The Magnificent Dozen
Jul 31, 2017 , http://www.kaieteurnewsonline....e-magnificent-dozen/
Guyana’s business environment is dominated by a small group of about twelve companies. If any of those companies goes bust or belly-up, the consequences for Guyana’s economy will be disastrous.
It may not affect growth, but when it comes to employment, financial stability and foreign exchange earnings, any instability within the ownership and operational structures of those companies can sink the economy of Guyana. The fall of any of these big companies will create severe aftershocks.
We have predators out there who want to get a foothold within these big companies. Those predators want to make minimal shareholding investments but want control so that they can acquire these companies as part of their private kingdoms.
There is rivalry among some of the twelve companies for market share and domination. There are backdoor deals being employed and gossip campaigns being launched, all with the intention of trying to undercut each other. Predatory corporate positioning and vicious competition are alive and kicking in Guyana’s corporate world.
The only reason why none of these twelve corporate giants have imploded or have been snatched by predatory companies is because of the brave actions of existing shareholders and corporate executives who know a threat when they see one.
Those shareholders and executives do what any responsible owners and executives would do. They protect their companies from hostile takeovers.
Every corporation has its rules. Those who wish to make a grab for companies have to understand those rules and the attempts which can be made, lawfully, to frustrate a takeover. Once you understand those rules, then you have to play by those rules.
You cannot expect corporations to bend their rules. You have to understand the shareholding structure and how those structures operate before you make a predatory bid for influence or even control. You have to plan and carefully plot your strategy when you are trying to secure a takeover or gain influence within the corporate structure.
You cannot complain that the system is stacked against you. You have to understand the rules of the game and the means by which the existing shareholders exert domination. Those rules are contained in the companies’ articles of association and do not always favor major shareholding concerns.
Two examples will illustrate this point. The government of Guyana had 20% shares in a company but found that they had little influence on the Board of Directors even though they were represented. The agreement constituting the company did not allow a 20% shareholder to have a decisive say.
The government knew that when they took that share and they were obligated to accept that the only value of those shares to the government were its worth and dividend potential. It did not grant them controlling influence.
A decision was taken to sell those shares to a foreign company. The new buyers knew what they were buying. They were not interested in control. They wanted to position themselves, perhaps, to eventually make a bid for the ownership.
They did not go around like a cry-a baby complaining about the unfairness of them being a major shareholder yet being unable to exert influence over what the company did. They are bidding their time, until they achieve their objective.
A second all-purpose company was established by the former government but its financing structure was such that government, which loaned the bulk of the funds for the company, did not have a controlling interest and still may not have such control.
The arguments can be made about the fairness of situations in which significant shareholders are shut out from the corporate Boardrooms. It is not a situation that is unique to Guyana. You have to understand the shareholding and representative structures of the companies you are investing. Those structures are the foundation of corporate stability.
The ‘magnificent dozen’ has provided stability to Guyana’s corporate environment. There are predators that want a ‘piece of the action’ and are prepared to upend the stability of this environment in the name of corporate greed.
Guyanese have to be careful about lending support to such predators who do not always have the interest of the companies at heart. Some of these predators just want to acquire other companies in order to remove the competition and close the company down.
A foreign company made a bid once to take over a local company. The suspicion was that it was interested in market share rather than the interests of the employees.
Guyana’s corporate sector is controlled by a handful of companies. It is a tenuous situation. Instability within these companies can have disastrous economic impacts. Beware of the predators!