India: Changes in Regulations Governing Capital Markets

SEBI has announced a number of changes in regulations governing capital markets. Some of the important decisions are:

1. Public issues by Insurance Companies

The Board noted that the SEBI (ICDR) Regulations, 2009, which are sector neutral, would also apply to insurance companies. The Board also noted and approved the recommendations of SEBI Committee on Disclosures and Accounting Standards (SCODA) for the following additional disclosures, having regard to the specific nature of insurance companies:

• Disclosure of risk factors specific to insurance companies;
• Broad headings under which an overview of the insurance industry shall be disclosed;
• Other disclosures specific to insurance companies;
• Formats for disclosure of financial information as specified by IRDA;
• Glossary of terms used in the insurance sector;

The Board also approved the two amendments to SEBI (ICDR) Regulations, 2009, viz., exemption from appointment of monitoring agency and disclosure of disclaimer clause of IRDA in the offer documents of insurance companies.

2. Preferential issue of equity shares or convertible securities or warrants to promoters and promoter group

In order to further tighten the preferential allotment framework, the Board decided that in case of preferential issues, where any promoter or any promoter group entity has previously subscribed to the warrants of the company but failed to exercise the warrants, the promoters and promoter group shall be ineligible for issue of equity shares or convertible securities or warrants for a period of one year from the date of expiry of the currency /cancellation of the warrants. The Board further decided that if any member of the promoters/ promoter group has sold shares in the previous six months, then the promoters/ promoter group would be ineligible for allotment on preferential basis.

3. Fixed Pay Date

In order to enable investors to manage their cash/ securities flows efficiently and to enhance process transparency, the Board decided to mandate companies to have a pre-announced fixed pay date for payment of dividends and for credit of bonus shares.

4. Enhancement of limit for defining retail individual investors

The Board decided that the maximum application size for retail individual investors may be increased to Rs.2 lakh across all issues.

5. Rights issue framework for IDRs

In order to facilitate simultaneous rights offering by the foreign issuers (who have listed their Indian Depository Receipts (IDRs) in Indian Stock Exchanges) in their home jurisdiction and in India, SEBI Board has decided to notify the framework for rights issue of IDRs. It is decided that for circulation in India, an additional wrap (disclosing information required in Indian jurisdiction and issue process relevant for the IDR holders) can be attached with the letter of offer, circulated by the overseas issuer in their home jurisdiction. Disclosure requirements for IDR rights would more or less be in line with the reduced disclosure requirements, applicable for domestic rights issues. Further, it is decided that IDR issuers, who are in compliance with the continuous listing requirements, can avail the facility of filing the offer document on fast track basis.

For complete details on these regulations see here.

China: Fastest Supercomputer

A Chinese scientific research center has built the fastest supercomputer ever made, replacing the United States as maker of the swiftest machine, and giving China bragging rights as a technology superpower.

The computer, known as Tianhe-1A, has 1.4 times the horsepower of the current top computer, which is at a national laboratory in Tennessee, as measured by the standard test used to gauge how well the systems handle mathematical calculations

Although the official list of the top 500 fastest machines, which comes out every six months, is not due to be completed by Dongarra until next week, the Chinese computer blows away the existing No. 1 machine.

Complete report.

The Legatum Prosperity Index

The Legatum Prosperity Index is the world's only global assessment of wealth and wellbeing; unlike other studies that rank countries by actual levels of wealth, life satisfaction or development, the Prosperity Index produces rankings based upon the very foundations of prosperity those factors that will help drive economic growth and produce happy citizens over the long term.

Most people would intuitively agree that “prosperity” is not just about money but also about quality of life. The Index defines prosperity as both wealth and wellbeing, and finds that the most prosperous nations in the world are not necessarily those that have only a high GDP, but are those that also have happy, healthy, and free citizens.

The Prosperity Index presents a broad view of wealth, happiness and prospects of the world's nations and citizens captured in eight sub-indexes. The idea behind the Index is that material wealth alone does not make for a happy society, but happy citizens are produced as much by democracy, freedom, social cohesion and entrepreneurial opportunity as they are by a growing economy.

