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United Kingdom: Gateway to Royalty
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Silverman Sachs
Financial Services
Investment Proposal for
UK
Team Brit Dilip Agrawal
Dhanush Chandrasekaran
Mohan Govind
Manjot S Grewal
Jenny Huang
Sherry Shen
Introduction
Purpose: Seek board’s approval on our investment
recommendation in the UK
We present our findings on:
● Evolution of corporate governance and current corporate
government practices in UK
● Micro and macro economic and political conditions of UK
● Risk analysis of the investment decision in UK
● Cross comparison of UK with other potential countries
Investment Recommendation
Invest in the UK
Evolution of Corporate Governance in
UK
Key stages in the evolution of UK governance (Last 25 years)
1992 - Cadbury Report
1998 – The Combined Code of Corporate Governance (renamed as the UK
Corporate Governance Code)
1999 – Turnbull Guidance on Internal control
2010 – Stewardship Code.
2013 – Companies Act (Strategic Report and Directors' Report Regulations)
2016 - UK Corporate Governance Code - Financial Reporting Council (FRC)
Ratings of Corporate Governance by Country
GMI Corporate Governance Country Ratings
Rank
Country
Companies
Average Overall
Rating
1
United Kingdom
394
7.6
3
Ireland
19
7.21
4
United States
1,761
7.16
12
Germany
79
5.8
GMI Rating Methodology -
19
France
100
4.7
20
India
56
4.54
29
Brazil
67
3.91
34
China
91
3.37
35
Japan
392
3.3
Incorporates more than 450 data points across the
following categories:
• board accountability
• financial disclosure and internal controls
• executive compensation
• market for control and ownership base
• reputational and socially responsible
investment issues
• corporate behavior
• shareholder rights
37
Mexico
21
2.43
Source: GMI Ratings (formerly, GovernanceMetrics International) — Country Rankings as of September 27, 2010
Corporate Governance Principles’ Comparison UK vs
USA
Equitable Treatment & Rights of Shareholders
•
•
•
•
•
Shareholder voting
Related party transactions
Takeover bid rules
The roles and responsibilities of institutional investors
The roles and Board representation of minority shareholders
Disclosure and Transparency
•
•
Notification of general meetings and information provided to shareholders
Shareholder rights to request a meeting and to place items on the agenda
The Responsibilities of Boards
•
•
•
•
•
Board Structure
Board Tenure
Board level committee
Board Responsibility for Risk Management
Board Nomination & Election
Stronger
Similar
Weaker
Country Comparison for Protection of Investors
UK
OECD
USA
Index of Transaction Transparency
10.0
6.0
7.0
Index of Manager’s Responsibility
7.0
5.0
9.0
Index of Shareholders’ Power
7.0
7.0
9.0
Index of Investor Protection
8.0
6.1
8.3
Source: Doing Business 2016
Political and Macroeconomic factors - Positives
Political:
Our Closest Ally for decades
Long standing democracy
Supportive economic and fiscal policies
Macro:
Stable and liquid financial markets
Well Developed Infrastructure
Ranked high on innovation index
English as business language
GINI Coefficient Comparison
OECD Avg.: 0.318
UK : 0.358 USA: 0.396
Research suggests that decrease in GINI coefficient raises GDP per capita
for advanced economies
Source: OECD.org
Political and Macroeconomic Factors - Negatives
Political:
Uncertainty post Brexit
Rise of Nationalism in the west
Risk of tariffs on Trade and investments
Macro:
High trade and current account deficit
Decreasing long term per capita income
Low productivity growth
Consumer dependent economy
Conclusion
We recommend investing in UK as it makes good economic
sense due to the following reasons:
•
•
•
•
One of the world's largest & mature financial markets
Strong Corporate Governance Structure
Good investor protection
Low impact of Macroeconomic/ Political issues
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