Organization Behaviour Case Study

Executive summaryIn this report, a case of Morgan-Moe’s drug stores will be studied. The company is suffering from a difficult economy situation, with stores being downsized and employees being dismissed. There is a huge problem concerning employee motivations. Therefore, the human resource team decided to change the management system, and they had conducted an experiment to test five newly designed programs. The outcome is analyzed based on sales revenues and employment turnover rate, and the most effective programs are selected accordingly.At the same time, critical thinking is applied in this report. The process of the experiment is reviewed, and several factors are added into the consideration. Meanwhile, both practical and theoretical information is provided relating to the changing workforce, the importance of goal and directions, the construction of organizational culture, the employ involvement and empowerment, the changing resistance, as well as the justice and fairne ss of work place. Through these further analyses, a more comprehensive management system is suggested to Morgan-Moe’s drug company.Background informationMorgan-Moe’s drug stores used to be the leading company in the retail industry with the firm owning hundreds of stores. However, there has been a dramatic declining in revenues recently based on a sharp decrease in the region’s manufacturing economy. The company used to consider high-margin items as their major product, but they have to switch their focus on low-margin commodities, and therefore the profit has been fallen rapidly. Out of frustration, the company has to cut down the number of stores, and dismiss the employees.As the business going worse, there are some negative influences on the employees. Because of the insecurity of their jobs, employees had formed a pessimistic attitude against their daily work. Besides, the lack of advanced notice and communication, as well as the unsatisfied severance paymen ts for departing employees, had caused the laid-off employees to have a radical emotion of angry. In this way, the working efficient of the daily operation was weakened, and the public image of the company has also been damaged.To deal with the changes and to solve those problems, Jim Claussen, vice president of Human Relations, determined to set a new direction for the company, and the human resource management team decided to transform their performance management system. In order to come up the most effective management system, the HR team had come up with five options for the company, and each individual manager of the store is able to choose the most appropriate approach for their management purposes. An experiment had been conducted, and the results are analyzed in details in the following report.Experiment approachAs mentioned above, there are five programs designed for this experiment (listed in the following table), and those programs can be considered as the variables. Pro gram one is designed to be the same as the previous system, with sharing little or no information; program two and three provide employees with information that is controllable (sick leave) or uncontrollable (sales and inventory replacement); and program four and five engage employees into the decision making process with employees providing suggestions for a better performance.Program No. ContentProgram 1Continues to stay the course and providing employees with little to no information or opportunities for participation.Program 2Tracks employee absence and sick leave and shares that information with individual employees, giving them feedback.Program 3Tracks sales and inventory replacement rates across shiftsProgram 4Tracks the same information as Programs II and III. Managers communicate it in weekly bases, during which employees make suggestions for improving performanceProgram 5Keeps the idea of brainstorming, but doesn’t provide employees with information about their beha vior or company profits To achieve a comprehensive analysis of this experiment, we need to identify what the independent and dependent variables are. According to Sechrest (1982), independent variables refer to factors of input which are able to be controlled, while dependent variable indicates the output or outcome which is determined by the dependent variable.In this case, the independent variables rely on both the management and employee perspectives. Analyzing from the management perspective, the information sharing level, the empowerment level and management style will all have an influence on the outcomes. On the other hand, factors of employees should also be considered as independent variables. For example, the employment age, their positions in the company, the working condition or location will all affect the experiment results.Our dependent variables focus on the outcome of those programs that we want to measure, and it can be classified as the average turnover rate, the sales profit, and the monthly staff cost time. Those dependent variables are determined by the independent variables, and the change of each independent variable will have an influence on the dependent variables and experiment outcomes.Finding and discussionThe experiment was conducted within 299 retail stores, and the results are listed in the appendix. As can be observed, program four and five should be regarded as the most effective methods in generating revenues and reducing turnover.First, we will focus on the revenue and cost aspects. As listed in the  following chart, program one and two have a relatively low profit per month, which indicates that the sales revenue of stores using program one and two is lower than those applying program four and five. In other words, stores which engage employee into the decision making process are able to generate more sales revenues in general. It can be seen that employee’s suggestions could help the company to increase the profit and achieve a better performance.Even though program four and five had generated the highest revenue during the experiment, they also caused the highest cost of staff time. On the other hand, since program one did not need to make any changes, there will be no staff cost. Staff cost means that the employees had to take some of their regular working hours into the information sharing and brainstorm meeting, so that the opportunity cost of those hours must be considered as well. Therefore, we need to deduct those costs from the revenue to get the net profit for each program. As can be seen from the following chart of net profit, program four and five still have a relatively higher profit of $9,580 and $11,250 than the other programs after remove the staff time cost from the revenues.Another measurement is the employee turnover rate, which represents the percentage of employees who either quit or terminate their jobs. To maintain the experienced employees and to reduce the time cost o f training newly recruited members, it is better for the company to keep a lower employee turnover rate. According to the experiment result listed in the following chart, program four and five have a relatively lower rate of employee turnover of 17% and 21%.On the other side, program three has the highest turnover rate, following by program one. It can be figured out based on the results that a high level of employee engagement into the decision making process will have a positive influence to reduce the employee turnover rate. If the employee’s opinions and ideas are encouraged and respected in the company, they are more willing to dedicate themselves into their working process.As analyzed above, it is obvious that methods four and five are superior to the other methods, because they generated higher profits and lower employee turnover rates. On the contrary, program one is the least effective management system with regarding to a lower sales profit and a higher employee tur nover rate. In this way, the company should be encouraged to modify their current management system, and systems like program four and five should be promoted to engage the employees into the decision making process.However, there are some concerns regarding to the experimental approach. In this experiment, each manager was able to select the program which they think might be the most appropriate for the retail store. As can be seen in the following pie chart, almost one third of the managers choose program one which is to keep the status quo. Even though a relatively large number of managers choose not to change, it does not necessarily mean program one is a better solution. However, more than half of the managers are willing to bring changes into the organization and to offer empowerment to employees. Meanwhile, program four and five are approved to be the more effective methods based on the experiment results, so the majority of managers agreed with our conclusion.Based on variou s management styles, managers would have different preferences, and therefore it is possible that the decisions were made with personal biases. In this way, the impartiality of the experiment would be negatively affected. To monitor the fairness of the experiment, a randomly assigned strategy could be recommended instead of the self-selection process. Critical analysisApart from the data and information that has been collected in this experiment, there are some other issues for the managers to consider. It is universally known that the world is continuously changing, and if a company wants to be the leading organization in the rapidly changing environment, it has to be adaptive and creative to fit into the new situation.In this case, the manager had made his effort adapting to the current situation by designing the different programs. However, the requirement of  diversified workforce (Langton, 2012) should also be seen as one of the new realities. In is undeniable that the employ ment of experienced workforce is more dependable than young workers, because they have accumulated more professional knowledge about the work.However, in the current unpromising economic situation, the company might want to hire more diversified workforces. It will not only serve the different need of various customers, but also could generate more fresh ideas during the brainstorm meeting. Meanwhile, with diversified workforce, the employees will generally increase their skills and capabilities by sharing their knowledge.Apart from adapting to the changing situations, the organizational goal and direction are also essential when making organizational decisions and motivating employees. Specific and achievable goals could improve employee’s performance and help the management process. According to Langton (2012), a well-designed company goal is able to provide a direction for employee’s actions, regulate their behavior and efforts, as well as increase their persistence during their working process. Meanwhile, goals and directions are also able to stimulate the development of administrative strategies, and it will dramatically increase the motivation of employees. Accordingly, the Morgan-Moe’s drug stores should primarily design a specific goal to direct the employment behaviors.As Lencioni (2012) represented in his book, once a company has accomplished setting their mission and goals, which he refers to as the â€Å"clarity†, those directions must be emphasized and reinforced during the daily basis of the operation process. In other words, the tasks and jobs assigned to employees must be designed based on the major objective and goal of the company. Meanwhile, award and appreciation systems should be provided to employees to promote their motivations. Fairness and equity must be considered when offering employees rewards, and the rewards should be in alliance with organizational goals and personal performance.In addition to organiza tional goals and objectives, organizational culture and value should also be created as a core factor within the organization. A satisfying culture could get employees to be engaged into the organization,  and it will also have a positive influence in the employee’s job satisfactory level, which might lead to a higher level of motivation. As showed in the following chart (Round the Clock Resources, 2012), a sustainable organization should build up a solid system around an appropriate working culture, with other aspects constitute a framework guiding the business process.At the same time, employment involvement and empowerment strategies must be implemented within the organization. Those strategies suggest a company to move some of the power from managing level into the general employee level, which indicates that employees should be inspired and encouraged into the decision making process. Based on Herzberg’s motivation-hygiene theory (Langton, 2012), employees shoul d be given greater responsibilities and more power to plan and control their work, and their motivation would be increased.As in this experiment, program four and five are designed with empowerment activities, they engage employees into the brainstorm meeting to communicate the current situation and to generate ideas and suggestions of what they can do to for a better development of the company. Judging by the results, it is testified that giving employees more responsibility is able to improve the sales profit, reduce employment turnover rate and increase the overall performance level of the organization.When bring changes into an organization, not all employees are willing to embrace the transforming. There will be a resistance power caused by the fear of the unknown and uncertain future. As Torben Rick (2011) illustrates with his â€Å"change cycle†, employees will experience several stages before they finally accept the conditions.During the changing process, it is signif icant for managers to have a clear communication with the employees, and the directions must be clear and precise, so that the employees understand the current situation and their expectations. Meanwhile, managers must be fair and impartial to maintain the organizational justice, in which way a satisfied working environment could  be established, and the employees are trusted and they will be more committed to the organization. Conclusion and recommendationAccording to the experiment results, program four and five are considered to be most effective because they are able to generate relatively higher net profits and lower employment turnover rates. It means a regular brain storm meeting is beneficial for the improvement of organizational performance and employment engagement. Therefore, managers should actively encourage employees to be involved into the decision making process.However, considering the current business situation, the managers should also embrace more diversified w orkforce, and different kinds of employees should be hired. Besides, a clear goal and direction should also be created by the management level to guide the behavior of employees. Apart from that, a favorable organizational culture should also be established to form an instructional working environment. At the same time, actions of employ involvement and empowerment should also be taken to increase motivation and employment responsibilities. During the management process, organizational justice and fairness should also be paid attention to, so that employee will be committed to the organization.

Outcome based education

Memoranda E. Local Title: Outcome-based Education: A Reaction Paper Outcome-based education is simply referred to student-centered learning methods that focuses on the student itself. The student would make a demonstration of the skills they had learned. It is different in traditional nursing wherein OBEY does not require a particular style of teaching.The student is open to use any kind of method they are comfortable with for learning. For a nursing student, it is very agreeable on my part to use the OBEY system and/or incorporate it to the traditional curriculum the students are familiar with. Nursing students are required to do return demonstrations to assess their competencies and the OBEY can be used for the students' benefit. It would be unwise, in my humble opinion, to eradicate the traditional method and be replaced by the outcome-based education.OBEY has been considered as a modern teaching strategy/curriculum and if the traditional methods had been totally replaced, there w ould be difficulties on the part of the professor handling the abject, especially if said professor is not actually young by age, but young by heart. The best possible solution that I am leaning myself into is to wean the traditional curriculum and slowly incorporate the outcome-based education so as to both professors and students won't have the shock in the new set up.If that plan goes successful, the it would be much better for two curriculums both old and new, merge into a single but much better off education system. The OBEY is still on the process of acceptance by different nursing schools and universities for it has not been openly used by faculties alike. It is but a reminder that the OBEY is still new and that it is very normal if few schools are using it on their student education.As the saying goes, old habits die hard, it is still on the process of usage and further recommendation. There is no perfect curriculum that can be used and be subjected to students. As I have sa id before, the OBEY is an interesting program that can be used to nursing schools because it submits to returns demonstrations and such. No door shall be closed in using this type of modernity.

