using the enterprise’s objectives and performance goals as a basis Mature business governance processes can be used for IT governance Governance redesigns should be undertaken only when strategy is being revised, in such cases IT governance can be used for leveraging the strategic transformation CIO’s and senior management’s involvement in IT governance is crucial for its success, because it ensures better alignment of IT with strategy The exception-handling process must be clearly defined, as short as possible and should enable and encourage organizational learning. The owner of the IT governance must be familiar with all aspects of the enterprise (not only IT) and have credibility with all business leaders. The owner of the IT governance must be made also responsible for its performance A layered structure is often necessary for IT governance (possible layers are: enterprise-wide IT governance – driven by enterprise-wide strategies and goals and IT governance at division and business unit levels) The effectiveness of IT governance is severely affected by the effectiveness of its communication and transparency Coordination in the governance of the all six assets, one of which is IT, is critical for maximizing the...

Words: 585 - Pages: 3

Chinese Jv

...cost of capital. It also had an obscure governance structure, which was a huge barrier in letting the joint venture to flourish. There were also clashes of interest between Jiao’ao Group and Global Beverage. Jiao’ao Group had clearly Global Beverage that even if they find any division isn’t efficient enough, there is no way they are going to shut it down in the next 24 months as employment is to utmost priority for them. The audit committee wasn’t up to international standards either so was the remuneration committee, which couldn’t be formed, as there was no consensus by the members. Remuneration of senior management was a serious issue as the general level of compensation for the senior managers wasn’t high enough for them to actually care about the company. After seeing all these problems in the company, Jan needed to make Dhangtu competitive again. He could either push for rationalisation or make the board and the governance work. Pushing for rationalisation could have been a good idea as maybe shutting down one-two divisions could reduce the size of company, making it more focused on one common goal. This could bring efficiency which the company badly required to get back in the game and compete again but this wasn’t possible as Jiao’ao Group clearly stated that for the next 24 months they couldn’t shut any division down as maintaining employment for the government was their main aim. Therefore, making the board and the governance tick was Jan’s best bet in order to make...

Words: 493 - Pages: 2