Development and Usage of Corporate Governance Scorecards

Transcription

1 IDEA Net Corporate Governance Scorecards James Simanjuntak Indonesian Institute for Corporate Directorship Development and Usage of Corporate Governance Scorecards May 17 18, 2012, World Bank Office Vienna, Austria 1

2 The Background Asian Financial Crisis in 1997 Poor corporate governance Practices Evaluation of the practices to seek improvement and reform Common measures among member countries/economies 2

3 Objectives To assess corporate governance practices To benchmark the practices among member economies To showcase and seek improvement and reform To promote awareness and implementation of best practices in each country and the region as well 3

4 Methodology Research methodology and approach: Observation through publicly available information, such as annual report, audited financial report, notice to call AGM, shareholder s MoM, company s website, article of association, SEC s website, stock exchange s webites, etc. Research teams assume the viewpoint of an outside investor or independent party (not linked to PLCs and regulatory bodies) Research teams: Assessor team Validation team 4

5 Methodolgy...cont d Philippines Self assessment and validated by ICD Philippines Dissemination: Published through corporate governance scorecard report Seminar/conference/Award Special workshop (Indonesia) Sharing experience from high perfoming firms 5

6 Methodology... Cont d Research Intrument: Based on OECD principles consisting of 117 items: Rights of shareholders (23 items) Equitable treatment of shareholders (12 items) Role of stakeholders (8 items) Disclosure and Transparency (32 items) Responsibility of the board (42 items) Apply weighted score to each principles 6

7 Methodology...cont d Analysis of Impact The objective is promote the understandings of and to encourage the implementation of corporate governance best practices 7

8 Indonesian Corporate Governance Scorecard At A Glance (majority Listed-Firms) Total Weighted Score (%) Corporate Governance Principles Study Study Study Rights of Shareholders Equitable Treatment of Shareholders Role of Stakeholders Disclosure and Transparency Responsibilities of the Board Overall Mean Score

9 Indonesian Corporate Governance Scorecard At A Glance (Top 60) Year Overall Top 60 Shareholders Rights Equitable Treatment Stakeholders Role D & T Boards responsibility

10 Indonesian Corporate Governance Scorecard At A Glance (Banking), 2011 Corporate Governance Principles Overall Banks Overall Top 60 Overall Rights of Shareholders Equitable Treatment of Shareholders Role of Stakeholders Disclosure & Transparency Responsibilty of the Boards

11 IDEA Net Comparison (in %) Year Country Average Score (Majority Listed-Firms) Philippines* Thailand Indonesia 2011 NA 77** NA 2010 NA 80 NA 2009 NA NA NA NA *) ICD Philippines has also implemented scorecards for banking industry and it is now developing scorecard for SOEs **) In 2011, Thailand used a more stringent instrument, especially to measure the role of stakeholders 11

12 Does Corporate Governance Work? Indonesian CG Scorecard, 2009 GCG Tobin s Q GCG Tobin s Q Pearson Correlation 1.22 Sig. (2-tailed).025 N Pearson Correlation.22 1 Sig. (2-tailed).025 N Note: Thai empirical evidence also shows a significant correlation between CG scorecard and Tobin s Q 12

13 Summary of Impact Analysis: Case Studies At Five Companies Firms recognize the positive impact of corporate governance scorecard on their corporate governance frameworks Firms are going forward to better adoption of best pratices CG best practices, such as OECD principles, are perceived to be very important in global competition The impact goes beyond awareness but they are implementing best practice. 13

14 Summary of Impact... Cont d Benefits of the implementation: Help companies in realizing their mission Improve company performance Enhancing accessability to financial sources both equity and debt financing Improve company image and stakeholders trust Provide the right tract to implement various best practices in corporate governance 14

15 Summary of Impact...cont d Challenges: The role of controlling shareholders Corporate culture Government/public governance Laws and regulations Costs to implement 15

16 Future Challenges of IDEA Net Scorecards Coordinated efforts Need to establish CG expert committee to oversee the assessment To meet regularly to update and to maintain consistency of the instrument used Participant countries/economies Not all IDEA Net members Participate in the assessment. The participants countries even tend to lower (3 from 6 countries) Financing It costs around $300 to $350 per company, including the seminar Consistency of the approach The Philippines uses self assessment and several items have been modified. Thailand had also modified its instrument. 16

17 IDEA Net Vs. ASEAN* OECD Principles IDEA Net ASEAN Item Weight Item Weight Rights of Shareholders Equitable Treatment of Shareholders Role of Stakeholders Disclosure & Transparency Responsibility of the Board Total *) Asean Capital Market Forum (ACMF) Initiative ASEAN Capital Markets Forum (ACMF), a forum of securities regulators under the umbrella of the ASEAN Finance Ministers established in 2004 provides ASEAN capital market regulators with a platform to work towards capital market integration and the observance of harmonise standards within the region, including ASEAN CG Scorecard and the CG Ranking of ASEAN PLCs. 17

18 Thank You 18