The Prosperity Index assesses 110 countries, accounting for over 90 percent of the world’s population, and is based on 89 different variables, each of which has a demonstrated effect on economic growth or on personal wellbeing. The Index consists of eight sub-indexes, each of which represents a fundamental aspect of prosperity:

1. Economy - Stable and growing economies increase per capita income and promote the overall wellbeing of its citizens.
2. Entrepreneurship & Opportunity (E&O) - A strong entrepreneurial climate in which citizens can pursue new ideas and opportunities for improving their lives leads to higher levels of income and wellbeing.
3. Governance - Well-governed societies enjoy national economic growth and citizen wellbeing.
4. Education - Education is a building block for prosperous societies.
5. Health - A strong healthcare infrastructure in which citizens are able to enjoy good physical and mental health leads to higher levels of income and wellbeing.
6. Safety & Security - Societies plagued by threats to national security and personal safety cannot foster growth in average levels of income or wellbeing.
7. Personal Freedom - When citizens enjoy their rights to expression, belief, organisation, and personal autonomy in a society welcoming of diversity, their country enjoys higher levels of income and social wellbeing.
8. Social Capital - Social networks and the cohesion that a society experiences when people trust one another have a direct effect on the prosperity of a country.

Each of the sub-indexes provides two important analyses: first, an economic assessment, and second, an assessment of a country’s subjective wellbeing, or happiness.

Rankings

Norway tops this year’s Index, narrowly ahead of Denmark and Switzerland, with the United States ranking 10^th, ahead of large European nations such as Britain, Germany and France, which all still make the top 20. Zimbabwe ranks last, following Central African Republic and Pakistan.

Key Findings

The findings fall into three main categories:

I. Prosperity is found in entrepreneurial democracies that have strong social fabrics.

1. Entrepreneurship and opportunity correlate more closely to a nation’s overall prosperity than any other factor.

2. It pays to be a democracy.

3. Changes in the “social fabric” of a country can lead to big changes in national prosperity.

4. Prosperity is about balance.

II. Prosperity is a blend of wealth and happiness, but not as one might think.

5. Material wealth cannot be explained only by economic factors, and happiness cannot be explained only by subjective emotions.

6. Choice and opportunity matter more to happiness than making a lot of money quickly.

III. Global prosperity is changing in unexpected ways.

7. Two Europe’s are emerging.

8. Improved governance is emerging as a key driver of prosperity in Sub-Saharan Africa.

9. It’s hard to be prosperous as a large country.

10. Economic growth is not enough for the BRICs.

For full detailed report see here.

Unilever to buy Alberto for $3.7 billion as growth plan

Consumer goods group Unilever Plc/NV will buy US hair and skin care company Alberto Culver for $3.7 billion in the latest move to rebalance its portfolio towards higher growth lines.

Unilever’s biggest acquisition in a decade will add brands such as V05, TRESemme and Nexxus to Unilever’s existing Dove and Sunsilk, and make it the world’s leading company in hair conditioning and the second largest in shampoo.

Analysts said the price of the deal looked high but could be justified by as-yet unspecified cost savings and by skewing Unilever’s business to more high growth, high margin categories compared to its other food and detergent businesses.

The acquisition follows a yet-to-be completed deal to buy Sara Lee’s bodycare division for $1.3 billion and will also mark Unilever’s biggest acquisition since its massive Bestfoods deal in 2000.

Unilever Plc shares rose 2.23% to 18.33 pounds by 3:56pm, in a little changed London stock market as other analysts said the deal will give Unilever greater hair care sales in the US where it has struggled in recent years.

Complete story.

India: SEBI Clears IPO Norms for Insurers

Capital market regulator Securities and Exchange Board of India (SEBI) has cleared the decks for initial public offerings (IPOs) by life insurance firms, but the much-anticipated changes in the takeover code weren’t approved by the watchdog as discussions at its board meeting remained “inconclusive”.

Sebi chairman C.B. Bhave said apart from adhering to the extant norms that are sector neutral, domestic life insurers will also be required to disclose risk factors specific to insurance companies and an overview of the insurance industry in general, while raising money through a public issue.

There are 23 life insurers in India with at least Rs. 12 trillion in assets.Private insurers such as Reliance Life Insurance Co. Ltd, ICICI Prudential Life Insurance Co. Ltd and HDFC Standard Life Insurance Co. Ltd have announced plans to tap the capital market.

While approving the recommendations of the SEBI committee on disclosures and accounting standards, the market regulator said life insurers will also be required to disclose financial information in the formats specified by IRDA and disclose the glossary of terms used in the insurance sector.

It has exempted such insurers from the appointment of a monitoring agency. They would need an IRDA disclaimer in the offer documents.

Complete story.

Strategic Management

Strategic management entails specifying the organization's mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives, and then allocating resources to implement the policies and plans, projects and programs. Recent studies and leading management theorists have advocated that strategy needs to start with stakeholders expectations and use a modified balanced scorecard which includes all stakeholders.

