Transparency is no longer a ‘tick box’ exercise for shipping stakeholders seeking capital

By Carly Fields


Setting and raising governance standards for shipping all come back to the charter contract, a panel at London International Shipping Week advised.  

Panellist Tony Foster, CEO and CIO of Marine Capital, went so far as to describe the most important party in the chain as the charterer. “If the charterer is driven solely by price and that capital is mispriced then everybody in the chain has a problem,” he said, adding that if all stakeholders in all parts of the chain do not participate in raising standards “the whole thing fails”. 

For him, governance standards in shipping come back to transparency, from which responsibility and accountability; proper risk management; transparency and active engagement all spring.

Taking part in the discussion on shipping finance and questioning who is the arbiter of better governance, Jens Martin Jensen, CEO of Athenian Holdings, pointed out that less than 2% of the world’s shipping companies are public. So far, he said, all the focus has been on those public companies which are not representative of the whole industry.

Banks, added Michael Parker, chairman of global shipping, logistics and offshore at Citi, are not doing enough. “Is it all about the money? Yes,” he said. “The standards are only going to increase.”

Parker said that the question is about transparency, rather than governance, and that data on what constitutes transparency is changing. “There are consequences and a cost to this,” he said, warning that the cost of shipping will have to increase in the future to cover rising crewing costs, governance and properly functioning supply chains. 

Governance standards in shipping come back to transparency

Capital attractions

Foster told the conference that definitions can only take the industry so far; it’s the practice and the rationale for why a charter is selected and why a ship is bought. “It’s whether you can provide that evidence to an institutional investor in a way that they will understand,” he said. “It has to be done and we will have to find ways to do this clearly in order to attract that capital. We have to set the definitions; we need to build that and then go to our investors and explain them. If we go down that route, we have much more chance with our investors.” Education of what constitutes good governance is therefore essential - and cannot be taught overnight.

Looking at good financial governance in practice, the panel highlighted Taylor Maritime Investments’ successful closure of an IPO in London earlier this year to raise $253.7m. It had subscriptions for 10m shares over the 150m share target for the IPO and a scale-back process had been undertaken. CEO Ed Buttery said that he hoped Taylor Maritime Investments’ success drives others. “For too long there have been horror stories about corporate governance. Those tests are becoming more stringent. Anyone coming to London who isn’t prepared to sign up to the highest level of corporate governance should look elsewhere. This is not a box ticking exercise anymore.”

Foster saw this increased governance ultimately driving the availability of finance for shipping. “I think Western asset managers - public or private - and Western institutes run the risk of ultimately having their business shrink considerably because they are unable to compete with capital or services because they do not meet the same standards.” Ultimately, he continued, it will come back to charterers - they have the biggest lever over change. “But their internal business models may have to change to enable them to do that.”

For too long there have been horror stories about corporate governance

Collective action

‘I did it my way’ “doesn’t work anymore in terms of governance”, said Parker. The industry has to do it collectively, in a way that society is prepared to pay for. And failure to improve governance and transparency is not an option, not only for attracting financial capital, but also for attracting human capital. “We have to attract more business by raising the bar,” said Foster, while Parker noted that the image of shipping and the narrative is crucial – both, he said, will help governance.

However, the secretive nature of shipping puts it on the backfoot. While it prefers to be private and not disclose anything, it still wants public money. “Shipowners have shown again and again that they cannot regulate this. We need someone to help us out,” said Jensen.

Parker suggested that the industry go down the route of making a licence mandatory for operating ships. “Shipping has to accept that it is going to become as regulated as aviation. You won’t have 27,000 ship owners then - that’s about raising governance in the industry.” It isn’t, he said, the IMO’s role. Instead, there could be a coming together of existing industry players to set standards around commercial shipping and elevate those collectively.