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Health Psychology Essay Example | Topics and Well Written Essays - 4750 words

Health Psychology - Essay Example I held on to the biomedical perspective. Now, I realize there is more to it than just physical health. This, I realized as I mature, because I encounter several stressful moments that affect my well-being not only physically but also mentally and emotionally. Such stress makes me unable to think well. I also realize that when I harbor negative emotions, it somehow translates to physical symptoms. Now, I adhere to the biopsychosocial philosophy of health. The discussions with my peers facilitated this belief because we all had our own notions and definitions of health, but the common ground is well-being. Many factors affect the health of a person and that includes social and environmental factors. The individual is also responsible for caring for himself, and his own illness prevention. This matter falls under the area of Health Psychology. This course has defined Health Psychology as â€Å"a branch of psychology that deals with how people cope and manage illness and health behaviour† (Course Notes, Psy 4101).. The person responsible for this is called a health psychologist. He is not a medical doctor but his field of expertise lies more on psychology and how to help people manage a healthier life. I also realized that health psychologists belong to a bigger group of psychologists that do research and development in this specialized field. This, I learned when I went to the site of the British Psychological Society (2010) and they included several areas where psychological research and methods apply: I know that in each area enumerated above, there fall numerous sub-areas that contribute to the wide scope of Health Psychology, and it is amazing how it still grows upon discovery of more information. The first area, the promotion and maintenance of health involves dissemination of health education. In line with the World Health

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Professors question - Essay Example Both North East Mexico and corresponding South Texas benefit from the energy boom from Eagle Ford Shale (DeBuys, 2011). Abundant energy has resulted to massive investment in the North East Mexico. Moreover, expansion of oil and gas production within Northern Mexico has resulted in increase in employment opportunities. North East Mexico depends on Texas in developing its underlying natural resources. Thus, many investors are positioning themselves in the North East Mexico to capitalize on the economic boom of Eagle Ford Shale within South Texas (DeBuys, 2011). Investments such as Infrastructure to accommodate the expected development, skilled workforce to fill the prevailing jobs created, the environmental effect of the expanded drilling, safety couple with security have been initiated within North East Mexico. Eagle Ford’s scale and swift of advancement has resulted to robust and comprehensive measure of the Northeast Mexico economic impact. Economic effect entail prosperous on employments, revenue and expenditure within the area. In summation, surge within Eagle Ford Shale drilling has resulted to sharp gains within the economic activity across the region. Nevertheless, billions of dollars that massive energy companies are committing to expand infrastructure for delivering hydrocarbons to the Texas Gulf Coast depicts that Northeast Mexico can anticipate robust production and

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Understand employment responsibilities and rights in health and social care Essay Example for Free

Understand employment responsibilities and rights in health and social care Essay Unit 201 – Understand employment responsibilities and rights in health, social care or children and young people’s settings. Describe the terms and conditions of own contract of employment. Probation period: When I joined Children 4 Most I was told I was on a 6 month probation period, This means that the management are able to terminate my contract if the company is unsatisfied with my working standards. Place of Work: I was also told that I may have to work at other locations for the nursery’s needs. Pay arrangements: My pay is  £433 a month which is paid Into my bank account in or around the 23rd of each month. I am also entitled to  £150 bonus every 3 months; this is given to each staff member if they haven’t had a sick day or been late to work in the 3 month period. Contracted Hours: My hours of work are 35 hours a week, A Monday to Friday arrangement. Holidays: My holiday year runs from the 1st of April to the 31st of March. I am entitled to 28 days holidays which include the days I have to take for Bank Holidays. Holiday Pay: Holiday pay will be at the normal rate pay. Notice period: If I choose to leave within my first month of being with the company a notice period is not permitted, However If I have been working with the company longer than 1 month a 1 week period will be provided, If I will have been with the company longer than 6 month’s a 4 week notice is required. Confidentiality: Should I breach this it may result in my contract being terminated. However if a child is believe to be in need or at risk of suffering harm, Legal advice should be obtained. Describe the information which needs to be shown on your pay slip. My salary should be shown and the hours which I have worked, Also the rate of my pay for example 433.3300. Also the date of the payslip, the tax code and employee number, The net pay and also my name. Total gross pay, Gross for tax, Tax paid, Earnings for National Insurance and also My National Insurance number. Explain what could happen when not carrying out the correct requirements of your role. If I didn’t carry out the correct requirements the children may not get the correct care that should be given. The nursery may also receive a visit from OFSTED and they may close down the nursery or change the rating for example from outstanding to pass, Parents may also take their children out of the nursery which may cause the nursery to close down. Explain how your role contributes to the overall delivery of then service provided. I provide all the correct care to ensure all the children’s needs are all correctly met and that they are happy and learning to all of their abilities. I have lots of responsibilities around the nursery from maintaining care of the children to protecting them and encouraging them with their learning. I also have to monitor the children and check the register frequently and carry out head count checks every 30 minutes. I also have close bonds with the parents and when carrying out activities making sure the safety aspects are all addressed and followed. If the correct care wasn’t provided, overall care may be dropped and accidents may happen. Explain how you could influence the quality of the service provided by – following the best practice within your work role. In a great position to influence a quality of care by setting standards of care, I show respect towards the children at all I times, I allow each child to have one and one time with me and I also allow each child to talk when they would like something. I deal with private situations with great respect for a example toilet routines, I encourage each child to close the toilet door behind them and I encourage each child to wipe themselves independently and pull up their clothing before they have opened the toilet door. Identify the personal information that must be kept up to date with your employer. The information includes: * name * address * date of birth * sex * education and qualifications * work experience * National Insurance number * tax code * details of any known disability * emergency contact details Explain agreed ways of working with employer. Without a job description you wouldn’t be able to apply for the job as you wouldn’t know what roles and responsibilities the job would entitle. Your employer will also have agreed on your pay and the benefits you may or may not get within the job for example a company car, you will have agreed to this by signing a contract.

