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Short & Sweet : PLC Lesson For 2013

Posted on January 9, 2013 at 3:50 PM

If I insist on waiting until I have something positive to say in the New Year we could be waiting a very long time. But I might have a way forward - courtesy the FT's Lex column and the link is here.

There are suddenly a lot of allegations around emanating from short sellers about accounting irregularites. Zoomlion, China's construction-eqipment maker, may be the latest to be a target. Lex has managed to make its column an excellent little lesson for doing business in 2013, wherever you are based, and whether or not you have anything to prove by way of reputation.

If you don't have access to FT.com, here are the basics (which I have lifted from the column) for good crisis management and also good business,whether or not you are subject to an attack by short sellers. Step one in this case was a speedy halt to trading but the rest apply in any scenario.

2. be completely transparent after allegations are made and go out of your way to do so. (Lex:  "And even if you cannot say much as you marshal your forces, at least say what you are doing to show how much you want investors' trust.")

3."bring in credible outsiders to investigate. Do this whether or not you fear the claims are justified."

Transparency is the first stage to establishing corporate culture. As Lex puts it : "The only way to limit long-term damage is to have built strong, open relationships with investors long before any attack. Business in China, like everywhere, is built on personal trust."

Ah, personal trust. I see all sorts of people in the New Year have decided it's time their businesses focused on their 'human capital' (ie their people) for the best results in a time of continued economic squeeze. If they are going to do that, they are going to have to go about it with complete transparency. Perhaps rewarding people for being honest would be a good start, having a conversation with employees, rather than setting up a process.

Financial services firms and others that have learnt anything from the financial crisis are busy building plans to redefine their corporate 'culture.' Lessons are surely learnt better by carefully scrutinised human interaction - I predict a boom in the 'board evaluation' market.

But what of all those plcs that are looking - with a hint of desperation - to the 'emerging markets' (including China) for their future growth ? Well, they need to do the same - evaluation, but throughout the whole organisation and by outsiders. Otherwise they are going to find they are in the unknown territory of someone else's corporate culture before they have even established their own, which is a surefire recipe for disaster.

When I think of 'emerging markets' I think first of India - I was born there, I lived there until I was 11 - and I shudder. But that's another story.

Let's just say now that it doesn't much matter if you go on about being 'the world's largest democracy' if it also means that there is no enforceable 'rule of law,' just as there is not much point in 'transparency' unless you also have 'accountability.'

The disconnect between India as it functions (not) and the way the hungry developed world looks towards it is growing - even if the spotlight of world attention is shining on it at the moment due to one brutal rape in the centre of its capital, New Delhi.




Categories: Transparency, Scrutiny, Accountability