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27/03/2003 - The Asian Roundtable on Corporate Governance, organized by the OECD in partnership with the World Bank, met in Kuala Lumpur, Malaysia, to establish regional reform priorities and to develop a White Paper on Corporate Governance in Asia.
Scheduled for release in Tokyo, Japan, June 11, 2003, the White Paper will set forth a common policy agenda for corporate-governance reform in the Asian region.
The 26-28 March meeting in Kuala Lumpur (the fifth in a series of OECD-organized Roundtables, which began in 1999) gathered 28 regulators from 13 Asian countries, plus 35 regional and international policy makers, experts and business leaders.
"The Roundtables bring together decision makers from across the region," said Charles Grieve, Hong Kong Securities and Futures Commission. "This provides an invaluable opportunity to share real-world experiences with our Asian peers, as well as with OECD-member-country experts."
The Roundtable identified four areas for priority reform: minority-shareholder protection, bank governance, improved enforcement and enhanced corporate-governance culture.
The protection of minority shareholders. The prevalence of closely-controlled businesses in Asia places minority shareholders at risk of exploitation. Such exploitation occurs when controlling shareholders and managers strip assets from the company through abusive self-dealing, pay themselves excessive compensation, engage in insider trading or act in their own interests to the detriment of the company.
Bank governance plays a three-fold role in corporate governance. The continuing need for equity capital often drives good corporate governance, since a company's track record with equity investors greatly determines its ability to raise additional public equity. Where soft lending practices reduce the need for additional equity, companies have less reason to care about their governance. Second, effective monitoring by lenders can help prevent or catch borrower problems or abuses that might otherwise go undetected by the borrower's shareholders. Finally, good bank governance increases returns to the bank's own shareholders and promotes financial-system stability.
Audit and accounting standards and practices should take into account international norms, including auditor independence, quality assurance, codes of ethics and continuing professional education.
Boards of directors must improve their participation in strategic planning, monitoring of internal control systems and independent review of transactions involving managers, controlling shareholders and other insiders.
Finally, improving corporate-governance laws and regulations has proven to be easier than enforcing these new laws and regulations and creating a corporate-governance culture. Changes in formal rules have not always been matched by changes on the ground, and in many countries, there is a widening gap between theory and practice, rules and their implementation.
Using the OECD Principles of Corporate Governance as a conceptual framework, the forthcoming White Paper on Corporate Governance in Asia will describe progress to date, identify remaining challenges and make concrete recommendations to guide policy makers and technical assistance providers.
"The White Paper's recommendations will carry weight because they represent the views of leaders from the region," according to Datuk Ali Abdul Kadir, Chairman of the Securities Commission, Malaysia, co-host of the Kuala Lumpur Roundtable. "The OECD plays an important role in providing an international policy perspective and facilitated dialogue, but ultimately the commitment -- and the responsibility -- to improve corporate governance in Asia have to come from us."
For further information about the OECD's work on corporate governance in Asia, journalists are invited to contact Helen Fisher, OECD Media-Relations (Tel:[33] 1 45 24 80 97 ) or Robert Zafft, OECD Financial and Fiscal Affairs (Tel: [33] 1 45 24 43 44).
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