Human Resources in Sri Lankas IT Sector

Human Resources in Sri Lankas IT Sector CHAPTER 1 INTRODUCTION For an organization to survive and expand in the rapidly competitive environment dominated by several players, it is paramount for an organization to perform. The organization performance would be measure according to several variables such profitability, sales, production quality and market share, however, few organizations give prominence for the most important factors which is human resources performance. According to HRM commentators retention and development of the organization employees are pivotal for organization performance. The overall purpose of human resource management is to ensure that the organization is able to achieve their success through people. Ulrich and Lake (1990) states that: ‘HRM systems can be the source of organizational capabilities that allow firms to learn and capitalize on new opportunities. But in the other hand HRM has an ethical dimension as well, which means it should also concern the rights and needs of people in an organization. With the increased competition, globalization, boundless technological advances, -companies are forced to think about the factors like HRM, environment†¦etc to run the extra mile ahead of the others. Therefore nowadays employers consider investments on the HRM functions are very significant and effective, rather than seeing it as just a cost. As it shown above, HRM should be incorporated with each and every function with in an organization. Starting from the recruitment process to the training and development, performance appraisal, performance incentives, promotion system , design of work and working environment†¦etc should aligned with effective HRM practices as it will reduce the direct indirect employee grievances which results in a highly motivated and pleased workforce, which in turn influences on the overall organization performances. When considering the structure of the Human resource management, there are two categories; 1. Managerial Functions 2. Operative functions Functions of HRM Managerial Functions Operative Functions Planning Employment Organising Human Resource Directing Development Controlling Compensation Human relations Recent trend in HRM 1. Managerial functions It include Planning, organizing, directing and controlling.  · Planning is the main activity that a manager has to consider. The management has to decide what to do and how to do to achieve the objective of the organization. Management uses this process to plan the future of the company, decide what actions they are going to make to avoid difficult problems etc. (Bateman, Snell, 2007).  · Organizing is established in the internal structure of the organization. It mainly concerns the flow of information within the company, division and coordination. Manager has to know what the subordinates can do and what kind of training they need. To achieve the objectives set in the planning process there should be a proper organization of work. In here the management set the tasks, responsibilities and authorities to the employees. The manager has to discuss the tasks with the employees and has to clarify what to do, how to do and make them understand about the job (Allen, G, 1998). Then it is easy to achieve the objective.  · Directing is the next stage after completing planning and organizing. This is to execution of the plan. It influences the people to achieve the objectives in a correct way through motivation, communication, and leadership. The proper direction of employees will affect the achievement of the objectives. The manager has to have a proper relationship with the employees in the company, and then they can easily direct the employees to achieve the target.  · Controlling involves checking, verifying and comparing of the actual with the plan that the company set. Actions and operations are adjusted to identified plans and standards through control. The training programs, conducting interviews, analyzing labor turnover details are some of the controlling functions that a manager can work out. Controlling allows setting the performance standards within the groups and to do the proper communication. 2. Operative functions These activities are related to specific activities such as, employment, human resources development, compensation, human relations and recent trends in human resource management.  · Employment This means securing and employing the people with the relevant qualifications to achieve the organizational objectives. The functions include in employment are, Job analysis, human resource planning, recruitment, selection, placement and induction.  · Human resource development This is the process of improving skills, knowledge, attitudes, aptitudes, commitment etc. depending on the organizational requirements. The functions include in human resource development are; Performance appraisal, training, management development, career planning and development, promotion, demotion and change and organization development.  · Compensation This is the process of providing sufficient, equal and fair reward to all employees. The functions include in compensation are; Job evaluation, incentives, wage and salary, bonus, fringe benefits, social security and measures.  · Human Relations It is the process of interaction between people. The management can practice different human resource policies to interact with the people. Good relationship will motivate people to do a better job In the organization. The functions in human relations include; Motivating the employees, developing the communication skills, developing leadership skills, providing comfortable work environment to the people, improving quality of work life of employees and boosting employee morale.  · Recent trend in human resource management This area is always developing. It is advancing at a fast rate. The recent trends in human resource management is; Quality of work life, recent techniques of Human resource management and total quality in human resources. In 1989 David Guest describes a human resource model according to what he thought. . This model consists of four elements; Human resource policies and practices Human resource outcomes Organizational outcomes Leadership 1. Human resource policies and practices when an organization is introduced there are many policies available in a company. They are; Organization and job design Management of change Recruitment, selection and socialisation Appraisal, training and development Reward systems Communication According to this model human resource policies are design to achieve the four key human resource outcomes which explains as the second element of this model. 2. Human resource outcomes The model include followings; Commitment Quality Flexibility Strategic integration Quality is not only concern about the quality of manufacturing product or the services provided by the company, it includes the quality of the workforce, the management of the workforce and the human resource policies used in the company. Flexibility is the facility to change the jobs people are doing, working arrangement such as number of hours they are working and the nature of employees contract. Strategic integration is the link between human resource strategy and business strategy. Guest explains that integration requires an organizational culture where managers work or share. The commitments have a direct relationship with valued business consequences. He says that commitment is confused and that the relationship between commitment and the performance is difficult to establish. When an employee commitment is higher means that employee is satisfied about the facilities and the way the company treat to employees. When they are satisfied performance will be automatically higher in the organization. 3. Organizational outcomes The organizational outcomes include following; High job performance High problem solving High innovation Low turnover, absence High cost effectiveness 4. Leadership Leadership is the most important element to make all these outcomes success. With the understanding of importance of the involvement of HRM for the betterment of an organization, this paper is about the effect of HRM development to the IFS business success. 1.1 Aims and objectives of the study During the recent years IT sector began to bloom and many leading IT professionals fortified the future of their companies by investing in Sri Lanka. Within few years it begins to expand and now a days it has become a major business sector which support the economy and which provides enormous career opportunities to the younger generation. Latest s show that, over 175 software developments companies are actively operating in Sri Lanka, which are originated from both national and international grounds and they are providing services for both the export and domestic markets. Some of these companies and their products are already well recognized and performing extremely well in the IT sector by competing with other foreign markets. Among these, companies like,Millennium Information Technologies- who not only turned the Colombo stock exchange in Sri Lanka into the worlds first ever event-driven exchange but with their versatile automated trading system have powered the Boston stock exchange among several other clients in the United States, as well as exchanges in Europe, Asia Pacific and Africa;Virtusa Corporation- one of the fastest growing software services firms in the US with seven years of consecutive growth and the largest technology center based in Sri Lanka and; Informatics- a local company whose telecom product is in operation at the regional sites of some of the worlds leading telecom operators, such as Cable Wireless of UK and Millicom of Luxembourg, are leading the way, marking the name of Sri Lanka in the world. Furthermore international names likeIFSfrom Sweden have set up their research and development center employing over 700 people and recently MicrosoftandOraclehave also opened offices in Sri Lanka. graph1 This is an effort to find out the involvement of human resource to the success of Sri Lankan IT sector and how well they are managed for them to get ready to face the future challenges in ever changing world. Taking the IFS Sri Lanka Ltd as the Reference point, the research will focus on interpreting the influence of Human Resource Management on the companys success. Research as a whole, is a process to find an answer to a specific question. The initial objectives of this study are to formalize the necessary procedures and questions to be answered, in order to gather the intended information, which will be desirable in finding an answer to the core research question. To achieve the above objectives, following are the outline of the information that will try to gather, to be used in developing proper evaluations conclusions. Actions taken to motivate the employees. Established procedures on providing job satisfaction to the employees. The process of developing employee skill and how the company utilize it. How strong is the employee-employer relationship Level of performance of the company and how the employees contribute its success. 1.2 Company Background IFS, is one of the worlds leading providers of component-based business software developed using open standards. Since 1983, IFS has been a provider of business applications focused on meeting the needs of selected industries. Basically, IFS operates in two areas: lifecycle management, where asset and product lifecycle management are critical issues, and mid market ERP (Enterprise resource planning), which covers distribution and manufacturing in midsize companies. Mainly company operates in Europe, the US, the UK, Australia and Asia with the head office situated in Linkoping, Sweden and having the employs about 2,723. Today, IFS is a global software company that helps leading enterprises improve efficiency, cut costs, react swiftly to market conditions, and take advantage of new business opportunities. IFS Applications, IFS suite of more than 60 web-based components, is the only true component-based business solution on the market, allowing deploying the software step by step as companys needs and budget dictate. Using open standards, IFS makes it easier to stay up-to-date with technology and integrate with legacy systems. And only IFS offers total lifecycle management, enabling their customers to maximize profitability over the lifecycles of your products, customers, and assets. IFS superior technology, functionality, and Industry focus have won praise from some of the worlds leading analyst firms. Gartner recognizes IFS as either a visionary or a leader in all four of its ERP and asset management Magic Quadrants. Most important, IFS legendary commitment to customer service has never wavered. Tod ay, IFS has an impressive roster of satisfied customers, ranging from mid-size companies to global industry leaders such as PepsiCo, General Electric, Lockheed Martin, General Dynamics, DuPont, Volvo, BMW, Deere Co., and Rockwell Automation. Since the day, IFS was founded, they have given a greater importance for the customer service. Therefore today, IFS has become the only enterprise software provider that offers a global product for the mid-market together with local support. IFS has support centres in each country in which it operates, ensuring that you will receive the best customer support anywhere in the world. IFS keep track of your unique component configuration; patch levels, and customizations, ensuring that the information is available globally to all IFS support centres. Therefore it has become the huge network of all the information required to solve the customer issues without any unnecessary delays. Within the huge IFS network, office in Sri Lanka has a major importance, as it is one of the two IFS R D centres in world and major part of software development is done there, with having more than 700 employees in two local country offices. The focus group for the study is mainly taken from Sri Lankan offices and depending on the opportunities employees from the other locations were involved in the study. 1.2.1 Financial Highlights Based on the IFS Annual report 2008, it illustrate that the company is having growth in every section. Mid 2008, IFS has announced long-term financial targets entailing that, in the next five years, product revenue will double through organic growth and acquisitions, the operating margin will increase to15 percent, the dividend will rise to 50 percent of earnings after tax and surplus liquidity will be used to repurchase shares. Furthermore, report says that IFS has signed 10 largest license agreements during the year had an aggregate value of SKr 141 million where as the corresponding for 2007 was SKr 103 million. A total of 20 license agreements valued at more than US$ 0.5 million each were signed. And In all, 215 (177 in 2007) new customers were added, and 760 (778 in 2007) customers either upgraded or expanded their existing solutions. Annual Net Revenue Annual Earnings Before Interest Tax (EBIT) Value Net Debt In order to summarize the success I have extracted the above three from the report which explains the key factors of companys growth. Net revenue (: 7) amounted to SKr 2,518 million (2,356 in 2007), an increase of 7 percent, which is the highest revenue the company achieved per year for the last 4 years. EBIT (Earnings before Interest Tax) value turns out to be Skr, million 154, which is a great turn over compared to the value, SKr million -128 in 2004. Furthermore, as the : 9 shows, IFS have succeeded in diminishing their debts. They have being able to reduce the debts from Skr, million 363 to Skr, million 3, which is a sole evidence for the success of the company. Variation of Total Assets Number of employees While concerned of their financial growth, IFS seems dedicated to the expansion of the company. From 2004 to 2008, their asset, as well as number of employees has increased continuously in a similar rate. 1.3 Significance of the research Success and development of any company is depends on the level of human resource involvement. Therefore it is most important to maintain motivated and satisfied workforce to obtain the very best results of its investment. Skill development, employer employee relationship, grade pay structure employee benefits are some of the key factor which directly related with the motivation of the work force. Purpose of study is to find out how well the importances of above factors are absorbed in the Sri Lankan IT sector; within IFS Sri Lanka Ltd. The research will try to extract the information related to the specific factors and analyze them with the every aspect of the companys performances. 1.4 Structure of the Research work With having the text divided in to the several sections, the dissertation starts with an introduction, which provides the basic understanding of HRM and its functions. It concludes with an overview of the whole thesis including the information helpful for the reader to understand the topic and related facts, we are going to discuss about. The next section is the literature review, which explains relevant theories that will help to support the topic and it is followed by the research methodology which explains the research approach, and how the aims and objectives are planned to achieved. Moreover it, clearly explain the methods that used to collect the relevant data and explained the reasons why there are chosen. The result section provides the actual results I have obtained, carrying out the research, and within the analysis section, it exploits the information gathered, and structured a comprehensive analysis. Conclusion and Recommendation sections conclude the research with interp reting the gathered data and results obtained in Analysis section, along with the aims and objectives discussed at the beginning and provide the necessary recommendations based on the live facts and exhibit the virtue of the research. 1.5 Limitations of research The main limitation of this research is getting the access to the employees within the selected company. The results would be much meaningful if the researcher is succeeded in involving many individuals as possible. Therefore it would be a greater challenge to formalize an easy and simple method to acquire the relevant information from the employees, to make sure that they dont feel it as an extra burden. Time can be considered as the other major issue since I have to formalize the whole process with in a very short time period and to make sure it has grasp many individuals as possible. CHAPTER 2 LITERATURE REVIEW Job Satisfaction Job satisfaction is one of the most important aspects related to the employee management as it is directly related to the performance of an organization. Because of humans tends to listen to the feelings deep in their thoughts, its not enough to full fill every other things, if the employee is not satisfied with what he/she does. Job satisfaction is not same as the motivation but it linked. Job design is aimed to enhance job satisfaction and performance by using different design methods such as Job rotation, job enlargement, job enrichment etc. Job satisfaction can be viewed as â€Å"a pleasurable or positive emotional state resulting from the appraisal of ones job experience† (Lock 1976). When someone is satisfied with his/her job that is job satisfaction, or when any job is fulfilled ones expectation that is job satisfaction. Job satisfaction mainly considers the attitudes and feelings that people have about the work. The Guion (1958) defines morale as ‘the extent to which an individuals needs are satisfied and the extent to which the individual perceives that satisfaction as stemming from his total work situation. However there are some features of job satisfaction identified by Paul Spectors (1985) such as, Pay- amount and fairness or equity of salary, Promotion-opportunities and fairness of promotion, Supervision-fairness and competence at managerial tasks by ones supervisor, Benefits- insurance, vacation, and fringe benefits, Contingent procedures-sense of respect, recognition and appreciation. According to While Luthan (1998) there are three important views to job satisfaction; Job satisfaction is an emotional thing related to a job that cannot measure. It is determined by how well outcome is achieved or exceeds expectations It shows some attitudes which can be used to identify how employees think about their job and how they achieve their targets. The factors that affect the job satisfaction of an employee can be divided in to three main areas; Internal factors External factors Individual factors Internal, external and individual factors which affect to the job satisfaction are listed in the table. Internal factors are the factors that linked to work but those are not the only factors affecting job satisfaction. External factors are related to work or to the working environment and individual factors mainly consider a person and the persons family and network of friends. Job satisfaction factors Description Internal Factors  · Job variety Number of skills and depth of knowledge required to do the job  · Autonomy The freedom that the employee get to control their own work  · Goal determination The freedom that the employees get to set their own targets and the criteria to achieve those targets  · Feedback and recognition The private and public comments that they achieve for their performance External Factors  · Achievement The persons success on their job. The trainings, improved equipments, proper education may be the way to increase the achievement and the job satisfaction.  · Role ambiguity and role conflicts Knowing the position of the work place, responsibilities and agreement between roles. Clarifying the tasks in the job, and the position in the organization. When reduce role ambiguity it lead to job satisfaction  · Opportunity The opportunities with the current and the other employers. If employees feel they have fewer opportunities in the current position, then job satisfaction decrease.  · Job security The assurance that employees get to their job  · Social interaction The way they deal with the others. The quality and the quantity of the interaction.  · Supervision Herzberg explain this as a hygiene factor. The quality of management is affect to the job satisfaction. If the quality is lower, worker can become dissatisfied.  · Organizational culture Culture and management style can increase/decrease job satisfaction.  · Work schedules Match between work schedule and the employees schedule. Flexitime may increase the job satisfaction by allowing employee to interface between work life and personal life  · Seniority The time duration that a person has held a position. When people are respect to the seniority, it will increase job satisfaction  · Compensation The rewards and the role of money Individual Factors  · Commitment This is the dedication that a person is doing to his/her job. If the actions of researching, selecting and the way he/she doing the job is visible to friends and others, then the person is satisfied.  · Expectations Every person has some expectation. Basically what people expect in return for work.  · Job involvement How important a job in someones life. More the person involved more satisfaction.  · Effort / reward ratio This is the balance between the amount they worked and rewards received  · Comparisons How a person can rate the job with someone else jobs. If a person has a good job compared to others they are satisfied.  · Age How old someone, the people who old have more work experience, they understand what are the best thing to do, but sometimes they cannot satisfy with their job. Younger people have no previous experience which to compare with the current job. So they are satisfied. Table 1 There are two main theories of job satisfaction, Variance theory and the model of job characteristics. According to Hackman and Oldham (1975) the variance theory explains that if you want X from your work then you are satisfied to the extent that it provides you with X. The second model explains the causes of job satisfaction are objective characteristics. When the employees are satisfied with their work they tend to work more, they are become more committed to the organization, and they are more productive than previous, they try to achieve their targets in a better way. (Bravendam Research Incorporated, 2002). However job satisfaction association with organizational commitment that was not mentioned in most of the studies was noted by Elangovan (2001). A negative association between the job satisfaction, stress and commitment was indicated in his study. According to his study, higher stress leads to lower job satisfaction and this in turn results in lower commitment. Petty et al, ( 1984) explains that there are three possible links between performance and job satisfaction. 1. Satisfaction generates performance 2. Performance generates satisfaction 3. Satisfaction and performance link indirectly 1. Satisfaction generates performance When designing the job it should aim to produce job satisfaction. Then it will optimize worker performance. 2. Performance generates satisfaction When a person perform well that achievement generates job satisfaction. He/ she feel to do more for their job. So the effort should be made to improve performance then it will increase job satisfaction. 3. Satisfaction and performance link indirectly These two are linked but under certain conditions. Apart from the above theories, there are successful studies proving the importance and impact of maintaining a satisfied workforce. The analysis by Vroom (1964) covered 20 studies, in each of which one or measures of job satisfaction or employee attitudes were correlated with one or more criteria of performance. Low salaries, lack of status and social security affect the motivation. When the motivation is low, job satisfaction is low. Lack of job satisfaction is a sign of turnover in an organization. The salaries and benefits which employees can achieve are related to job satisfaction. Motivation â€Å"Management is nothing more than motivating other people†, is one of the most popular proven principle followed within any kind of organization. Motivation is concerned with the strength and direction of behaviour and the factors that influence individuals to behave in certain ways. Individuals are motivated to perform in a specific method based on their perception of the situation. Motivation primarily concerned with what energizes human behaviour, what direct or channels such behaviour, how this behaviour is maintained. Motivation concerns energy, persistence and direction. According to Arnold et al (1991) there are three components of motivation, 1. Direction -what a person is trying to do 2. Effort how hard a person is trying 3. Persistence how long a person keeps on trying According to the diagram felt need creates tension for people. Tensions motivate people to avoid it. The environment will influence to shape people needs and expectations influence the effort. Management can influence employees expectations in a different ways, by offering incentives and setting them specific goals. The persons effort and results can influence the level of performance. The rewards / outcomes are the results achieved. Outcome can come from internal / external environment. Outcomes are always not positive; it can be negative as well. If it is negative, they tend to result in employee dissatisfaction / de motivation. There are number of motivation theories which are complementary to one another. The content models in motivation mainly focus on the needs that individuals are trying to satisfy in a situation. The process models focus on how managers can change the situation in a better way to tie satisfaction to performance. Reinforcement theory is as developed by Hull (1951) suggests that successes, in achieving goals and rewards act as positive incentives and reinforce the successful behaviour, which is repeated the next time a similar need emerges which is coincided with the theory by Taylor (1911), who wrote: â€Å"It is impossible, through any longer period of time, to get workmen to work much harder than the average men around them unless they are assured a large and permanent increase in their pay†. In this theory there are four principal techniques available, 1. Positive reinforcement If someone encourages the people when they done something they are utilising positive reinforcement. 2. Escape/avoidance reinforcement (Negative Reinforcement) This is a form of a reinforcement. It increases the behaviour of a person by taking away something bad. The negative reinforcement is not same as punishment. It is not a form of a punishment. 3. Extinction (repeated non reinforcement) Elimination of behaviour 4. Punishment Most of the people are not expected to take this kind of an experience. The main idea of punishment is to withhold rewards. Motivation is only likely when a clearly perceived and usable relationship exists between performance and outcome, and the outcome is seen as a means of satisfying needs. This theory was developed by Porter and Lawler (1968) in to a model that follows Vrooms ideas by suggesting that there are two factors determining the effort people put in to their jobs. First the value of the rewards to individuals that they satisfy their needs for security, social esteem, autonomy and self actualization, and the second is that rewards depend on effort, as perceived by individuals. According to Latham and Locke (1979) motivation and performance are higher when individuals are set specific goals, when goals are difficult but accepted, and when there is feedback on performance. Abraham Maslow developed the Hierarchy of needs model in 1940s and still it valid today to understand motivation, management training and personal development. This model explains the responsibility of employers to provide the work place environment which is encourages employees to fulfill their requirements. At the same time he explains needs are interrelated with some other needs that are less understood. Those are, Knowledge needs, understanding needs and aesthetic needs. The relationship of Maslows other needs The need for knowledge is defined as the desire to build up facts and s. The need for understanding is an extension of the need for knowledge. This involves search for the relationships between things and what they know and it includes the search for meaning. The aesthetic needs are the beautiful things need to be surrounded. According to Maslow all these need

The Baroque in Italy and Spain Essay -- Essays Papers

The Baroque in Italy and Spain The period called â€Å"Baroque† cannot easily be classified. The work that distinguishes this period is stylistically complex and even contradictory. While Baroque was born in Rome during the final years of the sixteenth century, it was not specifically Italian. Nor was it confined to religious art. While Baroque did have ties to the Counter-Reformation, it quickly entered the Protestant North where it was applied primarily to secular subjects. It would also be difficult to claim that Baroque is â€Å"the style of absolutism,† because Baroque flourished in the bourgeois Holland no less than in the absolutist monarchies. Nor do we see the turbulent history of the era reflected in Baroque art. While the seventeenth century was one of almost continuous warfare, these wars had practically no effect on Baroque imagery. It is equally difficult to relate Baroque art to the science and philosophy of the period. While a direct link did exist in the Early and High Renaissance, w hen an artist could also be a humanist and scientist, this changed in the seventeenth century. During this time, scientific and philosophical thought became too complex, abstract, and systematic for the artists to share. Still, there is a subtle but an important relationship between Baroque art and science. The complex metaphysics of the humanists, which gave everything religious, meaning, was replaced by a new physics. Human awareness of the world was continuously expanding and the cosmology of such men as Copernicus, Kepler, and Galileo broke the ties between sensory perception and science. By placing the sun, not the earth at the center of the universe, it contradicted what our eyes told us: that the sun revolves around the earth. The world... ...r more subtle. Velazquez explored the optical qualities of light more fully than any other painter of his time. Francisco de Zurbarà ¡n (1598-1664) stands out among the painters of Seville for his quiet intensity. Zurbarà ¡n worked almost exclusively for monastic orders and his most impressive baroque compositions are deeply moving for their direct and realistic approach to religious subject matter. The work of Bartolome Esteban Murillo (1617-1682) is the most cosmopolitan, as well as accessible, of any Spanish Baroque artist. His â€Å"Virgin and Child† (1675-1680) unites the influence of the Northern artists and Italians in an image that nevertheless retains an unmistakably Spanish character. Religion, politics, and philosophy all played a part in Baroque art. This interplay of passion, intellect, and spirituality make it one of the most compelling periods of Western art.

