Investors certainly cares how the companies they invest in, and a blow to look at the map will tell you why. When there are serious shortcomings in the meeting room, as evidenced this week to undermine Kazakh ENRC, shareholders finally felt where the shoe.
ENRC is inferior to the rest of the UK mining industry by a substantial margin during the past year, despite more than doubled its profits in 2010 on the back of the global boom in commodities. Chart shows why corporate governance cannot be an add - on for one Fund Manager. It is a fundamental element of the process which, in this case, led no surprise to many investors, giving the company a wide berth.
Most of the examples of bad governance are less glaring than the unedifying spectacle of defenestration of Wednesday last two non-executive directors of the ENRC. Sir Richard Sykes and Ken Olisa have shown the door, it would seem that, for having the temerity to do their work - holding managers to account. It was the first time in ten years a Director of a FTSE 100 company was voted off the coast of the Commission at an annual meeting.
At the heart of this debacle is the predominance of a trio of founding shareholders who promised an interventionist approach when the company floated in London in 2007 but have ignored since this promise. With undermine fellow FTSE 100 Kazakhmys and the Kazakh Government, the three have control over the shares of the company, less 20pc that are freely accessible to outside shareholders.
This would normally prevent a float in London, and a special exemption was granted for him to move forward on the ground was big enough for a few shares in the float to represent a liquid market. The events of recent days have questioned the wisdom of this decision.
ENRC as a publicly quoted company life was affected by controversies, including the eviction of its Chief Executive (who remains nevertheless responsible), a dispute mines purchase in the Democratic Republic of the Congo (now subject to a legal battle in the British Virgin Islands) and critical francs from the company by politicians, which one has warned its executives — not only way to be "a patsy for puppet-masters."
One of the great strengths of the London Stock Exchange is its international exposure. The first phase of globalization during the Victorian era, age, when the money raised in London built railways of the world, canals and Telegraph, the city funnelled capital of the world where he can work harder. That it continues to do so, it is a good thing for the prestige and balance of payments of the nation, but also to investors of the country.
Home bias means that people over-invest in their national markets and to the to the United Kingdom about half of all the assets are invested at home, four or five times that suggests the capitalization of the London market. But international companies listed on the UK bias means that it is more logical as it may seem. A London investment is to a large extent an investment in the world economy and especially in the emergence of the developing world.
However, the international character of the London market can remain only a positive if the threshold of quality for companies listing here is set to high and kept it. The stamp attached to a quote from London, with its implicit stamp of approval means that good companies and bad will cry for a list. Similarly, costs banking investment offers when massive foreign companies on the market mean there is a huge temptation does step to examine too closely before riding on the red carpet. It is a dangerous combination of incentives to close our eyes.
Investors are rights pushed more questions companies with no connection to the United Kingdom when they choose to register their shares in London. Not that anyone can claim that they have not received a warning in the case of ENRC. 25 Pages of risk in its prospectus factors were an indication that this was not going to be a smooth ride.
• Tom Stevenson is a Director of Fidelity International investment. The views expressed are his own
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