"In addition to corporate responsibility, what we see as important driver to our capital market is high levels of corporate governance and social responsibility to all the constituencies that are important to public companies. What we are seeing for the first time, what we call "when the rubber meet the road", is the boards of directors of companies at a more rapid level than ever before in our history are kicking out chief executive officers and other high levels officers who don't understand the principle or get caught in a situation they're not presenting to their employees and shareholders high levels of corporate governance." On Oct. 12, William F. Coffin, Chief Executive Officer of CCG Investor Relations presented his points of view upon Accessing the U.S. Capital Markets Through Best Practices In Corporate Disclosure and Transparency at Executive Forum, CEIBS.
"What I see missing here is that students don't understand the historical and cultural evolution of the American capital markets, which will put you at a disadvantage."
Mr. Coffin pointed out that in the context of the evolution of the American capital markets, there were three among the most important principles of corporate disclosure: virtual disclosure, an idea that disclosure is a continuous spectrum. There is a belief that in the future companies will potentially release financial reports on a daily basis. The second is the idea of financial disclosure V.S. non-financial disclosure. Last, the concept called "forward-looking information".
He said that to understand the cultural and historical roots of American capital markets was of practical importance to Chinese students. With rapid growth of the Chinese economy, the development of China's debt market place is leading companies to finance their growth to equity capital. The equity capital markets of China are not evolved to accommodate to potential growth of many companies. Increasingly, those companies are going to America for equity capital, which is the largest in the world.
The definition of high quality disclosure is, as is used in the MBA schools in America, the fullest disclosure possible on company performance so that the investors have sufficient information for decision making. If done properly, fullest disclosure of a company's performance could lower the cost of capital by reducing the risk premium associated with the particular investment. Lowering the cost of capital enables younger companies to compete with their peers in virtually any market place.
He noted that there was an expanding recognition of intangibles as performance drivers. It includes investment on technologies, organizational capital, customer capital, human resources etc.This is the new language to learn to participate in the capital markets.
Forward-looking information, one of the most controversial subjects, ties in with the modern concept of transparent corporate disclosure. 74% of the companies in America provide forward-looking information voluntarily. In the old days, companies would communicate this information by "filtering through security analysts". Yet the system became corrupt and reduced transparency. After Fair Disclosure was passed, companies were prohibited from telling security analysts until telling everybody else the information. Sarbanes-Oxley changed the model for compensating security analysts by prohibiting security analysts from receiving compensation and made it clear that there need to be a separation between security analysts and investment banking department. Companies realized that in order to lower the cost of capital, they would communicate information for their shareholders at the end of the investment community. They could also reduce the share price volatility which would scare investors away.
