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The 2006 Asian Roundtableon Corporate Governance

Enforcement Revisited/Boardroom Practices

Motoyuki YUFU Principal Administrator

Outreach Unit for Financial Sector ReformOECD

Session 2Implementation and Enforcement of Rules; Progress Made and Challenges Ahead

Bangkok, Thailand14-15 September 2006

The views expressed in this paper are those of the author and do not necessarily represent the opinions of the OECD or its Member countries or the World Bank

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Outline

Background; The Stock-Take Report

1. Regulatory Enforcement

2. Shareholder-Initiated Enforcement

3. Implementation; CG Codes, Principles and Guidelines

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The Stock-Take Report of the White Paper

The White Paper 2003 agreed on a stock-taking in a few years

Purpose: reference source for Roundtable economies and public to assess progress of implementation of 2003 White Paper Priorities

Not intended to rank or rate Roundtable economies

Based on 25 responses to Questionnaire (and further public information). Also discussed at previous Roundtable meeting in Bali

Progress made January 2003 – March 2005 (and some updated information available)

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The Stock-Take Report of the White Paper (Cont.)

The Report follows six priorities for reform of the White Paper

1. Awareness Raising

2. Implementation and Enforcement of Laws and Regulations

3. Convergence with International Standards for Accounting, Audit and Non-Financial Disclosure

4. Function of Boards of Directors

5. Protection of Non-Controlling shareholders

6. CG of Banks

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1. Regulatory Enforcement

Often involves many organisations; For instance, Justice Ministry Finance/Treasury Ministry Commerce/Industry Ministry Company Affairs Ministry Company Registrar SEC or FSA Stock Exchange Central Bank Police Public Prosecutors Office And more…

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1. Regulatory Enforcement (Cont.)

Coordination among relevant organisations for better law enforcement

China; Bureau for Investigation of Securities Crime (Ministry of Public Security, on the premises of CSRC)

Malaysia; High-Level Committee on CG Enforcement (Securities Commission, Royal Malaysian Police and Companies Commission)

Thailand; Department for Special Investigation (DSI) (and the WG system among DSI, SEC, Public Attorney and Bank of Thailand)

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2. Shareholder-Initiated Enforcement

The White Paper recommends shareholders be permitted derivative and/or class-action suits

“No consensus has emerged from the Roundtable on the derivative versus class-action issue.” (White Paper #148)

Among 13 economies 10 had provided for Derivative suits 　　 while 8 for Class Action suits (White Paper 2003)

After the publication of the White Paper, the OECD Principles were revised. Revisions include putting more emphasis on shareholders’ suits.

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2. Shareholder-Initiated Enforcement (Cont.)

Derivative Suits– Hong Kong; legislation to provide for statutory derivative

suits

Class-Action Suits – Korea; Class-action suits legislation was adopted and came

into force.– Thailand; Draft class-action suits legislation has been

proposed.– Chinese Taipei; A law established the Investor Protection

Centre; it has filed 41 class-action suits (as of May 2005)

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3. Implementation; CG Codes, Principles and Guidelines

Since 2003… Bangladesh; Voluntary Code (Bangladesh Enterprise Institute) and mandatory Code (SEC) Hong Kong; Revised Listing Rules to introduce Code (Stock Exchange) Indonesia; Revised 2001 Code (National Committee for Governance) Korea; Revised Code (Committee on CG) Pakistan; Manual for the 2002 Code (SECP) Singapore; Revised Code (MoF) Thailand; Revised Principles (Stock Exchange)

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3. Implementation; CG Codes, Principles and Guidelines (Cont.)

Efforts continue and most Roundtable economies now have CG Codes or equivalent. 　

Further improvements on this could be…

“Comply or Explain”

Public Consultation

Revision and Update; CG is evolutionary in its nature

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Thank you

The Stock-Take Report will be made public next month.

Also, check the OECD web site for the Policy Brief on CG of Banks in Asia (June 2006)