Corporate governance: Asia Pacific

JAPAN  The Japan corporate governance committee published its revised code in The Code had six chapters, which contained 14 principles.

(i) Mission & Role of Board :- It contains 5 principles –  Position & purpose of BOD  Function & powers  Organization of the BOD  Outside directors & its independence  Role of the leader of the BOD

(ii) Mission & role of committees estd within BOD:-  The BOD is recommended to establish various committees including an audit, compensation & nominating committee.  It should have atleast 3 directors & an outside director as chairman of the committee.

(iii) Leadership responsibility of the CEO:-  Formulate management strategies  Set up an executive mgt committee to assist him in conducting all aspects of the business

(iv) Addressing shareholder derivative litigation:-  A litigation committee, comprised a majority of independent directors, may be estd to determine whether litigation action should be made against directors or executives against whom the co/shareholders may have claim

(v) Securing fairness & transparency for executive management:-  Internal control  disclosure

(vi) Reporting to the shareholders & communicating with investors:-  The co’s executives are encouraged to meet analysts & others who can convey info to investors & shareholders about the co.  Info should be posted on the Internet.

 In 2004, the Tokyo Stock Exchange issued the principles of corporate governance for listed co’s.  The legal framework in Japan, via the Commercial Code of Revision on Boards (2003), provides for two corporate governance structures :- (i) Corporate Auditor’s system- consisting of general meetings with BOD, auditors (ii) Board of corporate auditors & a committees system- general meetings of the shareholders, BOD & committees.

SOUTH KOREA  The Korean committee was estd in March 1999, with funding from the Korea stock exchange, the Korea Securities dealers’ association, the Korea listed co. association, & the Korea investment trust co’s association.

 The Code has 5 sections:- (i) Shareholders – rights & responsibilities (ii) BOD – setting corporate goals & strategies to achieve them, approving business plans & budgets, supervising risk management activities, ensuring appropriate information disclosure. Board meetings of the full board should be held regularly, at least once a quarter.

(iii) Audit Systems – All public corporations, govt. invested institutions & financial institutions, should establish an Audit committee composed of at least 3 board members, of which at least two- thirds should be outside directors; at least 1 member should have professional auditing knowledge. (iv) Stakeholders – appropriate means of redress for infringement of their rights.

(v) Management monitoring by the market – Corporations shall actively disclose matters of material importance to the decision making of shareholders, creditors & other interested parties.

MALAYSIA  The Code has 4 parts :- (i) Broad principles of good corporate governance (ii) Best practices for companies (iii) Role of investors & auditors in corporate governance (iv) Explanatory notes

 Directors – responsibilities will include (i) Strategic direction of the co. (ii) Ensuring proper mgt (iii) Identifying risks & their management (iv) Overall effectiveness of the internal control systems (v) Investor relations (vi) Training of directors

 Director’s remuneration – there should be a committee to recommend remuneration levels for the executive directors. The remuneration of non-executive directors should be decided by the board as a whole & should reflect each non- executive’s experience & responsibilities in the company.  Accountability & Audit – an audit committee should be estd, comprised of atleast 3 directors with majority being independent. Its role is:- (i) Reviewing financial statements (ii) Appointment of external auditor, his fee, nature & scope of audit (iii) Reviewing the scope & results of internal control

 Shareholders - there should be an effective communication strategy b/w shareholders & board.

CHINA  The Code is broadly based on the OECD Principles of Corporate Governance. It contain 7 main chapters :- It contain 7 main chapters :- (i) Shareholders & meetings :- they should be treated fairly & should have equal rights, redress thru legal action, proper communication channels.

(ii) Listed co’s & its controlling shareholders – This section of the code deals with a protocol for how the controlling shareholders should behave when an enterprise is being restructured or reorganized prior to listing. The controlling shareholders initially nominate the candidates for directors & supervisors on the basis of their professional skills, knowledge & experience. The controlling shareholders initially nominate the candidates for directors & supervisors on the basis of their professional skills, knowledge & experience. The listed company should be able to act independently of the controlling shareholders. The listed company should be able to act independently of the controlling shareholders.

(iii) Directors & BOD – they should ‘faithfully, honestly & diligently perform their duties for the best interest of the co. they should meet periodically & have a pre- set agenda, with timely & clear information about all agenda items being sent to directors. (iv) Supervisors & supervisory board – this board should comprise individuals with professional knowledge or work experience in such areas as law accounting. Duties are :-  Supervising corporate finance  Supervising directors’ & managers’ performance  Protecting co’s & shareholders rights & interests

(v) Performance assessments & incentive & disciplinary systems –  Performance should be assessed thru a fair & transparent procedure  Compensation should be linked to both the co’s performance & the individuals performance. (vi) Stakeholders – the Code mentions that the co. should respect the legal rights of the various stakeholder groups & provide them with information as appropriate. (vii) Information disclosure & transparency

AUSTRALIA  In 2003, ASX corporate governance council issued the principles of Good Corporate Governance & Best Practice Recommendations.  10 core principles:- (i) Recognize & publish the respective roles & responsibilities of Board & mgt (ii) Have a board of an effective composition, size & commitment to discharge adequately its responsibilities & duties

(iii) Promote ethical & responsible decision making (iv) Have a structure to independently verify & safeguard the integrity of the co’s financial reporting (v) Promote timely & balanced disclosure of all material matters concerning the co. (vi) Respect the rights of shareholders & facilitate the effective exercise of those rights

(vii) The system should identify, assess, monitor & manage risk & inform investors of material changes to the co’s risk profile (viii) Fairly review & actively encourage enhanced board & mgt effectiveness (ix) Ensure the level & composition of remuneration is sufficient & reasonable & that its relationship to corporate & individual performance is defined (x) Recognize legal & other obligations to all legitimate stakeholders