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Transparency, will can help losing firms make comeback Market authority, get serious

THE ECONOMY is an important aspect of life and it is part of man’s daily life.  For example, accommodation is considered an economic item, while jobs and shopping for needs or accessories are economic conditions.  Even man’s birth and death are covered by laws on economy and its influences.  What I’m saying is not philosophical, it is an ‘economic’ speech.  Ask economic experts to ascertain my statement. Economically, affairs differ according to each condition.  For instance, if someone loses something, he begins searching in his memory as he might have given loan to a certain person or he asked another person to keep the money.  He may also review his personal expenditures or live in austerity.  He wants to move his personal economic position positively.  In other words, he acts in accordance with his capabilities.

As for companies - I’m talking here about the big ones, when any of them is unable to deal with a financial crisis due to debts or huge losses, the first move is to push aside undesirable files.  However, the coerced person resorts to difficult issues. Reducing expenditures is one of the easiest solutions for losing companies.  This step includes removing unnecessary expenses from the budget, probably the incentives of some top officials and even employees.  These solutions may also entail suspension of recruitments, reduction of salaries, allowances and compensation with different percentages, or firing some or many employees.

Some big companies with internal and external branches may adopt the same expenditure reduction policy.  They might re-consider their affiliates, some partnerships or contributions.  These circumstances usually lead to numerous disengagement cases; such as giving up shares in some affiliates or associate companies through separation.  Some of them separate with their capital, whereas many prefer separation based on the principle of giving up partnerships regardless of the manner by which it is done under the pretext of the so-called ‘poisonous assets’. I will not highlight reasons behind the losses, because some may use the international financial crisis as an excuse which is unacceptable in all cases, and others might claim decline in the value of assets.  We can talk a little about this point, since some companies had been affected by the remarkable decline in the value of assets, especially those purchased by borrowing from banks which do not provide financing facilities for free.  Banks lend money with the guarantee of considerable and accredited assets.

When the financial crisis happened, the prices of many assets decreased, hence, their value turned negative.  Under such circumstances, banks do not act as charitable societies.  They ask for mortgage or take other steps to protect their rights like resorting to the judiciary.  There are many examples in this regard as such incidents may have a negative impact on their positions in the bourse, that is, if they are listed on the stock market.  Many companies have been suspended from trading in the bourse for such reasons, while others have been de-listed.  These companies were treated in an oppressive manner without regard for the rights of shareholders or the companies’ condition.

On the contrary, some other companies were treated properly through rescheduling payment for their huge debts and their shares were re-negotiated in the bourse although they do not have enough capability as they no longer possess considerable assets or properties.  I will not, however, mention the names of these companies, as they are known to those who closely monitor the market.

Loss is not default and a mistake is not recklessness.  Using double standards and fooling shareholders are the real mistakes, particularly in terms of increasing capital which might serve as a door for misbehavior, deliberately or unintentionally, against the money of shareholders!  The funny thing is when we see a company deciding to distribute cash profits and increase the capital; only to empower itself to borrow money through the general assembly during the same assembly session!

Some malpractices have been going on, yet, the Kuwait Market Authority have not taken any serious step to prove it is keen on moving the wheels of development forward or it could be the ‘honest’ opponent for some companies experiencing difficulties, or even deal professionally with some of the listed companies.  Add to this the step of looking into the positions of some companies whose losses reached 75 percent of their capital and could be listed until now.  The solution lies in transparency and serious dealing, besides putting despotism aside in dealing with companies. Compliments do not handle situations nor provide good results.

By Yusuf Awadh

By: Yusuf Awadh

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