“Strategic management is an ongoing process that evaluates and controls the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment., or a new social, financial, or political environment.” (Lamb, 1984:ix).

According to Arieu (2007), "there is strategic consistency when the actions of an organization are consistent with the expectations of management, and these in turn are with the market and the context." Strategic management includes not only the management team but can also include the Board of Directors and other stakeholders of the organization. It depends on the organizational structure.

Strategic management as a discipline originated in the 1950s and 60s. Although there were numerous early contributors to the literature, the most influential pioneers were Alfred D. Chandler, Philip Selznick, Igor Ansoff, and Peter Drucker.

Alfred Chandler recognized the importance of coordinating the various aspects of management under one all-encompassing strategy. Prior to this time the various functions of management were separate with little overall coordination or strategy. Interactions between functions or between departments were typically handled by a boundary position, that is, there were one or two managers that relayed information back and forth between two departments. Chandler also stressed the importance of taking a long term perspective when looking to the future. In his 1962 groundbreaking work Strategy and Structure, Chandler showed that a long-term coordinated strategy was necessary to give a company structure, direction, and focus. He says it concisely, “structure follows strategy.”

In 1957, Philip Selznick introduced the idea of matching the organization's internal factors with external environmental circumstances. This core idea was developed into what we now call SWOT analysis by Learned, Andrews, and others at the Harvard Business School General Management Group. Strengths and weaknesses of the firm are assessed in light of the opportunities and threats from the business environment.

Igor Ansoff built on Chandler's work by adding a range of strategic concepts and inventing a whole new vocabulary. He developed a strategy grid that compared market penetration strategies, product development strategies, market development strategies and horizontal and vertical integration and diversification strategies. He felt that management could use these strategies to systematically prepare for future opportunities and challenges. In his 1965 classic Corporate Strategy, he developed the gap analysis still used today in which we must understand the gap between where we are currently and where we would like to be, then develop what he called “gap reducing actions”.

Peter Drucker was a prolific strategy theorist, author of dozens of management books, with a career spanning five decades. His contributions to strategic management were many but two are most important. Firstly, he stressed the importance of objectives. An organization without clear objectives is like a ship without a rudder. As early as 1954 he was developing a theory of management based on objectives. This evolved into his theory of management by objectives (MBO). According to Drucker, the procedure of setting objectives and monitoring your progress towards them should permeate the entire organization, top to bottom. His other seminal contribution was in predicting the importance of what today we would call intellectual capital. He predicted the rise of what he called the “knowledge worker” and explained the consequences of this for management. He said that knowledge work is non-hierarchical. Work would be carried out in teams with the person most knowledgeable in the task at hand being the temporary leader.

In 1985, Ellen-Earle Chaffee summarized what she thought were the main elements of strategic management theory:

• Strategic management involves adapting the organization to its business environment.
• Strategic management is fluid and complex. Change creates novel combinations of circumstances requiring unstructured non-repetitive responses.
• Strategic management affects the entire organization by providing direction.
• Strategic management involves both strategy formation (she called it content) and also strategy implementation (she called it process).
• Strategic management is partially planned and partially unplanned.
• Strategic management is done at several levels: overall corporate strategy, and individual business strategies.
• Strategic management involves both conceptual and analytical thought processes.

Networking with Entrecard

I was new to blogging and was looking for ways to drive traffic to my blogs. I was scouting all over the net to get some tool for increasing traffic to my blogs, when I chanced upon Entrecard while reading someone's blog. I quickly took the chance to click on it, and without second thoughts signed up with Entrecard.

Entrecard is the first blogging community that I registered with when I started blogging. I can say that it was my main source of traffic and it is where I met other bloggers of the same interest. It is indeed worth signing up with Entrecard, especially those who are new to blogging. If you have some interesting articles on your blog, you can easily get some attention. Whenever a visitor comes to your blog and clicks on the mailbox, both you and the visitor will get a point. You can then exchange these points for advertising space on other people’s blogs! It is really an amazing system. You can get some free advertising space for just going to other people’s blogs or getting people to visit your blog. I use this on all my blogs. This is an amazing program that will get you traffic to your blog, guaranteed.

Click here to get your Entrecard Widget!

Forbes Magazine's 2010 list of America's 100 Best Small Companies

Forbes Magazine is out with the list of America's 100 Best Small Companies for 2010. The Forbes list includes only publicly traded companies with annual revenue between $5 million and $1 billion. The companies on the list all have a stock price of at least $5 per share, and Forbes excluded financial institutions, real estate investment trusts, utilities and limited partnerships.

