Lai See

Assessing the true value of INEDS

Russian aluminium company Rusal, which is listed on the Hong Kong stock exchange, has pointed out to us in a letter that we were mistaken in saying it had a 10 per cent equity stake in the Hong Mercantile Exchange. (HKMEx). It is EN+, Rusal's parent company which has a 10 per cent stake in HKMEx. We have in the past questioned the position of Barry Cheung, who is an independent non-executive director (INED) on the Rusal board and also chairman of HKMEx, suggesting there was a conflict of interest. In the letter Rusal says: 'Mr Cheung's position as an INED of UC Rusal has been reviewed by our board and external legal counsel. It was concluded that Mr Cheung does not fail the relevant independent guidelines under the Hong Kong Stock Exchange's listing rules.'

It may well be true that Cheung complies with the letter of the listing rules. INEDs are supposed to be on the board to look after the interests of independent shareholders. It would be hard to conclude that Cheung is in the best position to carry out this role given that he is on the Rusal board, which is 47.4 per cent controlled by EN+ and Oleg Deripaska is respectively the majority shareholder and CEO of the former and chairman of the latter.

Shareholder activist David Webb has for many years been critical of the status of INEDs under the current Hong Kong listing rules and has long called for INEDs to be voted by independent shareholders, that is shareholders who are not directors and do not own more than 10 per cent of the company. Webb is currently running a poll on INEDs on his webb-site.com. Some of the results so far show that 85 per respondent feel that INEDs should be elected only by independent shareholders, 88.6 per cent say that the current system for appointing INEDS is not working for investor interests, and asked how to rate the overall performance of INEDS 12 per cent answered somewhat effective, 43 per cent generally ineffective, 34 per cent very ineffective, and 38 per cent completely ineffective.

Hot-headed climate attitude

We have received a somewhat intemperate response to one of our items which had the temerity to suggest that the world is not necessarily sharply warmer in recent times, as many would have us believe. Our ranting correspondent says that 2010 was the hottest year on record and 'that's a fact'. Unfortunately only according to James Hansen's Goddard Institute for Space Studies. GISS' temperatures are significantly higher than the other three main official global temperature records indicating global temperatures rising by 0.2 per cent while the other three show temperatures dropping by as much as 0.3 per cent over the year.

It is widely accepted that at times in the past, the medieval warm period for example, temperatures were significantly higher than today's while carbon dioxide levels were slightly lower.

It is also widely accepted that the earth has warmed some 0.7 degrees over the past 110 years with more than half of that rise occurring between 1900-1945 which since most of the increase in C02 is supposed to have occurred in the past decade, suggests the relation between global warming and C02 is highly complicated. While this is all highly fascinating, what is even more interesting is how hot under the collar those who peddle fear of global warming become at even the faintest trace of scepticism in the atmosphere.

Wary of logging moves

Six months ago the Norwegian Government Pension fund (Norges), one of the largest in the world, sold its holdings in Hong Kong-listed timber company Samling Global - saying the company was involved in systematic illegal logging in Sarawak. The pension fund has removed Samling from the list of companies it is prepared to invest in. Recently the Norwegian fund did the same to Samling's 67 per cent-held subsidiary Lingui Development, accusing it of illegal logging practices. Norges had held some 2 per cent of Lingui's market capitalisation. Coming hard on the heels of irregularities at China Forestry, the sector is likely to be treated with some wariness by investors.

Presenting Pele

Those with an interest in soccer from a bygone era might be interested in listening to Edson Arantes do Nascimento at an American Chamber of Commerce meeting on March 8. We are, of course, talking about the mighty Pele, who was a serious star rather than the over-hyped and overpaid wonders of the modern era.

He's going to be talking about the rebirth of the New York Cosmos, the club for which he once played and is currently honorary president, and about the impact of sport on education and philanthropy.