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.