May 20 2015 UTS Corporate Governance Service Program presentation at the ASX Emerging Markets & Disruptive Technology: New Horizons in Corporate Governance

1. UTS BUSINESS SCHOOL
UTS CRICOS PROVIDER CODE: 00099F business.uts.edu.au
How Well Is Corporate
Governance In Australia
Prepared For Imminent
Challenges?
Dr. Ulysses Chioatto
Governance
Services Program
Centre for Corporate
Governance

2. GOVERNANCE CHALLENGES 2025
 Investor Challenge – engagement
 Investment Narrative – we are in the
right part of the world
 Disclosure
 Why Emerging Markets (EM)
 Oz share of FDI
 Challenge 9% operating in Asia
 65% no intention to change
business.uts.edu.au

3. GLOBAL INVESTORS CHALLENGE
 Northern hemisphere investors hold up to 25 to 30%
on ASX 300 shareholder registers
 Seek long term positions on well managed companies
 good governance practices
 skills matrix
 Diversity – Asian directors
 Seek sustainable growth and ROI
 Engagement is problematic
business.uts.edu.au

4. INVESTMENT NARRATIVE
 Governance steering – do we have the best
mechanism to communicate corporate strategy to
investors – self or external investment?
 Essentially investment vehicles
 Better – quality - disclosure is the governance
challenge
 sustainable growth includes environmental
and social factors
 Global focus on financing energy – creating
energy – managing energy
business.uts.edu.au

5. GOVERNANCE DISCLOSURE
 General & Continuous – impact on
securities
 Fundraising – risks in making an
investment decision – should know - ought
 Financial Reporting – management of the
listed entity
 Operating and Financial Review - ‘material
business risks, ‘future prospects’, and
‘strategy’
business.uts.edu.au

6. EMERGING MARKETS
 Powerhouses are China and India
 40% of world's labour force and population
 Combined economic output $15.9 trillion USD
 point 3 and point 6 > either EU or the U.S.
 (Source: CIA World Factbook, 2011 statistics)
 Besides 21 countries in MSCI Emerging Market
Index there are also Argentina, Hong Kong,
Jordan, Kuwait, Saudi Arabia, Singapore, UAE
and Vietnam.
 (Source: Tarun Khanna, Harvard Business School,
How Companies Break Into Emerging Markets)
business.uts.edu.au

7. 5 CHARACTERISTICS
1.lower-than-average per capita income < $4,034
(See World Bank list)
2.rapid growth.
3.high volatility.
4.No solid track record of foreign direct investment.
5. higher-than-average return for investors.
 Not all EM are equally good investments.
 Breakout nations invested revenue in infrastructure
and education for their workforce.
 In 2014 Crisis they were ready.
business.uts.edu.au

8. AUSTRALIAN FDI BY 2014
 $472 billion USD of global outwards FDI, 1.8 % of
global outwards FDI (ranked 18th) - behind
Singapore and ahead of Sweden. (US = 24% No. 1
@ $ 6.3 trillion)
 Double that of prior decade
 10 times more than decade before that
 US$592 billion of global inwards FDI, 2.3 % of global
inwards FDI (ranked 14th).
 global trend of FDI towards Asian economies
(significantly China and Singapore)
business.uts.edu.au