www acga-asia org n Asian Corporate Governance Association

www. acga-asia. org n Asian Corporate Governance Association (ACGA) “Keeping Abreast of Emerging Global n Best Practices in Corporate Governance" ” n n n Presentation by Jamie Allen, Secretary General, ACGA at the ISCI Conference on International Economics and Corporate Governance in Emerging Economies Hong Kong, May 12, 2008 ACGA Presentation ISCI, May 12, 2008 1

Tomorrow’s Issues Ø Improved financial reporting Ø Strengthened shareholder rights Ø More effective enforcement Ø Better board practices Ø Focus on ESG ACGA Presentation ISCI, May 12, 2008 2

Improved financial reporting n What investors are looking for: Ø Consolidation of accounts: Korea, Taiwan (quarterlies) Ø More detailed/quicker translation of reports: Japan, Korea, Taiwan Ø Faster reporting deadlines: Hong Kong (moving from 120 days to 90 days for audited annuals? ) Ø Quarterly reporting: Hong Kong? Ø Quick disclosure of stock-option grants: Singapore recently tightened its listing rules. HK plans to do so. Ø Continuous disclosure: more regular disclosure sought of price-sensitive information. ACGA Presentation ISCI, May 12, 2008 3

Strengthened shareholder rights n What investors are looking for: Ø Proxy voting: earlier release of final agendas/circulars; full voting by poll; publication of full voting results. Ø Shareholder meetings: easier access for fund managers to meetings in Singapore (the “two-proxy problem”). Ø Fairer “general mandates”: tighter rules on dilutive private placements sought in Hong Kong. Ø Shareholder proposals: some fund managers exploring the option of putting forward proposals to AGMs; this is possible, but subject to restrictions. Ø Privatisations/delistings: protections for minority shareholders are weak in much of Asia. ACGA Presentation ISCI, May 12, 2008 4

Shareholder rights: A work in progress Market Can minority shareholders easily elect an INED? Are pre-emption rights for minority shareholders firmly protected? Is there a trend of large listed companies voting by poll? China No No Somewhat Hong Kong Marginally Yes India Marginally Indonesia No Largely No Japan No No No Korea No Marginally No Malaysia No Marginally No Philippines No No No Singapore Marginally No Taiwan Marginally No No Somewhat Thailand ACGA Presentation ISCI, May 12, 2008 5 Source: “CG Watch 2007”

More effective enforcement n What investors are looking for: Ø Regulatory spine and focus: a clear and consistent signal to the market on how they will enforce. Ø Securities law: a faster, fairer approach to dealing with insider trading and fraud. Cases drag on for years. Ø Listing rules: most exchanges have weak powers to enforce their own rules; investors want to see more rigorous efforts made. Ø CG Codes: these are rarely “enforced”; exchanges could be more active in promoting them (eg, in IPOs) Ø Transparency: regulators could be much more active in disclosing their enforcement actions and processes. ACGA Presentation ISCI, May 12, 2008 6

Better board practices n What investors are looking for: Ø Genuinely independent directors: yes please! Ø Independent chairman: if possible, but hard to achieve given large family & state blockholders. Ø Board composition: should reflect the business needs of the company. Ø Board structure/committees: less box-ticking and more thought as to how board committees are structured and operated, and the types of committees formed. Ø Audit committees: could be greatly improved; Singapore’s Audit Committee Guidance Committee formed in Jan 08. Ø Director training: a conundrum—if mandatory, often ineffective; if voluntary, limited take-up. Focus on pre-IPO. ACGA Presentation ISCI, May 12, 2008 7

INEDs & audit committees Market Is there a robust definition of INED? Are audit c’tees mandatory and implemented? Are audit committees functioning independently? China Somewhat Yes Marginally Hong Kong Somewhat Yes Somewhat India Somewhat Yes Somewhat Indonesia Somewhat Yes Marginally Japan No Somewhat No Korea Somewhat Yes Somewhat Malaysia Somewhat Yes Marginally Philippines Somewhat Yes No Singapore Somewhat Yes Somewhat Taiwan Somewhat Marginally Thailand Marginally Yes Marginally ACGA Presentation ISCI, May 12, 2008 8 Source: “CG Watch 2007”

Focus on ESG n What global institutional investors are doing: Ø Policy focus: signing up to the UN Principles of Responsible Investment; some are writing internal guidelines on ESG criteria for investment and voting. Ø IPO focus: starting to ask questions about whether IPOs meet all requisite environmental and labour standards. Ø Execution ability: starting to look for fund managers who can invest along ESG lines. Question: Should it be E, S + G? Or G, then E &S? ACGA Presentation ISCI, May 12, 2008 9

Conclusion n Progress in corporate governance reform in Asia varies considerably by country/market, and by company. n It also varies over time: the boom of the past 2 -3 years lessened pressure for reform, but this is likely to change given current volatility and bear markets. n While progress has occurred, it remains half-formed in many areas. Even the best markets are some way from being world-class. n The stronger the signal from the market to companies that governance matters, the better they will perform. ACGA Presentation ISCI, May 12, 2008 10

Contact details Jamie Allen Secretary General Asian Corporate Governance Association Ltd Room 203, 2 F, Baskerville House 13 Duddell Street, Central, Hong Kong Tel: (852) 2160 1788 (general) Tel: (852) 2872 4048 (direct) Fax: (852) 2147 3818 Email: jamie@acga-asia. org Website: www. acga-asia. org ACGA Presentation ISCI, May 12, 2008 11