POWERS OF INFLUENCE
The kingpins, rainmakers and deal breakers that shape Asian finance.
By Lori Calabro and Alix Nyberg

If this past year taught us anything, it's that the world is full of surprises, some of which will affect businesses in Asia no matter how far away they seem. The attacks in the US, battles in the Middle East, and the standoff between India and Pakistan continue to shape Asia's economic life. For good measure, local developments that would have been tough to predict a year ago are influencing the world. Paramount among these are China's resilience in a global downturn, Japan's ongoing failure to wrest itself from economic decline, and, in surprising contrast, South Korea's latter-day proof that Asian Cinderella stories do exist. The individuals and organizations that play their parts in these dramas color the day-to-day decisions of the region's CFOs. How to raise capital, where to outsource, whether to expand: all are deeply influenced by politicians, financiers, visionaries and gadflies that represent a larger circle of influence affecting Asian business. Who are the key members of this network? The search for corporate influencers inevitably starts with certain occupations: bankers, investors, regulators, lawyers, accounting rule-makers, politicians. Within these ranks certain individuals stand out, either for their actions this year or for their enduring impact on world markets over the past decade or so. Less obvious but no less significant are the organizations, opinion leaders and media players that control the distribution of information worldwide. Then there are the wildcards, like the unexpected collapse of Enron and the omni-present US accounting scandals. These remote events will almost certainly lead to big changes in financial reporting for all those Asian companies that seek to raise equity in the US. Any list of global influencers must inevitably omit a host of worthy candidates. That said, the exercise can offer a framework for understanding who the major players are, and who may be the originators of next year's surprises.

Raters & Regulators

CHINA
Laura Cha - Vice-chairman, China Securities Regulatory Commission

In trying to scrub China's securities markets, the 50-year-old, US-educated Cha has grabbed a dragon by the tail. Her recent anticorruption efforts include China's first-ever stock delistings, several major fraud crackdowns, and new audit requirements for domestic IPO prospectuses.

It doesn't help that China's two major stock market indices each fell more than 20 percent last year after rising more than 50 percent in 2000. The only market open to foreigners, the B-share market, is particularly sickly, with nary an IPO in more than 18 months, and daily trading volume at about 10 percent of last year's activity.

But Cha's track record - she cleaned up Hong Kong's stock market - and her recent comments about giving foreigners broader investment opportunities in China have won her the confidence of many foreign investors.

IASB

Arguably the greatest beneficiary of US GAAP's recent humbling is the International Accounting Standards Board (IASB), which is toiling to reconcile national accounting standards from around the world with international accounting standards (IAS) created by its predecessor, the International Accounting Standards Committee. While full convergence is a long way off, chairman Sir David Tweedie's insistence on putting the most sacred cows on the block first is already putting the scare into US CFOs. Of nearly 300 letters on IASB's stock option treatment, for example, most are from US finance executives pleading for the US way to be adopted. Pension smoothing, currently allowed by the US Financial Accounting Standards Board (FASB) but not by its UK equivalent, is likely to be another incendiary topic.

Tweedie, a feisty Scot who made his name building up the UK's Accounting Standards Board in the 1990s, typically pushes for progress over consensus at the monthly, multiday meetings - a style that rankles some members. Japan nearly withdrew its liaison, PricewaterhouseCoopers' subsidiary partner Tatsumi Yamada, on the IASB's decision to eliminate pooling (and Tweedie's pointed declaration that mergers of equals did not exist, even in Japan).

More conflicts are almost certain. Warren McGregor, liaison to Australia and New Zealand, is already well known as a critic of FASB's lease-accounting methods, likely to be the starting point for the IASB's rules. Members are all over the map on accounting for derivatives, a project the UK standards-setting board is spearheading (or stalling on, as US liaison Jim Leisenring has charged). European countries, meanwhile, struggle to hold on to the current IAS, since they are already obliged in principle to convert to those standards by 2005. In other words, don't hold your breath waiting for the revise.

UNITED STATES
Robert Herz - Chairman, Financial Accounting Standards Board

With the foibles of generally accepted accounting principles causing many to question the very existence of the Financial Accounting Standards Board (FASB), Herz, chairman of the FASB as of July 1, will have all sorts of fires to put out when he takes over.

