Asia needs stronger corporate governance
Asia needs stronger corporate governance
SINGAPORE (Dow Jones): Many Asian firms have taken steps to
strengthen corporate governance in the wake of the region's
financial crisis, but standards in Asia still fall far short of
those in leading countries, officials said on Wednesday.
"The argument for reform in Asia remains strong," Seiichi
Kondo, Organization for Economic Cooperation and Development
secretary general, said in opening a conference on the subject.
Good corporate governance is essential to ensure the smooth
flow of capital that Asia needs to weather the current global
economic slowdown, he told participants at the conference
sponsored by the OECD, World Bank and Asian Development Bank.
Corporate governance, a term that covers a wide range of
subjects such as the appropriate roles of directors, executives
and shareholders; accounting and financial reporting standards;
and managerial performance and is considered weak in many Asian
companies.
Achieving such reform in Asia will be tough because it not
only require changes in regulations, but "a change in the mindset
of companies," Kondo added.
In Singapore, where standards for corporate governance are
arguably the strongest among the world's emerging markets, the
city-state must do more, Finance Minister Richard Hu said.
"We know that we must not rest on our laurels. I believe the
corporate governance standards in Singapore are still not
comparable with those in leading jurisdictions, such as the U.S.,
UK, and Australia," he said.
Olivier Fremond, a member of the World Bank's corporate
governance unit, said it was the 1997-98 Asian financial crisis
that highlighted just how weak corporate governance standards
were in the region.
"Corporate governance has become a central issue of concern
for the World Bank," he said.
The conference is the third in a series of five in the region
aimed at producing reforms that can be carried out in Asian
countries through programs administered by the World Bank and
ADB, Kondo said.
Some observers have noted that the prospects for corporate
governance reforms in Asia are "rather gloomy" given some of the
deeply entrenched practices, such as the dominance of family
shareholders, said Jamie Allen of the Hong Kong-based Asian
Corporate Governance Association.
"It's a fair point," he said. "People say they see a lot of
form but not much substance in the area of reform."
There are signs, however, that Western-style corporate
governance practices are beginning to filter through to Asia, he
added.
Allen cited the example of pension funds in Japan starting to
vote their shares following years of poor returns from companies.
In South Korea, elections of outside directors are now being
contested in some cases, and in Hong Kong investors are forming a
group to represent the interests of minority shareholders, he
said.
"We're also seeing more shareholder activism in Indonesia that
wasn't there before," he said.