As I am reading Damodaran’s notes and slides on Corporate Governance (1st lesson on Corporate Finance,yes), I realise I might as well apply it in my analysis for 1169. (Yes I am doing my first independent stock pitch on it! Excited!)
Board of Director:
1. 5/9(total 12) key board members are inside directors of Haier Group with Zhou, Yunjie currently being both BOD Chairman and CEO. Nevertheless, many of the members have rich experience in Business Management, Investment banking, Investment and China’s market. The level of expertise offers investors the confidence.
2. Corporate governance report is issued annually together in the annual report, discussing issues with emphasis on transparency, accountability and independence in order to enhance the long-term value of our shareholders. Some issues to note are:
- High attendance rate for all the meetings
- CEO Zhou, Yunjie chairs the Remuneration Committee, Nomination Committee
- Dominance of some directors: CEO Zhou, Non-executive directors Mr Yu and Ms Cheng Li are in charge of a few important committee including remuneration, nomination –> concern over minority directors’ welfare
- Most of the Directors hold stocks of about 0.02
- Currently there is no other external measures of the quality of corporate governance available.
Mr. Zhou Yun Jie and Mr. Li Hua Gang are also the grantees of 2,250,000 and 110,000 restricted shares of the Company, respectively, in accordance with the Company’s Restricted Share Award Scheme, out of which Mr. Zhou Yun Jie’s 1,350,000 restricted shares and Mr. Li Hua Gang’s 66,000 restricted shares were cancelled as approved by the board of directors on 21 March 2016.
- Size of the Board: 12 Directors: Relatively large board size for large cap companies –> this may compromise the decision-making process
The top shareholders are parent and affiliated companies of Haier. CEO Zhou, Yunjie also has the largest holding as the individual shareholder. In this case, it is likely that the management team can have aligned interests with the shareholders.