Tzar Nicholas II - Downfall of Russia :: Russian Russia History

Tzar Nicholas II - Downfall of Russia It was Tzar Nicholas 2 political naivete and extreme obstinance that led to the downfall of the Russia Certain aspects of Tsar Nicholas 2's behaviour definitely contributed to bringing about the fall of the Russian Empire, however most of these qualities were not weaknesses in character as such, they were qualities we would associate with poor leadership. When we say 'weakness in character' we mean being easily influenced/controlled by others. Nicholas himself was a firm believer in autocracy; he was virtually unmovable in this belief. And this obstinant belief clearly illustrates he stuck to his beliefs, although in his early years as tsar his uncles had huge influence. That said, the fall of the Russian Empire was not all a result of Nicholas' character and poor leadership qualities, we must also see that the huge socio-economic changes happening as well as the outbreak WW1 hugely influenced the coming about of and the timing of the revolution. These changes would be hard for any government to manage. Nicholas 2's firm and obstinant belief of his commitment to autocracy can be clearly seen in a letter of reply he sent to a liberal zemstvo head before his coronation. "I shall maintain the principal of autocracy just as firmly and unflinchingly as it was preserved by my unforgettable dead father (Alexandra 3)"(Nicholas & Alexandra, Robert K. Massie). His ultra-conservative political outlook was influenced greatly when a child Tsar Nicholas was educated by the reactionary tutor Konstantin Pobenonstev, enemy of all reform. If there were any doubts about Nicholas' belief in autocracy they would have been put to rest. Pobenonstev was once called "The Highest Priest of Social Stagnation". He once declared, "Among the falsest of political principles is the principle of sovereignty of the people". In his early manhood Nicholas lived the life of an idle socialite uninterested in the affairs of state, he found government meetings 'boring' and uninteresting. As he had never taken a liking to political affairs he was underprepared to take the throne, this fact along -with his stubborn belief in autocracy- also goes a long way to explain his political naivete in many of the difficult situations he faced. Was this unwillingness to face the political realities due to him being blinded be his obstinate belief in autocracy or was it just that he was politically naà ¯ve? Throughout his rule as discontent rose Nicholas still believed that he still had the support of all his people save for a couple of 'undesirables'.

Physical and Chemical Properties Essay

Did you observer any chemical changes in this experiment? Yes What evidence did you use to decide that something was a chemical change? I observed during the application of the hydrochloric acid to some of the substances bubbling, and smoking Give at least two examples of chemical changes you observed. Green changed from blue to application of HCL to Mg smoking and bubbling and CuCO3 Classify the following properties of sodium metal as physical or chemical: †¢ Silver metallic color: Physical †¢ Turns gray in air: Chemical †¢ Melts at 98oC: Physical †¢ Reacts explosively with chlorine gas: Chemical Classify the following changes as physical or chemical: †¢ Water freezes at 0oC: Physical †¢ Baking soda when combined with vinegar produces bubbles: Chemical †¢ Mothballs gradually disappear at room temperature: Physical †¢ Ice cubes in a freezer get smaller with time: Physical †¢ Baking soda loses mass as it is heated: Chemical †¢ Tarnishing of silver: Chemical How would you show that dissolving table salt is a physical change? Because the salt doesn’t change to something else, it stays salt. Boil the water and the salt will still be there, not something else. Cleanup: Mix the leftover sodium hydroxide and hydrochloric acid in your beaker. This will neutralize them. Now, pour them down the drain with lots of water. Place the small amount of solid chemicals left (if any) in a small plastic bag and put it in the trash. After the burner fuel has completely cooled, screw the cap on tightly and store it in your LabPaq.

Globalization & Gender Inequality Essay

News reports suggest that economic giants from third world Asia namely China and India are expected to grow at the rate of 9. 7 and 6. 5 percent respectively. The GDP growth rate of these nations is much higher than that of any developed nation and hence are the two fastest growing economy of the world. China has now become the factory of the world with large multinational companies infusing lots of money in establishing manufacturing units and India is now one of the major destinations for back office jobs and is the leading service sector economy. The process which has got its roots right from the beginning of 20th century with the beginning of economic cooperation between Europe and the United States later became synonymous with the word development in Far East Asian Countries including the ASEAN (The World Bank Group, 2000). But still this globalization has yet to make this world a better place to live. The concern related to the globalization process is the growth which is visible is actually more of mathematical in nature than the real cumulative growth. It might be taking place at the cost those who are less privileged (Kumar, 2007). The purpose of this paper is look into the existence of gender inequality in the current scenario where globalization has made the whole world a village with each country having its own identity and purpose in this world. Exchange of information and knowledge is perhaps the simplest in the history of mankind with details of culture of one state can easily be gathered for study, research as well as adoption. But when the matter of gender equality comes into picture then the globalization has miserably failed in making its impact. Developed nations as we all know have made great advancements in implementing the concept of gender equality while the other developing and under-developed nations have miserably failed. As a whole in the developing nations including the Middle East region, globalization has brought great increase in country’s GDP but social structure of these nations have been far from with atrocities against women are almost similar prevalent in early 20th century (Ramji, 1997). Literature Review The economic growth produced and as defined in above paragraphs has yielded results more in terms of mathematical or statistical in nature. The definition of this economic growth in terms of increases in national income has actually undermines women and its contribution to the society. Various activities which are not directly related to economic nature are not being made a part of the national accounting system. Areas of work such as mothering or child-rearing and housework, socially constructed for women, are not included as work when national growth and GDP is being calculated. The UNDP Human Development Report 1996 has concluded that the much propagated economic growth and its expansion since 1980 recent decades show all too clearly that there is no actual relation between economic growth and human development especially females. The concept of Human Development Index (HDI) has been defined in order to calculate the average of the achievements a country undertakes when human capabilities are taken as the variable to measure. The term is being sub varied with smaller variables which includes life expectancy at birth, adult literacy rate, and real gross domestic product per capita i. e. , the PCI which comes into picture when we consider GDP as one of the variable rather the most important variable (Ramji, 1997). The human society has been given a broad view including both men and women while calculating the development of the society as a whole and its multi sided presence. The actual calculation of improvement on domestic front is being measured in terms improvement in human well-being taken along with economic growth targets. Feminist have been known to follow Walter Rodney’s definition of development in which an individual and his capability is given a level crafted out comparison with some standard value. The capability and its improvement imply the very increased skills and capacities enabling greater freedom over creativity coming out of self-discipline though responsibility and material well-being. The definition go on emphasizing on the features that holds true in sense of moral categories and its evaluation over a nation depending on the class in terms of social origin, personal code for the classification of what is right and what is wrong and age in which one lives. At the level of a community, sustainable human development is defined in terms of the development that gives priority to the poor, enlarging their choices and opportunities and providing for their participation in decisions that affects their lives. This development is pro-people, pro-nature, pro-employment, and pro-women and not only generates economic growth but also distributes its benefits equitably thereby regenerating the cohesive environment which empowers people. But here the ambiguity comes along with segregated approach towards women which is more gender gapped approach with facilitators enabling sustainable development programs that gives high priority to the poor with assumption being that the state of poverty is quite natural and any solution to achieve 100% poverty eradication is unrealistic. But the Human Development Report (1995, p4) has provided the feministic approach to poverty which suggest that almost 70% of total poor are actually women. The definition as of now used to consider poor as a whole but the reality across. But the reality talks of poverty among women are along with different parameter. It presents a very different picture and even in well to do families the condition of women is not good. In the paper by Vincent J. Bolt and Kate Bird, lack of resources and asymmetrical power relations often result in the discrimination of resources of the intra-household resources which include food, health care and education (13). Even if the females manage to earn some money, their income is being considered as the household income and again they have face discrimination when it is being distributed (Bolt, 14). Poverty and lack of education has prevented any possible social renaissance. The birth of a male child is still considered as very important phenomena. This sometimes led to the birth of a number of girls when parents go on giving birth to babies till the birth of a male child. With already poor household and lots of mouth to feed and a male child, the female members are forced to sacrifice their share in every possible resource sharing (Bolt, 20). The Helsinki Process in its report has stated that families suffering with persistent poverty and hunger are more prone to disease and violence especially domestic violence (11). The report also states that these people perform badly on health index too. They are in continuous chain of disease, conflict and with poverty contributing a lot to epidemics of infection with all access to health care being blocked (Helsinki Process, 15). So it’s not a surprise if world wide more than 500,000 women die annually in pregnancy with 99% being a part of developing but poor countries (Helsinki Process, 15). A family is always talked of being a unit of social system but in some part of western world and almost whole of Asia and Africa, the life of women and children is miserable because of conditions in the family itself. There have been some cases that family is rich. The male part comprising of father and son are financially sound but females’ condition is not just bad rather it is miserable. The family is seldom a unit. Distribution of resources is rarely equal. Females are given less food. All this leads to a condition where women are poor while their husbands or brothers or sons are not. But this is not the end of all sorts of oppressions. The newly searched form of household abuse is men afflicting their wife with HIV/AIDS virus. In most of the poor families, males migrate to cities in search of work and money. They get themselves affected with virus because of unprotected sex. And when they return they finally transmit it to their wives. Due to this, number of innocent sufferers of this deadly virus is on increase with potential high enough to cause an epidemic (Jacobson, 41). Poverty and continuous domestic violence has its effect not only on current generations but also on next generation because of children being regularly exposed to violent behavior. This actually opens a cycle of oppression and aggression with those children becoming more volatile and aggressive. Their chances of economic and academic successes get diminished to another low and will become another source of family and household abuse (Bloom, 16). Conclusion So technically there exist two causes of women’s poverty: the first one is absolute poverty while the second one is subordination within the family. When Globalization is talked about then with relevance to the women and men, it is basically a process presented in terms of economic and political paradigm through wide range of variables namely finance, investment, production and marketing that are being dominated by visionary banks and firms with actions spread across national borders and interests. But the thing globalization in terms of poor only presents another way of capitalism and monetary dominance with profiteering over cheap labor and atrocities of poor. Extending the same when looked upon with women in view gives a more grim view. The males have been found to usurp the decision making control irrespective of the family ((Ramji, 1997). condition. The Middle East region and other South Asian regions are very much prone to these social problems. Males have been found to try their best to prevent all sorts of help and any attempt of abused to attain economic independence. These males are poor and are thrashed all over their lives initially during childhood and now by their employers. Their level of frustration is extremely high which finally lead to their wives and children who are now at the receiving end of their frustration. They are alcohol abused and finally abuse their family members (Bloom, 13). Wife beating is a regular feature in those families. These people are very much prone to high risk sex and they finally transmit all this to their wives (Bloom, 23). The wives have more in their life left. They can only hope some thing better in next life only. With most of these cases being a part of developing nations and war torn ones, the chances of getting justice is the least. They are abused on every possible ground and may become mentally unstable with effect being faced by the child they have born. Bibliography Bloom, Sandra L. , â€Å"The PVS Disaster: Poverty, Violence and Substance Abuse in the Lives of Women and Children†. September 2002. A Review of the Recent Literature Women’s Law Project, 2002 . â€Å"Empowering People at Risk: Human Security Priorities for the 21st Century†. Helsinki Process. Robinson, M. , â€Å"Advancing the Human Development Agenda: A Shared Responsibility†, January, 2005. Third Forum on Human Development Cultural Identity, Democracy and Global Equity, Paris. â€Å"Poverty and Violence†. Bolt, Vincent J. & Bird, Kate. â€Å"The Intrahousehold Disadvantages Framework: A Framework for the Analysis of Intra-household Difference and Inequality†, July 2003. Chronic Poverty Research Centre. Kumar, A. (2007). Does Foreign Direct Investment Help Emerging Economies? Insights from the Federal Reserve Bank of Dallas, vol. 2, no. 1 â€Å"Security on Whose terms? If Men and Women are equal†. Kevinna Till Kevinna Foundation. â€Å"The NSDUH Report: Youth Violence and illicit Drug Abuse†, 2006, National Survey on Drug Use and Health â€Å"Surviving Violence and Poverty: A Focus on the Link between Domestic and Sexual Violence, Women’s Poverty and Welfare† 2002. Now Legal and Education Fund Ramji, S. (1997) Globalization and Gender Inequality, Simon Fraser University, Burnaby, British Columbia, Canada V5A 1S6 The World Bank Group (2000), Assessing Globalization, Economic Policy Group and Development Economics Group

Inventions That Affected the World Essay

Our world has experienced many changes within the last century. New inventions are made every month, and one of the most influential changes is the invention of the cellphone. The cellphone has completely changed the way we communicate, as well as the speed, convenience, and quality of our communication. Technology has made such an impact on society that most people won’t leave home without their cellphones. Also computers became human’s best friend. This is why one of the most life changing pieces of technology for many people has been the smartphone, an all-in-one, portable device that combines the functions of a cell phone with the functions of a computer. But how was life before this technology even existed? Back in the past, communicating with people was hard, especially with long distance. Letters were the only option to let someone know about something. But after the phone was invented, contacting people got much easier than before, even though, not everyone owned a phone. Computers were the other device that was invented, it was and still used in almost every concern. Then Internet invention had to step in and make life much easier. With Internet, people made electronic mails, which was another way to communicate with others. But to own all these things was very pricey back then, and to have them with you anywhere you go was not possible. So to do a specific thing, you had to use a specific device. To reach someone immediately, you had to use the phone that was wired-up and the recipient had to be close to his wired-up phone as well. To go to a specific location, you had to ask people that are familiar with the area you are going to. To send an email, you had to do it through the Internet from a computer. To remind yourself of a meeting something, you had to keep sticking little notes on your fridge door. To take a picture, you obviously needed a camera, and to send it to somebody, you had to use the mail and that would take couple days for the receiver to see it. To calculate an amount, you needed a calculator or you had to be good at math. To check next day’s weather you had wait till after the news on TV. To listen to your favorite music you had to buy a cassette or a CD and then go play it in your home stereo†¦ But after the smartphone was invented couple years ago, the race of human beings found everything to be easy. We can literally do anything with it, and with all the applications available we can even do more than we ever thought in just couple seconds. From calling someone to buying an airline ticket, it’s all available with a portable device that stays in your pocket. However, in my opinion the smartphone is the one of the best inventions ever made. I would highly recommend this gadget to anyone in this planet, because with it, we are never lost, never bored or wasting time, and always with an answer.

