Ib2 Grpb L3 Sino-singaporean Joint Venturesl - Sheena Ang
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Control Mechanisms, key personnel appointment, control and performance of Sino-Singaporean joint ventures Written by: Pien Wang, Chow Hou Wee and Peck Hiong Koh
Background of this article
PRC received most EJV since the opening up of her economy since 1979 Singapore, the fifth largest foreign investor has chosen EJV as their entry mode Chosen Sino-Singapore JV as the focus of the study in terms of the relationship between parents’ right to appoint key personnel, the degree of control & the level of performance satisfaction
Purpose of this article
The mechanism used by Singapore parent firms to control operation in JVs Control mechanisms used by parent firm with different level of equity stakes (majority, equal or minority)
Right to appoint key personnel Impact of these appointment on their degree of control over JVs Level of satisfaction with the JVs performance
Joint Ventures
Occurs when 2 or more firms pool a portion of their resources to invest in a common legal entity EJV (Equity Joint Venture) where the distribution of profits and losses is fixed according to the capital contribution of each shareholder
JV Control Mechanisms
Majority shareholding Right to appoint personnel to key positions Board meeting Limit issues requiring the unanimous agreement of the board members Capital budgeting and resource allocation Policies and procedures Use of technology and management advantages JV control-performance relationship
Result of Survey conducted
The results show that Singaporean firms preferred to be the majority stakeholders More than half of the parent firms appoint 2 to 3 directors in representing them in the JVs Performance gauge on growth profitability & overall performance were less than moderately satisfied Less than half of the firms indicate that they had either high or very high control over their JVs
Right to appoint the general manager Right to appoint personnel to critical functional areas Setting up of policies and procedures Auditing Majority shareholding Using monthly or quarterly reports Setting up of a spending authorization limit
Right to appoint the chairman of the board Limiting issues requiring unanimous agreement Frequent visits to the JV Board meetings Relying on management skills to gain control Relying on technical skills to gain control Right to appoint personnel to key positions
Conclusions
the survey shows that the ranking of the importance of mechanism differ depending on the equity stakes of the parent firms
majority – 3 most important control mechanisms were “right to appoint the general manager”, “majority shareholding” and “right to appoint personnel to critical functional areas” Equal – 3 most important control mechanisms were “right to appoint general manager”, “right to appoint the functional manager” and “setting up of policies and procedures” Minority – 3 most important control mechanisms were “auditing”, “right to appoint general manager” and setting up of policies and procedures”
However, the right to appoint general manager, right to appoint personnel to critical functional area, setting up of policies and procedures, using monthly or quarterly report & setting up of a spending authorization limit are important and interrelated Firms has greater sense of control and satisfaction of the JVs when they had the rights to appoint chairman, General manager, financial manager, production manager, marketing manager, human resource manager and purchasing manager
However we can’t rule out the same for different nationalities parent as there’s different management skills and know-how
Background of this article
PRC received most EJV since the opening up of her economy since 1979 Singapore, the fifth largest foreign investor has chosen EJV as their entry mode Chosen Sino-Singapore JV as the focus of the study in terms of the relationship between parents’ right to appoint key personnel, the degree of control & the level of performance satisfaction
Purpose of this article
The mechanism used by Singapore parent firms to control operation in JVs Control mechanisms used by parent firm with different level of equity stakes (majority, equal or minority)
Right to appoint key personnel Impact of these appointment on their degree of control over JVs Level of satisfaction with the JVs performance
Joint Ventures
Occurs when 2 or more firms pool a portion of their resources to invest in a common legal entity EJV (Equity Joint Venture) where the distribution of profits and losses is fixed according to the capital contribution of each shareholder
JV Control Mechanisms
Majority shareholding Right to appoint personnel to key positions Board meeting Limit issues requiring the unanimous agreement of the board members Capital budgeting and resource allocation Policies and procedures Use of technology and management advantages JV control-performance relationship
Result of Survey conducted
The results show that Singaporean firms preferred to be the majority stakeholders More than half of the parent firms appoint 2 to 3 directors in representing them in the JVs Performance gauge on growth profitability & overall performance were less than moderately satisfied Less than half of the firms indicate that they had either high or very high control over their JVs
Right to appoint the general manager Right to appoint personnel to critical functional areas Setting up of policies and procedures Auditing Majority shareholding Using monthly or quarterly reports Setting up of a spending authorization limit
Right to appoint the chairman of the board Limiting issues requiring unanimous agreement Frequent visits to the JV Board meetings Relying on management skills to gain control Relying on technical skills to gain control Right to appoint personnel to key positions
Conclusions
the survey shows that the ranking of the importance of mechanism differ depending on the equity stakes of the parent firms
majority – 3 most important control mechanisms were “right to appoint the general manager”, “majority shareholding” and “right to appoint personnel to critical functional areas” Equal – 3 most important control mechanisms were “right to appoint general manager”, “right to appoint the functional manager” and “setting up of policies and procedures” Minority – 3 most important control mechanisms were “auditing”, “right to appoint general manager” and setting up of policies and procedures”
However, the right to appoint general manager, right to appoint personnel to critical functional area, setting up of policies and procedures, using monthly or quarterly report & setting up of a spending authorization limit are important and interrelated Firms has greater sense of control and satisfaction of the JVs when they had the rights to appoint chairman, General manager, financial manager, production manager, marketing manager, human resource manager and purchasing manager
However we can’t rule out the same for different nationalities parent as there’s different management skills and know-how
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