Corporate Governance

The BRIC [Brazil, Russia, India, and China] Project ? An overview (Part 1)

By Daniel O?Connell

On this Blog, we mostly write about corporate governance.  In doing so, we typically focus on events, judicial proceedings, and corporate actions in  the United States, particularly those emanating from Delaware.  In an increasingly global economy, however, this may be too narrow a perspective.  

With the regulatory landscape seen as another variable input that affects the bottom line, corporations will increasingly seek out those jurisdictions that provide maximum managerial flexibility.  This will take them beyond the boundaries of the United States and could result in a global "race to the bottom."  Even aside from this dynamic, the evolution of corporate governance practices elsewhere may provide useful ideas that can be borrowed and applied in the United States. 

We will, therefore, turn our attention from time to time to corporate governance practices in the global markets.  We will start by examining Brazil, Russia, India, and China – the 'BRIC' nations.  These are important and fast growing economies.  According to Standard and Poor's,

The financial markets of the BRIC countries began to develop in earnest in the early 1990s thanks to a series of near-simultaneous events: China put privatization programs into place as it opened itself up to the outside world (1980-1990); Brazil's military dictatorship fell in 1985; democratic reforms took place in the Soviet Union and then in Russia from 1986 to 1991; and India began to pursue economic liberalization in 1992. Over this period, stock market capitalization among the BRIC countries increased from essentially zero in Russia and mainland China and from less than 10% of GDP in India and Brazil to 100% or higher in all four countries.  According to International Monetary Fund data, from 1997 to 2006, the cumulative volume of foreign portfolio investment into shares of companies located in BRIC countries grew to $697 billion from $70 billion.  

Moreover, the rapid growth is, as Goldman Sachs has noted, something that is likely to continue. 

Over the coming weeks and months, a number of student posts will examine corporate governance issues in BRIC nations.  Dan O'Connell will write posts about corporate governance practices in Brazil.  Rich Jasik will do the same for Russia.  Kinny Bagga will examine India, with Dan Snare assigned the exploration of corporate governance in China. 

Full post as published by The Race to the Bottom on April 01, 2010 (boomark / email).