CORPORATE GOVERNANCE REFORMS AND IMPLEMENTATION IN MONGOLIA 5 TH CORPORATE GOVERNANCE FORUM May 9, 2012 Ulaanbaatar, Mongolia Dr. Demir Yener Senior Corporate Governance and Finance Sector Advisor Business Plus Initiative

Doing Business in Mongolia 2012 Has Mongolia Strengthened Investor Protections—or Not? DB YearReform DB 2012No reform DB 2011No reform DB 2010No reform DB 2009No reform Please see Doing Business reports for prior years, at

3 1.Board responsibilities and capacities must be increased 2.Minority shareholders rights and equitable treatment of all 3.Improve transparency and disclosure 4.Public education for increasing CG awareness 5.Banks must play a larger role in promoting better CG 6.Transform the stock exchange into a vibrant market e.g. Government bonds & asset backed securities 7.Develop accounting and auditing certification programs. 8.FRC enforcement capacity must be increased 9.SOE CG must be improved 10.Help develop the market for corporate control USAID CG Assessment 2008 Recommendations

World Bank ROSC 2009 Recommendations 1. Hold all regulatory bodies accountable for enforcing the legal and regulatory framework. – Better resources for BoM, FRC, MSE and others 2. Restore trust in the market by developing a de-listing process for all companies that are inactive, suspended, –Help with independent and fair price discovery 3. Modernize the corporate governance framework by amending the company, banking, accounting and auditing, and securities laws, relevant regulations, in particular the listing rules.

World Bank ROSC 2009 Recommendations 4. Develop a strategy to improve upon the corporate governance of Mongolia’s state-owned enterprises. 5. Build a qualified cadre of directors by supporting the Mongolia Corporate Governance Center and other nascent CG institutions… –developing quality director training programs, encouraging directors and managers to participate in such programs, and publicly raising awareness of and building the business case for good corporate governance.

Strength Of Investor Protection Index (DB 2012) Source: World Bank Doing Business database, 2012

Protecting Investors Indicators (DB 2012) Source: World Bank Doing Business database. 2012

Recommendations for CG Reform Priorities Building the business case for the importance of good corporate governance practices 2.Ensuring that the legal and regulatory framework that adequately protects minority shareholders from expropriation. 3.Ensuring improved capacity of the regulatory institutions for an active, visible and effective enforcement of corporate governance 4.Enhancing the quality of disclosure in a timely and transparent manner, including all material information about ownership & control 5.Raising board performance by continued director training, monitoring and evaluation, and ensuring a transparent board nomination process 6.Facilitating and encouraging shareholder activism.

9 Role of disclosure in Corporate Governance “If investors are not confident with the level of disclosure, capital will flow elsewhere..” Arthur Levitt, Former Chairman of US SEC

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