Asian corporate law enforcers need more powers, say experts
Asian corporate law enforcers need more powers, say experts
SINGAPORE (AFP): Asian countries have made significant
progress to improve laws for better corporate governance but more
efforts in the area of enforcement are needed, speakers at a
forum said on Tuesday.
Guardians of corporate governance in the region still lack the
authority to ensure companies adhere to the laws, said Gabriel
Hawawini, dean of investment banking at French business school
INSEAD.
"There is a lack of enforcement I believe and lack of
enforcement not because there is a lack of will to enforce," he
told AFP on the sidelines of the corporate governance forum
organized by INSEAD and the Japan External Trade Organization
(JETRO).
"It's just that even the legislation that was introduced does
not give enough powers to these agencies to apply very strict
enforcement," he said.
Even Hong Kong, which is among the leading Asian economies
with a high level of corporate governance, has failed to empower
its Securities and Futures Commission with the necessary "bite
and teeth" to punish violators quickly like its US counterpart,
the Security and Exchange Commission, Hawawini said.
"In the US, the SEC can very quickly freeze any suspect assets
and even make arrests," he said.
"My understanding is that the Securities and Futures
Commission does not have this authority," he said.
In his address to delegates at the forum, Hawawini praised the
efforts of Asian governments to improve corporate governance --
which was painfully exposed as below world standards during the
1997-98 financial crisis -- but urged that watchdogs be given
more powers to enforce the laws.
"It is not enough to say you cannot do this or you cannot do
that. We also have to have a system that says if you don't do it,
you are going to be penalized," he said.
"So we need to go even a step further in the legislation."
Noboru Hatakeyama, chairman of the Japan External Trade
Organization, said Asia in its search for better corporate
governance could import some of the strong points in the U.S.-
based model including transparency and the belief that
shareholders are the key priority for companies.
But he urged against implementing the US model completely
because "Asia is still not an individual-based society" like the
United States.
"It's still very much a communal-based society," Hatakeyama, a
speaker at the forum, told AFP.
Global investors' demands for greater accountability and
transparency in financial systems since the crisis brought the
message home to Asian governments on the need for world class
corporate laws.
But the region's spectacular recovery from the crisis may be
leading some of the countries into a false sense of security,
Hatakeyama said.
"Some complacency may be settling into some of the countries
since the recovery. This could slow down the process," he said.
There must not be any slowdown in the efforts for better
transparency and accountability or else Asian companies will find
their value being diminished by investors, Hawawini said.
"There is mounting evidence that poor corporate governance
takes away from 20-40 percent of the value of your company," he
said.
"So the economic cost of poor corporate governance is not
negligible," he said.
Citing a survey by PricewaterhouseCoopers on Asian economies,
he said countries deemed to have weak corporate governance laws
typically have to pay a higher premium when they want to raise
funds in the global capital market.
For example, China and Indonesia have premiums of above 10
percent while Hong Kong and Singapore pay premiums of less than
three percent.