Many say the 48-year-old native New Yorker is the ideal candidate for the task. Known as a consensus-builder, the former PricewaterhouseCoopers senior partner brings technical expertise, particularly in derivatives and fair-value issues, to the job. He also brings some serious international savvy, including UK GAAP certification and a year on the 14-member International Accounting Standards Board (IASB).

He'll lean on the IASB to sort out the treatment of stock options, and may even try some imports at FASB. "I think some of the standards developed internationally could be applied to the US," says Herz. "I see it as a two-way street," he adds.

BELGIUM
Baron Alexandre Lamfalussy - Chairman, Committee of Wise Men

EU regulators are not known for speed - after all, it took them 20 years to create a central bank. But they are moving faster, thanks to the 72-year-old Lamfalussy, chairman of the so-called Committee of Wise Men and an author of its influential 2001 report on developing a pan-European market. By goading his colleagues about the superiority of the markets in the US, and setting the project on a "fast-track" schedule, Lamfalussy may succeed in pushing the EU to hash out a framework by next year. If it flies, companies would be able to use the same prospectus to raise capital in any EU country. By 2005, they could also trade continent-wide via a single exchange listing. If the project tanks, however, it may be another 20 years before a pan-European market is achieveds.

UNITED STATES
Harvey Pitt - Chairman, Securities and Exchange Commission

Hoping to initiate a "kinder, gentler SEC" - a phrase he's come to regret - Pitt has been forced instead to demonstrate a tougher approach to enforcement. As former chief counsel for the accounting firms in their battle with his predecessor Arthur Levitt, the 57-year-old Pitt must step delicately between the auditors and Congress in the post-Enron environment. So far this year, the SEC has opened nearly three times the number of financial fraud cases it handled last year, and brought others to dramatic conclusions, including a record US$10 million fine for Xerox, with ongoing probes into the company's executives and auditors (KPMG).

EUROPEAN COMMISSION
Karel van Hulle - EC Head of Financial Reporting and Company Law

Convert - or else! That's the key message this Belgian lawyer, aka Mr. International Accounting Standards, has the task of promoting to EU companies. Although a regulation requiring mass conversion to IAS by 2005 has been approved by the European Parliament, individual members are arguing that the EU should wait for the International Accounting Standards Board to conclude its efforts before making any changes.

Van Hulle, a single-market zealot, will have none of it - he won't even entertain the idea of extending the deadline. "Financial reporting will continue to develop; the art of communication must not drown in its wake," he wrote in a recent article. So much for that excuse; on the side, he's even pushing for the US Securities and Exchange Commission to accept IAS from foreign companies listing in the US.

World Players

INTERNATIONAL
Andrew Crockett - General Manager, Bank for International Settlements

As head of the Bank for International Settlements (BIS) since 1994, Andrew Crockett has shepherded this "central bank of central banks" from a European-focused organization to a clearinghouse and standards-setter for central banks worldwide. BIS is currently drafting Basel II, revisions to the 1988 Basel Capital Accords, which recommended a risk-weighted capital ratio for internationally active banks. He has aggressively resisted attempts by politicians, most recently German Chancellor Gerhard Schroder, to interfere with the financial standards-setting process. Notably, he has defended Basel II's emphasis on letting banks use their own internal methodologies to structure loan portfolios, rather than adhering to a broad-brush capital ratio focus. This rectitude, coupled with extensive experience at the IMF and previous tenure as executive director of the Bank of England, puts Crockett on the short list to become the next governor of the Bank of England).

INTERNATIONAL
Anne Krueger - First Deputy Managing Director, International Monetary Fund

In her attempts to structure a fair, streamlined way for nations to restructure their sovereign debt with increasingly diverse, non-centralized creditor groups (thanks to the increased use of securities and decrease in more-centralized syndicated loans), Krueger has found herself going head-to-head with John Taylor, undersecretary for international affairs at the US Treasury Department. Taylor, a George W Bush appointee, predictably abhors the regulation-oriented approach Krueger suggests - changes to IMF rules that allow a "supermajority" of creditors to agree on restructuring plans. Taylor's proposal calls for new contract language in all sovereign debt issues that allows the debtor to outline exactly how it would restructure in the event of impending default. Even IMF critics like Joseph Stiglitz hail Krueger's proposal, which is a reversal of an earlier plan that many felt gave the IMF too much power over restructuring proceedings. Stiglitz has called Krueger's plan a long-overdue recognition that market forces are often not enough to facilitate sovereign debt restructuring and economic reforms.

