Shareholder
value and the Glass Ceiling
Our columnist argues that limits on growth that hold back Sri Lankan
companies are largely self-imposed and that corporates should look
outward more aggressively to generate greater shareholder value.
A reader recently
asked
me why Sri Lankan corporates have limits in terms of shareholder
value and do not reach the global league. If Fortune 500 listing
is taken three Indian companies are there, Taiwanese companies are
a part of it, Japan dominates it and China is rapidly taking control
of it. I intend to discuss certain factors which I believe could
help Sri Lankan companies to reach the global league.
Reaching
out
Rather than limiting themselves to the borders of Sri Lanka listed
companies should venture out of Sri Lanka and should try to expand
in bigger markets.
The buying power and market size are significant that growth could
be achieved beyond one’s imagination. Companies such as MAS
Holdings, Dilmah have followed such a model. It is interesting to
note that HSBC a bank with origins in Hong Kong has become the largest
bank in UK as well as Europe. If Telekom Malaysia can try to dominate
in Sri Lanka through a subsidiary I wonder why SLT cannot consider
this option in other neighbouring markets.
Innovative
methods of growth
Rapid shareholder wealth also needs rapid action. The west is famed
for mergers, acquisitions and even Joint Ventures between competitors
to facilitate growth. While such forms of growth can have risks
of failure, when well managed they do tend to bring in higher wealth
for the shareholders. The tendency to frown upon such mergers and
acquisitions is high in Sri Lanka. The stakeholder communities such
as unions and at times public react in unexpected forms destabilising
good opportunities. Stakeholders intervened extensively to stop
the takeover of Sampath Bank by HNB showing how difficult strategy
implementation can be in our country.
Leadership
If most of the Fortune 500 companies are taken into account they
have strong results oriented leadership at the top. Corporates need
leaders who are men of action who do not tolerate waste and inefficiency
and who have a commitment to make money for thei shareholders. BP,
Microsoft Toyota and even Taiwan’s Acer have displayed such
leadership.
In most Sri Lankan corporates such aggressive leadership is lacking.
There is also a culture of frowning on leaders such as Harry Jayawardena
who display such corporate qualities. While leadership excesses
will have to be controlled through corporate governance practices
one has to note that it will not be possible for Sri Lankan corporates
to deliver high consistent value without strong leadership.
Product
development
Most global leaders are also leaders in innovation and product development.
This is an area where Sri Lanka has to work very hard.
While there have been initiatives in some areas such as apparel
trade, indigenous medicine, innovation and new product development
among Sri Lankan corporates tends to be low when compared to those
in other countries.
Socio
economic stability
Significant corporate growth also needs socio economic and political
stability. Most of the Fortune 500 companies are in the developed
world where these factors are very stable making growth comparatively
easy. Sadly this factor was lacking in Sri Lanka over the last two
decades and at times one could argue that the growth which had been
achieved by Sri Lankan corporates amidst such turmoil is admirable.
Message
to the investors
There
are no glass ceilings to corporate growth because the largest corporates
in the world tend to keep on growing. BP has in fact just posted
a profit of £ 11 billion for the year. For those with the
correct vision and strategies with a passion to maximise shareholder
wealth the sky would be the limit and if there are any glass ceilings
generally they are self inflicted.
(The writer could be reached at - ravim@icbsgroup.com) |