Demutualization of Stock Exchanges

DEMUTUALIZATION OF STOCK EXCHANGES PROBLEMS, SOLUTIONS AND CASE STUDIES Edited by SHAMSHAD AKHTAR Director, Governance, Finance and Trade Division, East and Central Asia Department, Asian Development Bank  © Asian Development Bank 2002 All rights reserved. The views expressed in this book are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank, or its Board of Governors or the governments they represent. The Asian Development Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequences for their use.Use of the term â€Å"country† does not imply any judgment by the authors or the Asian Development Bank as to the legal or other status of any territorial entity. ISBN 971-561-475-2 Publication Stock No. 100602 Published and printed by the Asian Development Bank P Box 789, 0980 Manila, Philippines . O. CONTENTS Foreword Principal Authors Abbreviations xiii xv x xi PART I : ISSUES INVOLVED IN STOCK EXCHANGE DEMUTUALIZATION 1 Demutualization of Asian Stock Exchanges— Critical Issues and Challenges by Shamshad Akhtar 1. 1 1. 2 1. 3 1. 4 1. 5 1. 6 1. 7 1. Introduction Demutualization: Its Definition, Size and Significance Motivation and Driving Factors for Demutualization From Mutuality to Demutualization of Exchange Benefits of Demutualization of Exchanges Regulatory Oversight: Challenges and Responses for Demutualized Exchange Financial Viability of Demutualized Exchange Conclusion 3 3 4 5 8 12 19 25 29 2 2. 1 2. 2 2. 3 2. 4 2. 5 2. 6 Background Information on Demutualization by Pamela S. Hughes Introduction What Demutualization Means The Reasons to Demutualize The Models An Update Since Demutualization Conclusion 33 33 33 36 40 43 47Demutualization of Stock Exchanges—Problems, Solutions and Case Studies APPENDIX 1 : The Models 48 3 Motivations, Mechanics and Models for Exchange Demutualizations in the United States by Roberta S. Karmel 3. 1 3. 2 3. 3 3. 4 Overview Reasons for Demutualization How Demutualization is Accomplished Post-Demutualization Models 59 59 61 65 70 4 The Structure of a Demutualized Exchange— The Critical Issues by David Holthouse 4. 1 4. 2 4. 3 4. 4 4. 5 4. 6 4. 7 Introduction Ownership Corporate Governance Access Rights Risk Management Financial Management Conclusion 73 73 73 77 80 81 82 83 Demutualization of Exchanges— The Conflicts of Interest (Hong Kong) by William Pearson 5. 1 5. 2 5. 3 5. 4 5. 5 5. 6 5. 7 Structure of Exchanges Regulatory Role and Self-Regulation Public Policy Objectives of Stock Market Regulation Why Should Demutualization Require a Reassessment of SRO Functions? What Responses are Being Developed to Deal with These Problems? Conclusion Hong Kong’s Framework: Listing of HKEx and the Framework for Dealing with Conflicts of Interest 85 85 88 91 92 95 99 100 iv Contents APPENDIX : Hong Kong Exchanges and Clearing Limited: Reinforcing Hong Kon g’s Position as a Global Financial Centre—A Policy Paper 2 : Memorandum of Understanding for the Listing of HKEx on SEHK 3 : Section 13 of the Exchanges and Clearing Houses (Merger) Ordinance 4 : Chapter 38 of the Rules Governing the Listing of Securities on the Stock Exchanges of Hong Kong Limited 5 : Procedures to Deal with Conflicts of Interest 105 114 131 APPENDIX APPENDIX APPENDIX 133 138 APPENDIX 6 Demutualization of Exchanges—The Conflicts of Interest (An Australian Perspective) by David Holthouse 6. 6. 2 6. 3 6. 4 6. 5 6. 6 6. 7 6. 8 6. 9 Introduction Background to Conflicts An Exchange’s Listing Regulation of Other Listings Supervision of Intermediaries Profit Motive versus Supervisory Function Public Interest versus the Exchange’s Commercial Interest New Business Lines Conclusion 145 145 146 148 149 149 150 152 153 154 7 Demutualization of Exchanges—The Conflicts of Interest (The Australian Regulator’s Experience) by Claire Grose 7. 1 7. 2 7. 3 Introduction Self-Listing Other Conflicts 157 157 157 160 vDemutualization of Stock Exchanges—Problems, Solutions and Case Studies 8 8. 1 8. 2 8. 3 Regulation of a Demutualized Exchange (Canada) by Pamela S. Hughes Introduction Role of an Exchange Self-Regulation and Government Oversight SRO Conflicts of Interest Supervision of Listings Self-Listing Managing Conflicts of Interest Prudential Regulation Shareholders Directors and Officers Memoranda of Understanding Conclusion 163 163 165 165 169 171 171 172 172 173 175 175 176 8. 4. 8. 5 8. 6 8. 7 8. 8 8. 9 8. 10 8. 11 8. 12 9 9. 1 9. 2 9. 3 9. 4Regulation of a Demutualized Exchange (Singapore) by Lee Boon Ngiap Background Regulatory Issues Arising from Demutualization The Regulatory Relationship between the Monetary Authority of Singapore and Stock Exchange of Singapore Conclusion 177 177 178 179 183 10 Regulation of a Demutualized Derivatives Exchange (United States) by Natalie A. Markman 185 185 186 190 192 195 Introduction A New Framework Exchange Oversight Regulatory Issues Raised by Demutualization Conclusion 10. 1 10. 2 10. 3 10. 4 10. 5 vi Contents APPENDIX APPENDIX APPENDIX : Designated Contract Markets for Regulated US Derivatives Exchanges 2 : Registered Derivatives Transaction Execution Facilities 3 : The CFTC Market Surveillance Program 196 202 205 11 Regulation of Demutualized Exchanges (Australia) by Claire Grose 213 213 214 214 215 215 217 Legislative Framework Australian Securities and Investment Commission’s (ASIC) Powers Supervision by Market Operators Memoranda of Understanding (MOUs) Changes Due to Demutualization New Legislation 11. 1 11. 2 11. 3 11. 4 11. 5 11. 6 PART II: DEMUTUALIZATION CASE STUDIES 2 Australian Stock Exchange—The Conversion to a Demutualized Exchange: ASX’s Experience by David Holthouse 12. 1 12. 2 12. 3 12. 4 12. 5 12. 6 12. 7 12. 8 12. 9 Introduction Background to Australian Stock Exchange’s Demutualization Obtain ing Member Approval Mechanism Used for Conversion Changes to the Corporations Law The Demutualization Process Memorandum of Understanding (MOU) with ASIC Demutualization and Listing Outcomes Subsequent Supervisory Development: ASX Supervisory Review Pty Limited 221 221 222 223 224 225 226 228 229 230 ii Demutualization of Stock Exchanges—Problems, Solutions and Case Studies 12. 10 Changes in ASX’s Focus and Activities 12. 11 Conclusion 231 233 13 Hong Kong Exchanges and Clearing Limited— Demutualization, Merger and Listing: The Hong Kong Exchanges’ Experience by Lawrence Fok 235 235 236 238 239 242 246 Introduction Pre-Merger Period: Two Exchanges and Three Clearing Houses Merger and Proposal Reasons For the Merger Market Reform Conclusion 13. 1 13. 2 13. 3 13. 4 13. 5 13. 6 14Hong Kong Securities and Futures Commission— The Conversion to a Demutualized Exchange: The Hong Kong Regulator’s Experience by William Pearson 247 247 250 255 258 258 The Need for Reform The Reform Process Rationalized Market Regulation Implementing Legislation: Exchanges and Clearing Houses (Merger) Ordinance Key Issues Arising from Hong Kong’s Experience with Demutualization 1 : Summary of the Exchanges and Clearing Houses (Merger) Ordinance 14. 1 14. 2 14. 3 14. 4 14. 5 APPENDIX 261 15Singapore Stock Exchange—Demutualization and Listing of the Singapore Exchange Limited by Alan Shaw 265 265 Introduction 15. 1 viii Contents 15. 2 15. 3 15. 4 15. 5 15. 6 15. 7 15. 8 15. 9 Drivers for Change: The Rationale for Demutualization and Merger Impact of Demutualization The Merger Act The Process of Demutualization The Singapore Exchange’s Initial Public Offer The Structure of Singapore Exchange The Governance of Singapore Exchange Listing and Conflict of Interest 265 267 269 270 271 272 274 276 279 281 5. 10 Conclusion APPENDIX 1: Procedures to Deal with Conflicts of Interest 16 Toronto Stock Exchange—From Toronto Stock Exch ange to TSE Inc. : Toronto’s Experience with Demutualization by Timothy Baikie 283 283 283 286 291 292 296 298 298 Introduction An Overview of the Toronto Stock Exchange (TSE) The Development of Mutual Exchanges Consolidation, Globalization and New Competition The Demutualization Decision Market Regulation by a Demutualized Exchange Next Steps Conclusion 16. 1 16. 2 16. 16. 4 16. 5 16. 6 16. 7 16. 8 17 Demutualization of the Philippine Stock Exchange by Maria Larrie Alinsunurin 299 299 300 300 301 304 307 Introduction Ownership Structure of the Stock Exchange Upon Demutualization Trading Rights Corporate Governance Business of the Exchange Statutory Regulatory Role 17. 1 17. 2 17. 3 17. 4 17. 5 17. 6 ix Demutualization of Stock Exchanges—Problems, Solutions and Case Studies PART III: STRUCTURE OF MUTUAL EXCHANGES 18 The Colombo Stock Exchange (Sri Lanka) y Rajeeva Bandaranaike 18. 1 18. 2 18. 3 18. 4 18. 5 18. 6 18. 7 18. 8 18. 9 Ownership Structure Listing Data Corpor ate Governance Business of the Exchange The Vision, Mission and Corporate Strategy Trading Rights Regulatory Framework Self-Regulation Statutory Regulatory Role 313 313 314 314 315 316 317 317 317 319 320 321 321 18. 10 Investor Protection 18. 11 Funding of the Colombo Stock Exchange 18. 12 Stock Exchange Seeks to Demutualize 19 The Kuala Lumpur Stock Exchange (Malaysia) y Securities Commission (Malaysia) 323 323 323 324 324 325 326 327 329 329 Introduction Ownership Structure of the KLSE Listing Data Corporate Governance Business of the Exchange Trading Rights Risk Management and Supervisory Issues Statutory Regulatory Role Stock Exchange Seeking to Demutualize 19. 1 19. 2 19. 3 19. 4 19. 5 19. 6 19. 7 19. 8 19. 9 x Contents 20 The Shanghai and Shenzen Exchanges: Business Operation, Governance Structure, and Regulatory Function (People’s Republic of China) by Feng Wei 331 331 332 333 335 337 Overview Business Operation Governance Structure Regulatory Function Outlook on Demu tualization 0. 1 20. 2 20. 3 20. 4 20. 5 21 The Taiwan Stock Exchange (Taipei,China) by Wanpo (Mina) Wang 341 341 342 342 343 344 344 347 347 Ownership Structure of Taiwan Stock Exchange Corporation Listing Data Corporate Governance Business of the Exchange Trading Rights Risk Management Statutory Regulatory Role Stock Exchange Seeking to Demutualize 21. 1 21. 2 21. 3 21. 4 21. 5 21. 6 21. 7 21. 8 22 Current Organizational and Regulatory Structure of The Stock Exchange (Thailand) by Klao Sanasen 349 349 352 Thai Capital Market Structure The Stock Exchange of Thailand 2. 1 22. 2 xi Contents FOREWORD Demutualization of a stock exchange is entire process by which a non-profit member-owned mutual organization is transformed into a forprofit shareholder corporation. Exchanges around the world have been demutualizing because of international competition and technological challenges to traditional modes of trading securities. The change of a stock exchange from a member-owned organization to a for-profit shareholder corporation triggers a number of questions about regulatory oversight.When a demutualized exchange is listed on its own board, some regulatory oversight needs to be transferred to a government regulator. In many countries, demutualization of the major national stock exchange has been accompanied by general securities regulatory reform. This book grew out of a conference on Demutualization of Stock Exchanges held in Manila on 13-14 August 2001 organized under the APEC Financial Regulators Training Initiative sponsored by the Asian Development Bank.The conference focused on developing greater understanding of demutualization by discussing the general problems it engenders and how these might be solved, developing common themes and lessons from case studies and also seeing how different countries have evolved different approaches to demutualization. This book is divided into three parts. Part I, consisting of Chapters 1-11, discuss various dimensions and iss ues involved in the process of stock exchange demutualization.Chapters 1-3 give a broad overview of the reasons for demutualization, the critical issues and challenges, the decision-making process relating to demutualization and the possible models stock exchanges may choose, including that of a privately owned for-profit corporation and that of a publicly held company listed on the exchange’s own board. Chapter 4 sets forth the critical issues an exchange and its regulator must confront in connection with the demutualization process from the vantage point of a particular jurisdiction—Australia.Chapters 5-7 discuss the conflicts of interest raised by an exchange’s demutualization and then Chapters 8-11 set forth how regulators in Canada, Singapore, the United States and Australia attempted to deal with some of these conflicts through regulation. Part II of this book is a series of case studies. Chapters 12-17 discuss the demutualization experience in Australia, Hong Kong, Singapore, xiii Demutualization of Stock Exchanges—Problems, Solutions and Case Studies Toronto and the Philippines.Part III of this book provides information about jurisdictions that have not demutualized their exchanges. Chapters 18-22 discuss the Colombo, Kuala Lumpur, Shanghai and Shenzen, Taiwan and Thailand exchanges. Chapters 1-16 were submitted as papers by professionals who presented papers at the conference. Chapters 17-22 were submitted by participants in the conference who were not presenters. This conference was coordinated by the Finance and Industry Division (East) of ADB under the overall guidance and supervision of Ms.Shamshad Akhtar, Director, Governance, Finance and Trade, East and Central Asia Department. Special thanks are due to the various contributors as well as the organizers. The book has been edited by Ms. Akhtar. Ms. Roberta Karmel, Professor of Law at Brooklyn Law School, was engaged to integrate the conference materials and provide edi torial advice. R. Jane Lee, a student at Brooklyn Law School supported the compilation of this book. Mr. Lyle Raquipiso coordinated the publication of this book and Ms. Nancy Bustamante provided administrative support. Geert H.P van der Linden . B. Director General East and Central Asia Department Asian Development Bank xiv Contents PRINCIPAL AUTHORS SHAMSHAD AKHTAR is Director, Governance, Finance and Trade Division of the Asian Development Bank’s (ADB’s) East and Central Asia Department. She oversees ADB’s financial market operations in the People’s Republic of China, Mongolia and the Central Asian Republics, including SME, microfinance and other rural market financial intermediation; governance and private sector assessment work; and trade liberalization and facilitation.Concurrent to holding other portfolio from 1998-2001, she was head of ADB Secretariat for Asia Pacific Economic Cooperation, leading the policy dialogue and preparation of all papers/ documents for this forum, involving interactions with Finance Ministers and Central Bank Governors and their Deputies. Before joining ADB in 1990, she worked as Economist in the World Bank in the 1980’s, and prior to that, in Pakistan’s Planning Agency. She obtained a B. A. in Economics and M. Sc. in Economics from Islamabad, an M. A. n Development Economics from University of Sussex in the United Kingdom (UK), and a Ph. D. in Economics also from UK. She had her post-doctoral fellowship as a Fulbright scholar and was visiting fellow at the Department of Economics, Harvard University in 1987. Ms. Akhtar has presented numerous papers on economics and finance in international conferences. TIMOTHY BAIKIE is Director, Global Market Initiatives at the Toronto Stock Exchange and is responsible for analyzing market structure issues from a broad, strategic standpoint, including the market model for the Global Equity Market (GEM).Previously, he was Special Counsel, Market Regula tion and Director of the Regulatory and Market Policy Division of the