INTERNATIONAL
James D Wolfensohn - President, World Bank

Wolfensohn, an Australian-born former investment banker, had a short reprieve from relentless antiglobalist protest after the terrorist attacks. The break seems only to have given protesters time to regroup. They're now redoubling their attempts to bankrupt the World Bank by calling for a boycott of its bonds, its primary fund-raising tool. Meanwhile, new criticism of the bank - one of the major funding sources in the developing world - is coming from the US Congress, which recently released a committee report that called its development efforts "dismal". Deflecting the censure hasn't interrupted Wolfensohn's efforts to improve living conditions for the world's poor. He recently called for a doubling of aid from all nations and announced a pilot plan (which could cost up to US$5 billion) to bring primary-school education to the 125 million children in poor nations who do not attend school. One of his biggest challenges: heading off a Bush proposal to increase the percent of aid given out in the form of grants, not loans.

WORLD TRADE ORGANISATION
James D Wolfensohn - President, World Bank

According to its literature, the World Trade Organization (WTO), headed by former New Zealand prime minister Mike Moore, technically "does not dictate to governments" and "simply provides administrative and technical support" for its 144 members. Yet, as the world's primary trade-dispute referee, the WTO can move billions of dollars from one country to another with expert-panel decisions. US companies learned that lesson last January, when an appeals panel sided with the EU in declaring that the US law allowing companies to set up tax-favorable foreign sales corporations overseas was illegal. To recoup damages, the EU has already threatened to levy up to 100 percent tariffs on goods ranging from cereal to airplanes. Conversely, WTO intellectual-property rules promise to yield US companies an extra US$19 billion per year, according to a recent World Bank study, while costing Indian businesses US$900 million.

With nearly all major nations as members, the WTO can use sheer peer pressure to force change. Just look at China, which was granted membership in 2001 only after 15 years of negotiations and 1,000 pages of stipulations. If all goes as planned, the US$1.1 trillion economy will eliminate hundreds of subsidies and quotas in the next decade, while allowing foreign financial-services providers freer rein by 2005, among myriad other changes. Russia is now racing to get its laws in order, according to its officials. The WTO moves slowly, but its authority is likely only to accelerate in the coming years.

Exchange Masters

UNITED STATES
Richard Grasso - Chairman, New York Stock Exchange

Since September 11, Richard Grasso, 55, has been to the capital markets what Rudy Giuliani was to the citizens of New York: the man who promised, and delivered, a speedy return to business as usual. For the New York Stock Exchange (NYSE), business has been better than usual. During the past two years, Grasso has rebuilt the exchange by aggressively investing in technology, introducing new products, and getting rid of exchange rules that prevented companies from picking their own specialists. The bear market has given him time to implement changes, and today the NYSE is again the place to list. Possibly on deck: whether or not to merge with the American Stock Exchange.

AUSTRALIA
Richard Humphry - Managing Director, Australian Stock Exchange

The Australian Stock Exchange (ASX) may not be the largest exchange in the world, but it is one of the most innovative. Under Humphry, in 1998 it became the first exchange to demutualize and list its shares on its own exchange, giving it greater transparency and greater access to capital. Many other exchanges have followed suit. Humphry has also announced a broad alliance with the Tokyo Stock Exchange that may lay the foundation for a pan-Asian market. And that's just for starters: Humphry believes that within the next four years, a global exchange could be established, comprising 1,500 to 2,000 well-known stocks trading 24 hours a day in New York, supported by regional and national exchanges.

