4th Asian Roundtable on Corporate Governance Applying CG Principles to Financial Institutions and Insolvent Companies Professor Nara Srinivasan Dean, Murdoch Business School Director, Project Acorn(Asian Corporate Governance) Mumbai, November 2002

The Issues:Global Perspectives  Currently no International Standards(G10 Basel Committee maybe soon)  Normal CG Rules Apply but in Most Jurisdictions Cross Directorships Specifically Neglected(Conflict of Interest Rules Apply)  Regulators Generally Weak and Under funded (with some exceptions)

The Issues:Global Perspective  Joint approach using OECD and Basel Committee recommendations  OECD Principles suggested as being ideal  Basel Committee 1)Sound regulation through effective Governments  2)Disclosure regimes  3)Accounting Standards  4)Industry Associations ie Voluntary Participation

The Issues: Global Perspectives  5)Importance of Risk Management approach  Apec Business Advisory Council(ABAC) and PECC working on implementing Basle 11 Accord on Risk Management  Main challenge: Non Ownership Issues and SME’s  Political Interferences

Asian Region: Classic Responses?  Major Problems: 1) Ownership Structures of Financial Institutions ie Oil Companies 2) Government Involvement in Pension Funds and Insurance Business 3) Cross Shareholding ie Financial Institutions and Major Industries 4) Shareholder Inactivism 5)ISLAMIC BANKING

ASIAN REGION: Classic Response  Study of 6 Focus Groups (42 Ceo’s, Regulators and Board Members of Financial Institutions)  No Stakeholder Definition  No Performance Management Tools for Ceo’s, Brokers and Sales Personnel(read fund managers)  Risk Management role of Boards unclear  Government Nepotism?

Asian Perspective: Insider?  Government?  Legal Definitions of Insider Unclear in 5 Asian Countries  Perspective that Insider is Good..ie Competitive Advantage  Lax Anti-Competitive Policies and Regulator

Asian Perspective: FRAUDS  Financial Institutional Frauds: Ranges from BMF(1985) to Bali Bank(1998)  Major Frauds in Pension Funds disguised as CG Failures?  Government Control of Financial Institutions…Fear Factor?  Cross Border Cooperation?

Where To?  Major assistance for Insolvent Companies  Working within current systems  Role of Financial Institutions in CG should be emphasized  SME’s and Financial Institutions Directors seem very lost  Shell Companies receiving Financial Institutions backing…..watch this space

Where To?  Improve Anti-Competitive Regulation  Pension Fund regulation (ie OSFI in Canada)  Role of Central Banks vs Bank Supervision  Islamic Banking Regimes and CG  Incentives to Supervision Agencies  Independent Risk Management&Audit