Exchange, which is responsible for policy and rule development for the equities and derivatives market. He has spoken at numerous conferences on market regulation, market structure and corporate governance issues and was a member of the Advisory Board for the 1999 Canadian Corporate/Securities Law Moot Court Competition. He received a B. A. from York University (Glendon College), an LL. B. and a B. C. L. from McGill University and an LL. M. rom the University of Illinois at Urbana-Champaign. He was called to the Ontario Bar in 1987. LAWRENCE FOK is the Deputy Chief Operating Officer of Hong Kong Exchanges and Clearing Limited and the Chief Executive of the Stock Exchange. Mr. Fok joined the Stock Exchange in February 1992 and was xv Demutualization of Stock Exchanges—Problems, Solutions and Case Studies appointed Executive Director of the Listing Division in February 1997 and Senior Executive Director of it s Regulatory Affairs Group in November 1998. Mr. Fok has over 19 years of experience in financial services and securities regulatory work.Before joining the Stock Exchange he worked for the Securities and Futures Commission, the Office of the Commissioner for Securities and Commodities Trading of the Hong Kong Government and other private organisations in areas of corporate finance advisory work, securities dealing, venture capital investment, mainland China trade and investment management. CLAIRE GROSE is Special Counsel, Regulatory Policy Branch at the Australian Securities and Investments Commission (ASIC). For two years prior to July 2001, she held the position of ASIC’s Director, National Markets Unit.Before joining ASIC in January 1999, Ms. Grose was a senior partner in the national Australian law firm Freehill Hillingdale & Page, specialising in corporations and securities law. She has more than 20 years experience as a corporate lawyer and played a major part in devel oping changes to the Corporations Law in Australia in her role as a member of the Corporations Law Simplification Task Force from October 1993 to March 1997. DAVID HOLTHOUSE is National Manager, International Affairs, at the Australian Stock Exchange (ASX), which he joined in February 1996.His responsibilities include fostering links with governments, businesses and market participants to ensure that ASX has a role in shaping the regional capital market environment, coordinating ASX’s international activities to ensure strategic fit, identifying cross-border listing opportunities where ASX can add value, and providing an effective protocol service on behalf of the Exchange. He has been a member of the Working Committee of the East Asian and Oceanian Stock Exchanges Federation (EAOSEF) since 1997 and is currently the Federation’s Working Committee Chairman.A key activity of the Committee during this time has been the facilitation of cross-border trading. He was formerly a career naval officer, retiring as a Rear Admiral in 1993. He is a member of the governing bodies of a number of professional and charitable organisations, and a Graduate of the Australian Institute of Company Directors. He is a Chartered Professional Engineer, and a Fellow of both the Institute of Engineers Australia and the Institute of Marine Engineers (UK). He was appointed as an Officer in the Order of Australia in 1991. xviPrincipal Authors PAMELA S. HUGHES is a securities law partner at Blake, Cassels & Graydon LLP in Toronto. Her practice focuses on international corporate finance and mergers and acquisitions transactions and advice regarding capital market regulatory reform. Ms. Hughes is a member of the team of lawyers from Blake, Cassels & Graydon involved in the ongoing Ontario Securities Commission (OSC) Policy Reformulation Project which commenced in 1995. Prior to February 1, 1995, Ms. Hughes was Director of the Capital Markets/International Markets Branch of the OS C.Ms. Hughes has also taught international securities regulation in the LL. M. programme at Osgoode Hall and the LL. B. programme at the University of Toronto, and was a contributing editor to North American Corporate Lawyer. Ms. Hughes updated the chapter on Philippines securities law in International Securities Regulation: Pacific Rim, Volumes I and II (New York: Oceana) released in 2000. In 2000, Ms. Hughes was nominated by the federal Department of Finance to the financial services roster for dispute resolution under the North American Free Trade Agreement.ROBERTA S. KARMEL is a Professor of Law and Co-Director of the Center for the Study of International Business Law at Brooklyn Law School and Of Counsel to the law firm of Kelley Drye & Warren LLP In addition, she is a . director of the Kemper Insurance Companies. She was a Commissioner of the Securities and Exchange Commission from 1977-80, and a public director of the New York Stock Exchange, Inc. from 1983-89. She received a B. A. cum laude from Radcliffe College in 1959 and an LL. B. cum laude from New York University School of Law in 1962.Professor Karmel is the author of over 30 articles in legal journals, and writes a regular column on securities regulation for the New York Law Journal. Her book entitled Regulation by Prosecution: The Securities and Exchange Commission vs. Corporate America was published by Simon and Schuster in 1982. LEE BOON NGIAP heads the securities regulatory policy function in Monetary Authority of Singapore (MAS). His division is responsible for regulatory framework development, policy coordination and market analysis of the securities, futures and asset management industries in Singapore.Prior to taking up his responsibility in the Securities and Futures Department, Mr. Lee was the Representative in the MAS office in London, responsible for spearheading the promotion of Singapore as an attractive place for UK and European financial institutions to invest and set up operatio ns. Mr. Lee joined MAS in 1986 and worked in several departments before joining the Markets and Investment Department, where he rose to become a Senior Assistant Director in the Monetary Management Division. xvii Demutualization of Stock Exchanges—Problems, Solutions and Case StudiesThere his responsibilities included the conduct of Singapore’s exchange rate and monetary policies, and management and evaluation of the foreign exchange exposures of public sector entities. He holds an honours degree in Civil Engineering from the National University of Singapore and is a Chartered Financial Analyst. NATALIE A. MARKMAN is Counsel to Commissioner Thomas J. Erickson of the US Commodity Futures Trading Commission. She provides legal counsel and analyzes such policy issues as those created by derivatives market deregulation, electronic trading, and exchange demutualization.Ms. Markman reviews and evaluates all documents submitted by staff for Commission approval, including exch ange designations, contract and rule approvals, rulemakings, opinions, and enforcement actions. Previously, she served as Special Counsel in the Commission’s Office of International Affairs, as an Attorney-Advisor in the Office of the Chief Counsel of the Commission’s Division of Trading and Markets, and as an Attorney-Advisor to Commission Administrative Law Judge George H. Painter. Ms.Markman also was a Teaching Fellow for the Foundations of American Law and Legal Education program at the Georgetown University Law Center, where she received her J. D. degree in 1993. WILLIAM PEARSON is Director in the Corporate Finance Division of the Securities and Futures Commission (SFC) in Hong Kong. He is responsible for assisting in formulating policies for the effective regulation of listed companies and the securities markets. Daily work involves monitoring and regulating corporate activities of publicly listed companies, overseeing the Stock Exchange in its listing related fu nctions, nd approving offerings of shares and debentures to the public by non-listed companies. Mr. Pearson joined the SFC as a Senior Manager in the Corporate Finance Division in 1998. Prior to that he spent nine years as a lawyer with Norton Rose, a London law firm, practicing in the areas of corporate finance and M&A. He graduated as a lawyer from King’s College, London in 1987. ALAN JOSEPH SHAW is Executive Vice-President of the Singapore Exchange Limited, Head of Risk Management and Regulation.Previously, from 1991-2000, he was National Manager, Supervision of the Australian Stock Exchange Limited, Melbourne. He was educated at the University of Melbourne, from which he received a Bachelor of Laws in 1979, a Graduate Diploma of Public Policy in 1988, and a Master of Arts in Public Policy in 1994. From 1980-91, he served as a Principal xviii Principal Authors Legal Officer for the National Companies and Securities Commission, as a Judge’s Associate, and as a Barris ter. He has authored a number of articles on company law. xix Abbreviations ABBREVIATIONSAmex APEC Archipelago Archipelago Exchange ASIC ASTC ASX ATS BOT CATS CBA CBI CBOT CCASS CDNX CDS CFE CFTC CGE CME CMP CNS CSE CSRC DTF EBOT ECM ECN Australian Securities and Investments Commission Australian Settlement and Transfer Corporation Pty Ltd Australian Stock Exchange alternative trading system Bank of Thailand computer assisted trading system Colombo Brokers Association Canadian-based interlisted issuer Chicago Board of Trade Central Clearing and Settlement System Canadian Venture Exchange Central Depository System communication front-end system Commodity Futures Trading Commission Committee on the Governance of the Exchanges Chicago Mercantile Exchange Capital Market Masterplan Continuous Net Settlement Colombo Stock Exchange China Securities Regulatory Commission derivatives transaction execution facility exempt board of trade exempt commercial market electronic communications netwo rk American Stock Exchange Asia Pacific Economic Cooperation Archipelago Holdings, LLC Archipelago Exchange, LLC xxi Demutualization of Stock Exchanges—Problems, Solutions and Case Studies ETF ETP FCM FIBV GEM HIBOR HKCC HKEC HKEx HKFE HKFECC HKSCC IDA IISL IMM IOM IOSCO IPO KLSE KULBER LFX LSE MAS MCD MDEX ME MESDAQ MkSE MMCD MOF MOU MSE xchange traded fund equity trading permit futures commission merchant International Federation of Stock Exchanges Growth and Emerging Market Hong Kong Interbank Offered Rate HKFE Clearing Company Hong Kong Exchanges and Clearing Hong Kong Exchanges and Clearing Limited Hong Kong Futures Exchange Limited HKFE Clearing Corporation Limited Hong Kong Securities Clearing Company Investment Dealers Association India Index Services & Products Limited International Monetary Market Index and Option Market International Organization of Securities Commissions Initial Public Offer Kuala Lumpur Stock Exchange KLSE-Bernama Real-Time Information Services L abuan International Financial Exchange London Stock Exchange Plc Monetary Authority of Singapore Malaysian Central Depository Malaysia Derivatives Exchange Montreal Exchange Malaysian Exchange of Securities Dealing and Automated Quotation Bhd Makati Stock Exchange Mark to Market Collateral Deposit Ministry of Finance memorandum of understanding Manila Stock Exchange xxii Abbreviations MSRS NASD NASDAQ NASDR NSE NYSE OECD OM OSC OTC PCX PCX PCX Holdings PCXE PSE REC RIIAM SAFE SC SCA SCANS SCCP SCORE SCH SEA SEC SEHK SEL SEOCH SES SET Malaysian Share Registration Services National Association of Securities Dealers, Inc. NASDAQ Stock Market, Inc. NASD Regulation, Inc. National Stock Exchange of India New York Stock Exchange Organisation for Economic Co-operation and Development OM Gruppen AB Ontario Securities Commission over-the-counter Pacific Exchange PCX Equities, Inc. PCX Holdings, Inc.PCX Equities, Inc. Philippine Stock Exchange, Inc. recognized exchange controller Research Inst itute of Investment Analysts Malaysia South Asian Federation of Exchanges Securities Commission Securities Commission Act 1993 Securities Clearing Automated Network Services Sdn Bhd Securities Clearing Corporation of the Philippines System on Computerised Order Routing and Execution Securities Clearing House Securities and Exchange Act of 1992 Securities and Exchange Commission The Stock Exchange of Hong Kong Limited Taiwanese Securities and Exchange Law SEHK Options Clearing House Limited Stock Exchange of Singapore Stock Exchange of Thailand xxiiiDemutualization of Stock Exchanges—Problems, Solutions and Case Studies SFA SFC SFE SGX SGX-ST SIA SIIS SIMEX SIPF SME SRC SRO STAMP TBDC TSD TSE TSE RS TSE TSEC TSI Securities and Futures Act Securities and Future Commission SFE Corporation Limited (formally known as Sydney Futures Exchange Limited) Singapore Exchange Limited Singapore Exchange Securities Trading Ltd Securities Industry Act 1983 Special Isolated Immediate Settleme nt Singapore International Monetary Exchange Limited Securities Investors Protection Fund Small Medium Enterprise Board Securities Regulation Code Self-regulatory organization standard message protocol Thai Bond Dealing Center Thailand Securities Depository Co. , Ltd.The Toronto Stock Exchange TSE regulatory services Tokyo Stock Exchange Taiwan Stock Exchange Corporation Thailand Securities Institute xxiv PART I Issues Involved in Stock Exchange Demutualization Demutualization of Asian Stock Exchanges—Critical Issues and Challenges 1 Demutualization of Asian Stock Exchanges— Critical Issues and Challenges Shamshad Akhtar 1 1. 1 Introduction Stock exchanges offer a host of services to listing companies. These include: (i) liquidity, (ii) execution of services, (iii) signaling function for listed companies, (iv) monitoring of trading to prevent manipulation and insider trading, (v) standard rules to reduce transaction costs, and (vi) clearing of buy and order transaction s.Traditionally, stock exchanges operating as a â€Å"club of brokers† offered these services as monopoly operators serving largely under a mutual governance structure. The members of the club enjoyed rights of ownership, decision-making (one member, one vote), and trading. Value enhancement of the exchange was achieved by restricting access. Stock exchanges are now increasingly changing their business model and restructuring themselves across the world due to the simultaneous convergence of a number of powerful developments. The most notable of these has been the: (i) rapid advancement and innovation 1 Director, Governance, Finance and Trade, East and Central Asia Department, Asian Development Bank. 3 Part I: Issues Involved in Stock Exchange Demutualization n technology that has facilitated alternative trading systems (ATS) including electronic communication networks (ECNs); and (ii) growing market competition and integration as well as globalization induced partly by cross -border listing and portfolio flows, etc. Together these developments have eroded the significance of physical national stock exchanges and their trading floors. Consequently, across the globe stock exchanges are now rethinking their business strategy and model in order to find ways of how best to survive. In the process, exchanges have evolved towards new corporate, legal and business models to strengthen governance and face the competition.This process of transformation from members' associations into for-profit corporations is referred to as demutualization. There is a great need to distill lessons from the rapidly evolving experience with demutualization and synthesize both the normative and positive aspects of this exciting and relatively new structure so that developing countries can take advantage of it. This paper, therefore, aims to provide basic perspectives and dimensions of demutualization based on a review of literature and experience. In the process it explains: (i) Wh at is demutualization and how significant has it been? (ii) What factors have been driving the demutualization of exchanges? iii) What ownership, legal and strategic approaches are being adopted in the process of demutualization? (iv) What are the principal benefits of demutualization? (v) What regulatory challenges and responses does a demutualized exchange face? (vi) Have the demutualized exchanges been financially viable? 