The rankings are based on earnings growth, sales growth and return on equity in the past 12 months and over five years. They dropped companies that are thinly traded and those with fuzzy accounting or major legal troubles. They also factored in the stock performance of each company compared with that of its peers.

Topping this year's ranking is $218 million (sales) Medifast which sells prepackaged meal plans through a network of salespeople called health coaches. In Medifast's direct-sales model successful dieters are encouraged to become coaches themselves. Halfway into 2010 there were 8,000 coaches, up 72% from the same period in 2009.

The top ten companies in the list are:

Rank	Company	Sales ($mil)	Sales Growth (%)	EPS Growth (%)	ROE (%)
1	Medifast	218	41	35	17
2	InterDigital	359	17	149	48
3	American Public Education	174	49	47	28
4	Deckers Outdoor	869	33	35	22
5	WebMD Health	480	28	103	21
6	NutriSystem	534	63	76	51
7	National Presto Industries	491	27	34	39
8	Industrial Services of America	285	3	22	22
9	True Religion Apparel	335	54	50	48
10	Transcend Services	84	33	91	28

View Complete list

UK : The Takeover Panel Code Committee

On 1 June 2010, the Code Committee of the Takeover Panel published a public consultation paper which set out suggestions for possible amendments to the Takeover Code.

The consultation gave rise to an unprecedented number of responses, with 97 formal responses being received from a broad range of respondents representing industry, investors, academics, practitioners, trades unions and individuals. It also occasioned a great deal of discussion among market participants and other interested constituencies.

The Code Committee has issued a statement in  response to the Consultation Paper and sets out the Code Committee’s conclusions in relation to the principal issues consulted upon. The Code Committee has concluded that there is a case for proposing amendments to the Code and the Code Committee will publish one or more public consultation papers in due course setting out the proposed amendments in full in accordance with its usual procedures for amending the Code.

The Code Committee has concluded that hostile offerors have, in recent times, been able to obtain a tactical advantage over the offeree company to the detriment of the offeree company and its shareholders.

In view of this conclusion, the Code Committee intends to bring forward proposals to amend the Code with a view to reducing this tactical advantage and redressing the balance in favour of the offeree company. In addition, the Code Committee has concluded that a number of changes should be proposed to the Code to improve the offer process and to take more account of the position of persons who are affected by takeovers in addition to offeree company shareholders.

For further details  see here. 

USA : SEC Proposes Rules on "Say on Pay" and Proxy Vote Reporting

The Securities and Exchange Commission has proposed rules that would enable shareholders to cast advisory votes on executive compensation and "golden parachute" arrangements. The rules are called for by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Under the proposed rules, public companies subject to the federal proxy rules would be required to:

• provide their shareholders with an advisory vote on executive compensation and an advisory vote on the desired frequency of these votes;
• provide shareholders with an advisory vote on compensation arrangements and understandings in connection with merger transactions, known as "golden parachute" arrangements; and
• provide additional disclosure of "golden parachute" arrangements in merger proxy statements.

The proposed rules would also require that institutional investment managers report their votes on executive compensation and "golden parachute" arrangements at least annually, unless the votes are otherwise required to be reported publicly by SEC rules.

For complete details on the rules see here.

Indian Ayurvedic Body Slams Colgate for Patenting Lal Dant Manjan

Lal dant manjan may make many Indians remember the old Dabur commercial featuring a schoolboy named Raju and his Masterji. But lal dant manjan, or ‘red herbal dentifrice’, is now patented in the US by Colgate Palmolive, and Indian ayurvedic companies have sought government intervention to cancel it.

The Association of Manufacturers of Ayurvedic Medicines (Amam), which represents 200 companies including Dabur, Himalaya , Hamdard and Baidyanath, has accused the American personal care giant of patenting an Indian traditional knowledge in the US, India and elsewhere.

It has urged the patent authority, the health ministry as well as the industrial ministry to take immediate measures to stop patenting of this traditional product and “initiate action not only in the US but also in other countries where Colgate Palmolive might have applied for the patent”.

Colgate received patent for red herbal dentifrice in the United States in June this year on the basis of an application dated 2005, filed in India.


Full report in Economic Times

Financial Reporting Council : The UK Approach to Corporate Governance

An updated edition of the Financial Reporting Council publication The UK Approach to Corporate Governance has been published this month.

The UK approach combines high standards of corporate governance with relatively low associated costs. In a September 2009 report by Governance Metrics International, the UK ranked second in a table showing average governance performance by companies in different countries.