FRANCE
Jean-François Théodore - Chairman and CEO, Euronext

Jean-François Théodore has been busy. Since forming Euronext out of the former Paris, Brussels, and Amsterdam exchanges in 2000, he has overseen a listing of its shares, added Portugal's leading stock exchange, and signed a cooperation deal with the Helsinki bourse. Now the 55-year-old is digesting his biggest catch - London's Liffe derivatives exchange - and casting a line for other acquisitions. In fact, amid speculation that the Deutsche bourse is again contemplating a bid for the London Stock Exchange, Théodore has made it quite clear that such a bid wouldn't go uncontested. Few expect that Euronext will remain Europe's second-largest stock exchange by market capitalization for long.

Bankers

GERMANY
Josef Ackermann - Chairman, Deutsche Bank

Is Josef Ackermann Americanizing Deutsche Bank? The 54-year-old Swiss-born executive, who took over as chairman last month, is already shaking things up at Germany's largest bank. Ackermann gives all due respect to German political sensibilities, but he is also taking management power over Deutsche away from the company's supervisory board and putting it squarely on executive front lines. Increasingly, that will mean more emphasis on the securities trading/underwriting and asset-management businesses the company has acquired rather than on commercial and retail banking in Germany. Industry watchers expect Deutsche to make another acquisition in either the UK or the US to compete more broadly with Citigroup and JP Morgan Chase.

UNITED STATES
William Harrison - CEO, JP Morgan Chase

The urge to merge can be hard to resist. When William B Harrison Jr., 58, became CEO of Chase Manhattan in 1999, he was determined to keep up with Citigroup, which acquired Salomon Smith Barney and then Travelers Group in 1998. Harrison's aim, like Citigroup's, was to get into more-lucrative investment-banking services. To that end, he purchased Hambrecht & Quist in 1999, before the tech collapse, and then pulled off a megamerger with JP Morgan. Postmerger performance has suffered - earnings were down by 70 percent last year. The bank also has more than US$2 billion in exposure to Enron, and its dealings with Enron are being investigated by the US's SEC and Federal Reserve. Nonetheless, JP Morgan is the second-largest bank in the US, with a huge syndicated lending operation and a growing presence in investment banking.

CHINA
HSBC Holdings and Bank of China

Outside Hongkong and Shanghai Bank in Hong Kong, two bronze lions stand guard; passersby rub the paws for good luck. And why not? The bank is part of London-based HSBC, one of the world's largest banks and the most powerful financial institution in Asia, outside of Japan. But HSBC's presence in China is currently limited, and its strong ties to the colonial past may handicap it in establishing a stakehold in the Middle Kingdom. Indeed, some observers think the future belongs to Bank of China (BOC). That's something of a long shot; BOC has been rocked by revelations of massive theft, and concern over the solvency of China's banking system is mounting. Still, China wants to show that it's serious about cleaning up the system - and BOC is its strongest financial arm.

CEOs

UNITED STATES
Jeffrey R Immelt - CEO, General Electric

Instead of having a smooth transition to CEO, Jeffrey Immelt has had a bumpy ride since he started on September 7, 2001. Almost overnight, General Electric's (GE) predictable earnings growth became a red flag for investors concerned about potential Enron-like earnings shenanigans. In response, Immelt, 46, complained about the company's floundering stock price during this year's shareholders meeting, and he expressed shock at the investment community's criticisms of GE's accounting. But he also reacted; this year's annual report includes an entire section on special-purpose entities. The world is watching how GE handles these challenges. If the only remaining original member of the Dow Jones Industrial Index can't restore investor confidence in the face of questions about earnings integrity, who can?

JAPAN
Yotaro Kobayashi - Chairman, Fuji Xerox

As a key spokesman for Japanese industry, Kobayashi, 69, presses the government to bolster Japan's economy and move toward reform. It's often a thankless task. Lately, the result has been more encouraging, as he has sought "drastic, aggressive taxation change" aimed at both business and consumers, and more government deregulation. Under Kobayashi, the Keizai Doyukai, Japan's Association of Corporation Executives, has set itself up as more activist than the country's four main economic associations. He aims to have the organization take a powerful role in politics, economics, foreign policy and education. And he wants it to help Japan through the pain and discomfort - complete with unemployment and some corporate failures - that the needed reforms will likely cause.