1. 2 Demutualization: Its Definition, Size and Significance Demutualization, in the strictest sense, refers to the change in legal status of the exchange from a mutual association with one vote per member (and possibly consensus-based decision making), into a company limited by shares, with one vote per share (with majority-based decision making).Demutualization makes sense if it induces a change in the exchange’s objective from managing the interests of a closed 4 Demutualization of Asian Stock Exchanges—Critical Issues and Challenges member-based organization with a central focus on providing services for the benefit primarily of the members/brokers and keeping costs and investments limited to financing agreed by members, into a company set up with the objective of maximizing the value of the equity shares by focusing on generating profits from servicing the demands of their customers (brokers and investors) in a competitive manner. The number of exchanges that have privatized or listed has been increasing since the Stockholm Stock Exchange demutualized in 1993.In 1999, 11 stock exchanges had been privatized or listed and this number rose to 21 by early 2002, with several other exchanges either considering demutualization or already having stated their intent to do so. Of the World Federation of Stock Exchanges-formerly the International Federation of Stock Exchanges (FIBV)-member exchanges, around 52% of stock market capitalization is accounted for by demutualized exchanges. In Asia, demutualized stock exchanges including the Tokyo Stock Exchange now account for 76 % of the region's market capitalization (Figures 1. 1 and 1. 2). Figure 1. 1. Market Capitalization FIBV Stock Exchanges (2001) Figure 1. 2. Market Capitalization Stock Exchanges in Asia (2001) Demutualized 52%Not demutualized 48% Demutualized 76% Not demutualized 24% Source: International Federation of Stock Exchanges (FIBV) Source: International Federation of Stock Exchanges (FIBV) 1. 3 Motivation and Driving Factors for Demutualization Today, exchanges are no longer the sole primary and secondary market makers or the sole service providers of trade execution, signaling or other activities. This is largely because of the widespread proliferation of ATS and ECNs that have been supported by technological revolution and introduction of high capacity hardware, software packages and Internet facilities. ATS/ECNs have allowed efficient and effective matching 5Part I: Issues Involved in Stock Exchange Demutualization of the buy and sell orders of customers at lower transaction costs, while offering price transparency, trader anonymity and extended trading hours. Large global brokers are able to price-match within their own order-stock and only report the net position as a trade to the exchange (thus avoiding transaction costs). Given the competitive edge, the market share of the ECNs has grown. In 2002, ECNs have accounted for 45% of NASDAQ shares traded (compared to 25. 5% in 1999) – although they only accounted for about 5% of the listed shares traded. Of the several ECNs, Island ECN alone accounted for 32% of the ECN's market share.Instinet makes up another 29%, ArcaEx 27. 2% (formed through the merger of Archipelago and REDIBook), Bloomberg Tradebook 6. 3% and Brut ECN 5. 3%. The rest is accounted by other networks. 2 Having attracted substantial trading, ECNs are also entering into strategic alliances or tie ups with other exchanges or are offering services such as quotes and listing shares to further raise re venues. The growing competitive pressure has also triggered a wave of restructuring and mergers and alliances among securities markets to maximize economies of scale, accessibility and market reach, while providing global trade facilities through around the clock trading.For instance: (i) Euronext was established by the merger of former national exchanges in France, the Netherlands, Belgium and Portugal and the integrated equity trading markets of the northern-European countries of Sweden, Finland, Denmark and Norway; (ii) in the derivatives markets, a/c/e, the trading platform of Eurex and Chicago Board of Trade (CBOT), and Globex (Chicago Mercantile Exchange, Liffe, Singapore and others), have already formed global alliances with participants from all time zones, thus creating 24 hour trading markets; and (iii) NASDAQ has developed global alliances/interconnections to attract more liquidity for the United States and regional securities markets. NASDAQ has structured agreements wit h Europe, Japan, Hong Kong and Canada and is positioned for similar arrangements with China, Latin America and Middle East. In Asia, several exchanges have trading links and dual-listing agreements with the United States-based NASDAQ. 2 Global Finance Staff Research. 2002. National Association of Securities Dealers (NASD). JP Morgan, H. 6 Demutualization of Asian Stock Exchanges—Critical Issues and Challenges The market integration has encouraged a process of disintermediation.With the emergence of new structures, there is no need for formal floors of stock exchanges or financial market intermediaries and participants, as they do not add value (to match the cost) to trading of securities. Exchanges with low market capitalization and weak trading volumes have had to particularly re-examine their operations and organizations with the view to increasing their competitive offering and price mix to minimize further diversion of trading volumes. Summarizing the emerging issues, a r ecent World Bank study3 concluded that: â€Å"Powerful trends of internationalization and migration of order flow are putting pressures on stock exchanges around the world. For some exchanges, already more than half of trading and listing has migrated offshore†¦ Migration makes it difficult for countries to sustain a full-fledged local stock exchange.As trading volumes further decrease, financing the fixed overhead of maintaining market oversight, clearing and settlement systems, †¦ and generating enough business for local investment banks, accounting firms, and other support services will become even harder, especially for smaller emerging markets. The trend towards increased migration will thus make it more difficult for small exchanges to survive. † [page 18] In order to survive in this environment, exchanges need to diversify and move towards commercially oriented business practices with greater focus on improving efficiency, accessibility and ease of use of the ir systems. Since exchanges have higher overhead costs (as compared toECNs) due to (among other things) cost of building and facilities, they need to strive harder to achieve profitability and economies of scale, while offering competitive services and fees compatible to those being provided by the ECNs. These considerations have driven exchanges to consider alliances and consolidation. By merging two exchanges, the exchange can multiply the volume at the same overhead cost (provided cost cutting synergies are fully explored). It can thus offer to the investors and brokers more listed securities for trading on the same platform. There are forecasts available that indicate that by 2010, there will be fewer than five major stock exchanges; and, perhaps two or three of these will be entirely electronic markets—which have not yet been established. 4 3 4 Claessens, Stijn, et. l. 2002. Explaining the Migration of Stocks from Exchanges in Emerging Economies to International Centers. World Bank Working Paper No. 2816. Young, Patrick. 1999. Capital Market Revolution: The Future of Markets in an Online World. Harlow: Financial Times. 7 Part I: Issues Involved in Stock Exchange Demutualization 1. 4 From Mutuality to Demutualization of Exchange The transformation of exchanges from mutual to demutualized structure involves two key features: (i) a change in the ownership structure, and (ii) a change in legal as well as organizational form. Both need to be accompanied by adequate safeguards to ensure appropriate governance.Depending on the nature of ownership and legal forms adopted, the demutualized exchange—given their corporate model and facing growing competitive pressures—lends itself to focusing on evolving strategic positioning which, depending on a number of conditions, could involve greater market consolidation, vertical integration and product diversification. 1. 4. 1 Ownership Structure The transformation from the mutual member-based to demutu alized exchange involves issues of transferability of ownership from members to nonmembers. There are various ways that dilution of membership can be achieved. Sequentially, it involves conversion of existing member seats by monetizing these and assigning a certain value per seat.Once the valuation is done, the members can opt to convert their membership to share ownership or to sell off their interest to nonmembers. In most cases of demutualization of exchange, members have opted to retain their share ownership. A listing of equity shares in the exchange facilitates the unlocking of the members' equity and buy out of the interest of the traders, while leading to the monetization of the value of the members' seats. An entity with freely transferable shares, rather than membership rights, can form equity-swap-based strategic alliances or mergers with other exchanges, domestically or in other countries or time zones. Such alliances are stronger and offer greater credibility than pure cooperation agreements.To avoid stock exchanges operating in special or limited interests, securities regulators often place restriction on ownership by one holder or a group of holders to non-controlling stakes of 5-10%. Limits on ownership stakes could affect potential take-over by other exchanges. Such take-overs could have merit in terms of efficiency and economies of scale of the market especially where more efficient participants acquire inefficient ones. Recognizing the synergies of take-overs, most demutualized exchanges have provisions in place to allow other 8 Demutualization of Asian Stock Exchanges—Critical Issues and Challenges exchanges, or technology partners, the possibility of acquiring or swapping strategic stakes.The reluctance to relinquish control to strategic partners or owners remains however one reason why non-equity, swapbased cooperative alliances have been more prolific in the exchange industry. 5 Indeed, several hostile take-over attempts (includin g OM Gruppen's moves to acquire the London Stock Exchange in 2000, and the bidding war for Sydney Futures Exchange by Australian Stock Exchange and Computershare in 1999) have failed due to the voting strength still exerted by the brokers (Table 1. 1). 1. 4. 2 Legal and Company Structure Most stock exchanges are registered as private limited companies with a paid-up capital base, while others operate as member associations or cooperative arrangements.At the end of 2000, FIBV statistics indicates that 90% of its member exchanges, accounting for 60% of market capitalization, were private limited companies. Almost 46% of these were legal company exchanges with inside ownership. Around 25% (accounting for 21% of market capitalization) of the exchanges had been privatized, 13% (accounting for 8% of market capitalization) were registered as listed companies6 and the remaining 17% had other types of status—with some being state-owned or semi-public entities (such as the Shenzhen and Shanghai Stock Exchanges (SZSE and SHSE). As evident in Table 1. 2, in Asia, with the exception of SZSE and SHSE, most of the exchanges are legal entities registered as private limited companies.So far, five exchanges in Asia have been fully demutualized, with three of these listed on their own exchange, and another two have announced plans to demutualize in 2003. The legal structure for the demutualized exchange is based on considerations similar to that for any profit-making company including decisions on number of shareholders (partnership vs. corporation), voting procedures, limitation of liability (liability limited to equity invested vs. joint and several liability for all debts), accounting and reporting requirements (based on taxation laws and on partners/shareholders' access to information of the company) and distribution of dividends (re-investment 5 6Interestingly, this is similar to another rapidly globalizing industry with national quasimonopolistic companies—th e airline industry—in which global cooperation alliances have proven very important for customer retention. Notably half (of six) of the exchanges that have listed themselves are in Asia. 9 Part I: Issues Involved in Stock Exchange Demutualization Table 1. 1. Asian Stock Exchanges: Shareholding Structure SHAREHOLDING LIMIT Australian Stock Exchange (ASX) Initially maximum shareholding limit was 5%, but the Financial Services Reform Act raised this to 15% in March 2002. Higher shareholding can be allowed if it is in national interest subject to approval of the Minister for Financial Services and Regulation.Singapore Exchange Limited (SGX) Maximum shareholding limit is 5% and can be higher if approved by the Monetary Authority of Singapore (MAS). In 2001, MAS announced that, with its approval, strategic investors and fund managers who invest pools of consumer funds could acquire up to 10% of share-holding. SHAREHOLDING STRUCTURE As of June 2001, issued and paid-up capital of AS X amounted to A$106,282,000. After listing, ASX’s shareholders rose from 606 to 16,313. Besides individual investors, the large domestic and international fund managers subscribed to ASX equity including Chase Manhattan Nominees Ltd. whose holding is 6. 9%, National Nominees Ltd. 3. 5%, followed by AMP Life Ltd. (2. %), Westpac Custodian Nominees Pty. Ltd. (2. 11%) and Citicorp Nominees Pty. Ltd. (2. 07%). The top 20 shareholders account for 27. 3% of issued capital. SGX has authorized share capital of S$1,000,000,00. As of August 2001, its issued and paid-up capital stood at S$10,000,000. The top shareholders include SEL Holdings Pte. Ltd with 25% of total shares (but owing to the restrictions in the exercise of votes attached to shares, SEL is not regarded as a substantial shareholder), Raffles Nominee Pte. Ltd. (12. 9%), followed by DBS Nominees Pte. Ltd. (9. 9%), Overseas-Chinese Bank Nominees Ltd. (5. 3%) and HSBC Singapore Ltd. and Citibank Singapore (each over 4. %), a nd others with significant stake in the range of 0. 60-2%. The top 20 shareholders account for 77. 8% of total shares. Out of the shares issued to SEL, the Company made an Initial Public Offer (IPO) and a private placement. The IPO raised S$470 million. Consequently, the issued and fully paid share capital of SGX increased from S$61,670 as at 30 June 2000 to S$10 million as at 16 November 2000. HKEx has authorized share capital of HK$2,000,000,000. As of December 2001, issued and fully paid capital amount to HK$1,040,664,846. As of March 2002, the two Central Clearing and Settlement System (CCASS) Participants held 28. 8%, and 12. 