It is proportionate and capable of dealing with a wide variety of   ircumstances. There is a relative lack of prescription as to how a company’s board organises itself and exercises its responsibilities. The UK Corporate Governance Code identifies good governance practices, but companies can choose to adopt a different approach if that is more appropriate to their circumstances.

The key relationship is between the company and its shareholders, not between the company and the securities regulator or stock exchange. Boards and shareholders are encouraged to engage in dialogue on corporate governance matters. Shareholders have voting rights and rights to information, set out in company law and the Listing Rules, which enable them to hold the board to account.

For complete report see here (pdf).

What is Economics?

Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek οἰκονομία (oikonomia, "management of a household, administration") from οἶκος (oikos, "house") + νόμος (nomos, "custom" or "law"), hence "rules of the house (hold)". Current economic models emerged from the broader field of political economy in the late 19th century. A primary stimulus for the development of modern economics was the desire to use an empirical approach more akin to the physical sciences.

Economics aims to explain how economies work and how economic agents interact. Economic analysis is applied throughout society, in business, finance and government, but also in crime, education, the family, health, law, politics, religion, social institutions, war, and science. The expanding domain of economics in the social sciences has been described as economic imperialism.

Common distinctions are drawn between various dimensions of economics. The primary textbook distinction is between microeconomics, which examines the behavior of basic elements in the economy, including individual markets and agents (such as consumers and firms, buyers and sellers), and macroeconomics, which addresses issues affecting an entire economy, including unemployment, inflation, economic growth, and monetary and fiscal policy. Other distinctions include: between positive economics (describing "what is") and normative economics (advocating "what ought to be"); between economic theory and applied economics; between mainstream economics (more "orthodox" dealing with the "rationality-individualism-equilibrium nexus") and heterodox economics (more "radical" dealing with the "institutions-history-social structure nexus"); and between rational and behavioral economics.

History of Economics

The first writings on the subject of economics occurred in early Greek times as Plato, in The Republic, and Aristotle wrote on the topic. Later such Romans as Cicero and Virgil also wrote about economics.

In medieval times the system of feudalism dominated. With feudalism, there was a strict class system consisting of nobles, clergy and the peasants. In the system, the king owned almost all the land and under him were a series of nobles that had land holdings of various sizes. On these landholdings were series of manors. These were akin to large farming tracts in which the peasants or serfs worked the land in exchange for protection by the nobles.

Later the system of mercantilism predominated. It was an economic system of the major trading nations during the 16th, 17th, and 18th cent., based on the idea that national wealth and power were best served by increasing exports and collecting precious metals in return. Manufacturing and commerce became more important in this system.

In the mid eighteenth century, the Industrial Revolution ushered in an era in which machines rather than tools were used in the factory system. More workers were employed in factories in urban areas rather than on farms. The Industrial Revolution was fuelled by great gains in technology and invention. This also made farms more efficient, although fewer people were working the farms. During this time the idea of "laissez faire" became popular. This means that economies work best without lots of rules and regulations from the government. This philosophy of economics is a strong factor in capitalism, which favours private ownership.

In the nineteenth century, there was reaction to the "laissez-faire" thinking of the eighteenth century due to the writings of Thomas Malthus. He felt that population would always advance faster than the science and technology needed to support such population growth. David Ricardo later stated that wages tend to settle at a poor or subsistence level for most workers. John Stuart Mill provided the backdrop for socialism with his theories that supported farm cooperatives and lab or unions, less competition. These theories were brought to a high point by Karl Marx who attacked the capitalistic, "laissez-faire" theories of competition and instead favoured socialisms, marked more government control and state rather than private ownership of property.

Another important idea at this time was the change in how items are valued. While formerly and item's value stayed the same according to what the item was, now worth of an item is determined by how many people want the item and how great the supply of the item was. This was the beginning of the laws of supply and demand.

In the first half of the twentieth century, John Maynard Keynes wrote about business cycles - when the economy is doing well and when it is in a slump. His theories led to governments seeking to put more controls on the economy to prevent wide swings.

After World War II, emphasis was placed on the analysis of economic growth and development using more sophisticated technological tools.

In recent years, economic theory has been broadly separated into two major fields: macroeconomics, which studies entire economic systems; and microeconomics, which observes the workings of the market on an individual or group within an economic system. In the later twentieth century such ideas as supply side economics which states that a healthy economy is very necessary for the health of the nation and Milton Friedman's ideas that the money supply is the most important influence on the economy.

In the twenty-first century, the rapid changes and growth in technology have spawned the term "Information Age" in which knowledge and information have become important commodities.