HONG KONG
Li Ka-shing - Chairman, Hutchison Whampoa and Cheung Kong

If Warren Buffett has a counterpart in Asia, it may be the 74-year-old head of Hong Kong-based Hutchison Whampoa, which operates ports globally and has other interests in telecommunications, real estate, retail, manufacturing and energy.

Li's far-flung businesses did as well as US-based Berkshire Hathaway's in the 1990s, with annual returns above 20 percent, earning him Forbes magazine's designation as Asia's wealthiest man. Templeton World Fund and Templeton Foreign Fund manager Jeff Everett rates Cheung Kong as "one of the best managements in Asia, if not the world." He adds that investors who expect "a great bull market in Asia" might do well to align themselves with "a man who's going to see opportunity there first and foremost." Says Everett: "It's not going to be Warren Buffett. It's going to be Li Ka-shing."

UNITED STATES/AUSTRALIA
Rupert Murdoch - Chairman, News Corp.

Who says all media are liberal? Murdoch, 71, runs his US$14 billion intercontinental news and entertainment company with equal attention to profits and promotion of his conservative views. Last year Murdoch's growth plans were set back by the worldwide advertising plunge, and special disruptions like BSkyB satellite broadcasting's affiliation with Germany's failed Kirch Group.

Across his empire, he's planning "painful cost-cutting and new efficiencies" to help cope with the highly competitive market. Look out Twentieth Century Fox, Fox Television, GemstarTV Guide, HarperCollins books, and Murdoch newspapers, which include the Sun and the Times of London. But for the consummate self-made man - who started with a single Adelaide paper in 1954 - it's all about setting the stage for more global expansion.

Gadflies

UNITED STATES
William Gross - Manager, Pimco Total Return Fund

As caretaker of the US$235 billion Pimco Total Return Fund, William Gross's words make waves in the US$14 trillion bond market. This spring, he took General Electric to task for what he considered misleading investors by overloading on short-term debt and massaging earnings. That sent GE stock tumbling more than 6 percent in two days and forced company managers to promise to reduce short-term debt. In October 1999, observers thought he was crazy when he predicted that the US economy was on the skids. Now they're listening closely to his forecast of a slow, protracted recovery.

UNITED STATES
Institutional Shareholder Services

When Institutional Shareholder Services (ISS) talks, people listen. The proxy advisory group headed by Jamie Heard analyzes proxy issues and provides vote recommendations for 10,000 US shareholder meetings each year. ISS's recommendation to back Hewlett-Packard's US$22 billion bid for Compaq Computer tipped the scales in one of the largest and hardest-fought merger-approval battles in recent memory. More recently, large institutional investors are taking its advice and not investing in companies with excessive stock-option overhang.

JAPAN
Toshiaki Murakami - President, M&A Consulting

In Japan, shareholders have traditionally held little sway in corporate policy-making, with boards generally insider-only affairs. That could change, thanks to the efforts of Yoshiaki Murakami, 42. In January, the former Trade Ministry bureaucrat demanded that cash-rich apparel maker Tokyo Style raise dividends and buy back its own stock. To emphasize the point, Murakami, whose company is Tokyo Style's largest shareholder, is nominating two outside directors. He is also credited with launching the first-ever hostile bid by one Japanese company for another, in 1999, and has urged pension funds to take an active role in company policy-making, Calpers-style.

UNITED STATES
David Webb - Editor, Webb-site.com

While Hong Kong regulators talk about untangling the island's sticky networks of family-owned companies, insiders say Webb, 36, is actually doing it. His Webb-site.com "speaks the unspeakable," as he says, taking companies to task over sketchy insider IPO and M&A arrangements, and occasionally shaming them into reform. In 1999, he actually forced Hong Kong-based Wheelock to increase its offer for department store operator Lane Crawford International through a minority-shareholder revolt. Webb's reception among regulators has been mixed - the stock exchange appointed him to two important oversight committees last year, but financial overseers recently squashed his campaign for an exchange-funded shareholders association that would allow for class-action suits.

Additional reporting was provided by Ronald Fink, Kris Frieswick, Roy Harris, Leigh Held, Julia Homer, Joseph McCafferty, Michael O'Loughlin, Andrew Osterland, Tim Reason and Edward Teach.