1% of HKEx’s issued share capital.SFC granted approval to these two entities as minority controllers of HKEx on the basis that the shares are held in custody for their clients. Hong Kong Exchanges and Clearing Limited (HKEx) Maximum shareholding limit is 5%. The Securities and Futures Commission (SFC), in consultation with the Finance Secretary, may give approval to a person to hold more than 5% where it can be demonstrated to be in the interest of the public or the investing public. Philippine Stock Exchange (PSE) The Securities Regulation Code imposes a 5% maximum shareholding limit for individuals and individual companies and 20% for industry or business groups. The demutualized PSE has an authorized capital stock of P36. million, with subscribed and fully paid-up capital base of P9. 2 million representing a portion of the members’ total contribution of P286. 6 million as of 31 December 2000. Each of the 184 member-brokers was granted 50,000 common shares of the new PSE at a par value of P1. 00 per share. The remaining members’ contribution of P277. 4 million will be booked under additional paid-in surplus. Prior to demutualization, TSE had a capital of Y11,500 million. After demutualization, TSE raised it to Y22,874 million by issuing 2,300,000 shares for equal allotment to its members. The total number of au thorized shares after demutualization is 9,200,000. TSE now has 114 shareholders.Tokyo Stock Exchange (TSE) Under the Securities and Exchange Law, there is a 5% maximum shareholding limit. Source: Stock Exchanges. Latest Annual Reports 10 Demutualization of Asian Stock Exchanges—Critical Issues and Challenges Table 1. 2. Asian Stock Exchanges: Legal and Corporate Structure STOCK EXCHANGE TSE LEGAL FORM TSE was demutualized on 1 November 2001 Legal Status: Company SGX was demutualized in December 1999 Legal Status: Company (for profit). Singapore Exchange Securities Trading Limited (SGX-ST), the stock exchange, is a wholly-owned subsidiary of SGX. HKEx was demutualized in March 2000 Legal Status: Company (for profit) with the Stock Exchange of Hong Kong Limited (SEHK) set up as a wholly- owned subsidiary of HKEx.ASX was demutualized on 13 October 1998 Legal Status: Company (for profit) LISTING STATUS Not listed (plans to list in FY2005) SGX On 23 November 2000, the Company was admitted for listing of SGX-ST. SGX became a public-listed company with 1,000,000,000 ordinary shares outstanding. HKEx Listed ASX ASX was listed on its own exchange on 14 October 1998. When ASX shares were quoted on 14 October 1998, they closed at A$4. 25; sub-sequently they rose as high as A$16 by 16 March 1999. By the end of 1999, they traded at a range of A$10 to A$11, valuing the company at between A$1 billion and A$1. 1 billion. Not Listed PSE PSE was demutualized in August 2001 Legal Status: CompanySource: Stock Exchanges. Latest Annual Reports needs vs. distribution to partners, taxation). In most jurisdictions, a limited liability company has been observed to be the traditional and preferred option for profit-making ventures involving more than a close group of partners. The methods for transforming an association into a limited liability company varies between jurisdictions, but in principle, the existing members agree to transfer the assets and operations of their associ ation to a newly formed company, in exchange for shares in that new company. 11 Part I: Issues Involved in Stock Exchange Demutualization 1. 5 Benefits of Demutualization of Exchanges 1. 5. Improvements in Corporate Governance Exchanges, when run as mutual associations, clubs and cooperatives of traders and brokers allow members exclusive rights of access to trading systems and platforms. Operating under this mutual structure, exchanges enjoyed quasi or full monopoly on trading and they derived profits from the intermediation of nonmember transactions. Since members under the mutual structure were owners of the exchange, they imposed rights to trading and disallowed direct access to the trading floor to any outsiders. Brokers inadvertently resisted changes if these entailed additional costs, loss of revenue or competitive threat.This resistance eventually impeded the ability of the company to react quickly to a rapidly changing market environment. Also, in some developing countries if the exchanges enjoyed a legal or decreed national monopoly, government-appointed officials and stakeholder representatives were often represented on the board. While in the short-run such appointments may have proved conducive to mitigating entrenched vested interests, in the long-run these can prove counter productive leading to unhealthy government interference. With the changing economics of automated auction trading and its easy access electronically, the economics of member-cum-trading floor based exchanges has lost its merit.As a result, it has generated pressures to replace the age-old reliance on one member, one vote and the committee-based decision structure where control is vested with the interest groups that have exclusive rights of intermediation at exchange. Under demutualization, there is increased acceptance to separation of ownership from membership that automatically provides trading rights. This segregation helps introduce effective corporate governance if: (i) there are accompanying improvements in the incentive structure,7 which allow the exchanges to sell their equity stakes to nonmembers and outsiders, (ii) decision making is based on this new ownership structure (not on rights of intermediation), and (iii) when there is an effective oversight of a governing board and a company structure. 7 Steill Ben 2002.Changes in the Ownership and Governance of Securities Exchanges: Causes and Consequence. In Brookings-Wharton Papers on Financial Services. Washington D. C. : Brooking Institution Press. 12 Demutualization of Asian Stock Exchanges—Critical Issues and Challenges Since under demutualization the economic ownership of the exchange is separated from trading membership, it is not appropriate that interest groups (such as the trading members) have exclusive authority over the decisions of exchange. After demutualization, some exchanges have granted less than 50% of the voting rights to the broker members on the board of the exchange (see Table 1. 3).To gradually decrease broker influence on the board, the exchanges have appointed independent directors or directors that are nontrading owners. After demutualization, the appointment of government appointed officials (a common feature of exchanges in developing economies) has by and large been viewed as controversial given that the demutualized exchange is a private sector company operating in a competitive environment. In environments where broker influences are often daunting, the continued role of the representative(s) of the securities regulator can support the transition of exchange till such time as the regulation is changed to allow the exchanges to operate in a fully competitive manner.Besides appropriate board representation, it is important that the management of the exchange is fully qualified and motivated to act not only in the best interests of the shareholders, but also to conduct the business in a prudent manner so as not to disrupt the orderly and fair trading in the capital markets. To ensure that this public interest is satisfied, â€Å"fit-and-proper† screening of the board and management, similar to tests put in place in the banking regulations of many jurisdictions, could be undertaken. The management should be accountable to the board, which would determine management's appointment and remuneration, supervise the strategic direction and audit the financial and operational results, including risk management, and if needed, effect the removal of management.To ensure the effective supervision and auditing of management, it would seem prudent to ensure that a majority of board members are truly independent directors. To remain competitive, a stock exchange must follow international best practices in ethics and procedures. This is necessary in order to ensure that institutional investors do not shift their investments to other alternatives perceived to be more fair or secure. Therefore, it is in the profit-motivated exchange's best interest to ensure fair and transparent practices; and, as such, good corporate governance needs to be an integral part of the exchange once it is driven by the profit motive. 13Part I: Issues Involved in Stock Exchange Demutualization Table 1. 3. Asian Stock Exchanges: Board Representation STOCK EXCHANGE ASX BOARD REPRESENTATION/COMPOSITION 9 member board of directors. Of ASX's 9 directors, 4 are ASX Members/ Affiliates. 11 member board of directors. Of SGX 11 directors, 4 represent broker interests. SGX plans to broaden membership base by attracting new international members both global and regional securities houses. In addition, SGX will be introducing a new membership structure that allows new and existing members to choose between trading-only membership or clearing-only membership or both trading and clearing membership. Central Depository Pte. CDP) clearing rules have been revised to incorporate the admission requirements and expect to launch the new membersh ip structure in the third quarter of 2002. The board comprises 8 Public Interest Directors appointed by the Financial Secretary to represent public and market interests, 6 Directors elected by shareholders, and the Chief Executive of HKEx who is an ex-officio board member. Pursuant to the Exchanges and Clearing Houses (Merger) Ordinance, the number of Public Interest Directors will be reduced to no more than the number of elected Directors immediately following the annual general meeting of HKEx in 2003. 51% of the board (8 of 15 directors) should be independent. 11 member board of directors, of whom 6 are outside directors. SGX HKEx PSE TSESource: Stock Exchanges. Latest Annual Reports 1. 5. 2 Opening Up of Trading Rights of Exchanges Consistent with the for-profit motive, the demutualized exchanges in Asia have included provisions to admit new trading partners (Table 1. 4) and permitted eligible applicants (new customers) unrestricted commercial access to the services of exchange. Some exchanges, however, adopted a moratarium period on the issuance of new trading rights. If share ownership were a requirement for trading membership, it would be relatively easy for existing members to protect their market share by refusing to sell existing or issue any new shares, thus barring new entrants.If new shares can only be issued to the active trading members, then the public, financial institutions, institutional investors and others would generally not be able to invest. The question of a broader ownership 14 Demutualization of Asian Stock Exchanges—Critical Issues and Challenges Table 1. 4. Asian Stock Exchanges: Trading Rights and Dividend for Profit-Seeking STOCK EXCHANGE ASX TRADING RIGHTS Trading rights may be acquired through application with ASX or from an existing Participant. Trading rights have to be acquired through application with SGX, as these cannot be secured through transfer from an existing member. In July 2000, SGX opened the securities mar ket to new members, and five new member firms joined in 2000.SGX also changed its rules to allow a single legal entity to be a member firm in each of the securities and derivatives markets thereby furthering their members' opportunities to trade in both markets. Access to the markets may be obtained through acquisition of trading rights from existing members of the exchanges and from HKEx after the expiry of a two-year moratorium on March 2002. Trading rights issued by HKEx (other than those automatically conferred to the exchange shareholders on the effective date) will not be transferable. For a further period of 2 years thereafter, no new trading rights will be issued for less than HK$3. 0 million per Stock Exchange Trading Right or for less than HK$1. 5 million per Futures Exchange Trading Right.An entity may acquire trading right from an existing trading participant (with approval of TSE), or through application with TSE. Trading right can be acquired through purchase from an e xisting trading participant. PSE temporarily imposed a moratorium on the issuance of new trading rights and limits it to its present number of 184, transferable for an unlimited period of time. PAYOUT RATIO 70% of net profit after tax. 85% SGX HKEx 46% TSE n. a. PSE n. a. Source: Stock Exchanges. Latest Annual Reports base of the exchange (as a public listed company) is critical in situations where exchanges need to raise funds for future investments. Broader ownership would help avoid potentially large swings in the value based on the trading of a limited number of shares only.With share ownership separated from the right to trade, the question of the compensation of existing trading members arises especially since trading rights are granted freely to new members when the existing 15 Part I: Issues Involved in Stock Exchange Demutualization members had to acquire their trading memberships. If existing shareholders continue to retain their shares, then they would enjoy the trading r ights granted to the shareholders and there would be no need to compensate them for trading rights. This is argued largely because for both the old and new shareholders, the economic value that the shares now represent would always be inclusive of the right to trade provided such rights have been granted.In order for shares to have economic value, there must be an expectation of dividends, at some point in the future. The introduction of a dividend policy (which does not exist in mutual exchanges), coupled with a listing of the shares, thus transfers the value of stock exchange share ownership from the right to trade, to the right to receive dividends and trade the shares (see Table 1. 4). These factors should in theory minimize the resistance to the demutualization of exchanges by the brokers. However, a moratorium (limited in time) on the granting of new trading rights has often been introduced to lessen the competitive impact on smaller brokers. 1. 5. Restructuring and Alliances of Exchanges After being demutualized, most exchanges have revisited their commercial strategy to improve viability and enhance business prospects. Exchanges have opted to: (i) consolidate, merge and/or integrate their domestic markets; (ii) build alliances by establishing cross-border linkages with other exchanges within or outside the region; and (iii) merge with other exchanges—a phenomena more predominant thus far in Europe. In Asia, the exchanges have by and large opted thus far for (i) and (ii). Emphasis has been largely to re-group businesses to broaden the markets, offer issuers and investors better distribution networks and improved liquidity.Predominant in-country mergers or restructuring have taken place in Singapore, Hong Kong, Australia and Japan, and in early 2002, the Kuala Lumpur Stock Exchange (KLSE) merged with MESDAQ (Table 1. 5). In-country restructuring of exchanges has involved: (i) Merger of two or more exchanges into a single viable nationallevel compa ny, which would be of sufficient scale to be an interesting partner for other (foreign) exchanges, and as a listed company for investors to consider. While these mergers lead to 16 Demutualization of Asian Stock Exchanges—Critical Issues and Challenges Table 1. 5. Asian Exchanges: Mergers and Alliances STOCK EXCHANGE TSE MERGERS PRIOR TO DEMUTUALIZATION Hiroshima and Niigata Stock Exchanges merged with the TSE in March 2000. ALLIANCES W