May 6, 2010 3:00 am
In India, a corporate governance watchdog has emerged from a relatively unexpected quarter - the World Bank.
The World Bank has a practice of debarring suppliers of goods and services for infringements of its internal guidelines and then publishing the names of the alleged offenders on its website.
Over the past few years, three well-known Indian companies have appeared on this list: outsourcing groups Satyam Computer Services and Wipro Technologies, and, it emerged yesterday, appliance group Videocon Industries.
Satyam was barred for eight years for allegedly providing "improper benefits" to World Bank staff in exchange for contracts and for providing "a lack of documentation" on invoices. Satyam, which was later implicated in India's worst corporate fraud, declined to comment on the case.
Wipro was accused of providing "improper benefits to staff" for allocating shares in its 2000 initial public offering to the World Bank's then chief information officer. Wipro has denied any wrongdoing.
In the latest case, the World Bank has accused Videocon of violating its rules on "fraudulent practice" in bidding for a contract. It gave no further details but banned Videocon from providing it with services for three years. Venugopal Dhoot, Videocon chairman, did not respond to requests for comment yesterday. Investors take the World Bank's rulings seriously. Videocon shares fell 3.47 per cent to Rs218.65 per share yesterday. The broader market was down 0.3 per cent.
Pru stumbles into Asia
A journey of a thousand miles begins with a single step, said Lao Tzu, the Chinese philosopher. Prudential's Asian adventure has begun with a series of stumbles so surprising it merits a new word - Pru-lish - to describe clumsy behaviour by a blue-chip multinational that should know better.
In March, it was Pru-lish for the UK insurer not to devote more time to courting its core British-based investors about the planned merger with AIA, AIG's Asian arm. It was the height of Pru-lishness for Tidjane Thiam, the group's chief executive, to entertain an invitation (later declined) to join the board of Société Générale, after the ambitious AIA deal was on the table. Now, the British company appears to have acted Pru-lishly in assuming it would be able to square the deal with its home regulator, the Financial Services Authority, before yesterday's planned announcement of a $21bn rights issue and publication of a detailed prospectus.
It was already clear to those close to the deal three weeks ago that the FSA might be harder to convince than the group's Asian regulators. The Pru should have anticipated a hold-up.
This merger would pose huge challenges of execution, integration and, ultimately management, offset, so the company says, by much larger rewards. Its disorderly debut is a blow to shareholders' confidence. But it will not force the Pru's board, let alone its advisers, to rethink the rationale. They have too much at stake. That leaves the regulator as the system's last line of defence. Mr Thiam and his team can say what they like about the timing of its questions, but the FSA is far from foolish to insist on answers.
Focus on the French
What can be deduced from the fact that the two young bankers currently dominating the headlines in financial markets are both French? Fabrice Tourre, the Goldman Sachs mortgage securities specialist, has hardly been out of the news after revelations about the complex synthetic security his bank created for customers. Meanwhile, Jérôme Kerviel had returned to relative obscurity until this week, when the former Société Générale trader re-emerged as author of a book about the bank's €50bn trading scandal.
Conveniently, the two men are not just French, but also the same age - or at least they were when they became internationally recognised. They even enjoyed catchy nicknames: Mr Tourre dubbed himself Fabulous Fab in e-mails; Mr Kerviel says he was called the cash machine. But the similarities end there. Mr Tourre is a product of France's traditional elite education system, Mr Kerviel not so.
Most important of all, Mr Tourre has emerged with the full support of his superiors, while Mr Kerviel, who faces trial next month, has been portrayed as a rogue trader par excellence by his former bank. Nevertheless, Mr Kerviel's definition in his book of the "law of banking" as "he who wins is always right" might strike a chord with Goldman's myriad critics.
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