The CG Ranking of ASEAN PLCs & the CG SCORECARD Working Group D -Progress Update and Issues 17th ACMF Meeting 26 September 2012 1
Recap: Objectives and Approach Objectives Raise CG standards and practices of ASEAN PLCs Showcase and enhance visibility and investability of well-governed ASEAN PLCs Complement other ACMF initiatives and promote ASEAN as an asset class Scorecard is a diagnostic tool to improve CG standards of ASEAN PLCs Approach Create a universal CG Scorecard containing key elements of good CG Devise a scoring methodology Validate and publish ASEAN CG Scorecard Assess ASEAN PLCs identifying top 50 PLCs in each jurisdiction and top 50 PLCs regionally Progress ASEAN CG Scorecard released to public in March 2012 Final deliverables of pilot year submitted to regulators in May 2012 Commencement of 2 nd year (May 2012 Mar 2013) Enhancements of the Scorecard Quality assurance and peer review Validation of the scorecard 2
Recap : Progress from the last ACMF meeting At the 16th ACMF meeting in Singapore (7 March 2012), ACMF granted its endorsement to : 1. Release of the ASEAN CG Scorecard to the 3 DRBs (TIOD, MSWG and IICD) 2. Pursue funding under ADB s RETA for the 2 nd Year 3. Commencement of the 2 nd year by the CG experts Update as at September 2012: 1. Two additional CG experts came on board Dr. Jesus Estanislao Chairman, Institute of Corporate Directors Philippines Dr. Hien Thu Nguyen Vice Dean, Finance Department, School of Industrial Management, University of Technology, Vietnam National University of Ho Chi Minh City. 2. Funding under ADB s RETA of approximately USD500k was secured for the 2 nd year 3. Second year has commenced and currently on Phase III 3
Second Year Timeline : May - November 2012 Deliverable: Domestic Top 50 Ranked List Phase 1 Phase 2 Phase 3 Phase 4 May June July Aug Sept Oct Nov Dec Enhance Scorecard Discussion on the Enhancement of the Scorecard (3 days) 27 April, 15 & 16 May Update: Beta Validation (2 days) 9 & 10 July Update: Testing Discussion after the Beta Testing (2 days) 21 & 22 June Domestic Ranking Exercise Stock taking discussion on the Domestic Ranking Exercise (1 day) 27 August Update: 2 Oct Peer Review (2-29Oct) Submission of results (25 Sep)* Peer Review Result meeting 31 Oct & 1 Nov - Engagement with regulators, PLCs and DRBs to: - Educate and train DRBs - Promote and secure buy-in from stakeholders - Manage political and market expectations - Showcase top CG companies in each ASEAN country assessed Release of the Domestic Ranking Discussion on plans for Regional Ranking Exercise (2 days) 6 & 7 December 31 May 1 June 2012 ACMF Working Group meeting ACMF working group meeting (6 Sept) 17 th ACMF meeting (26 Sept) * Except for Vietnam and Philippines who will submit results on the 15 Oct 4
Second Year Timeline: December March 2013 Deliverable : Regional Top 50 List ASEAN PLCs Phase 4 Dec Jan Feb March Regional ranking exercise Peer Review (2 days) Release Regional Top 50 to Regulators 5
Promotional and engagement efforts in 2012 Date Events 1 June ACMF working group meeting - Detailed briefing by CG experts to regulators on the CG Scorecard and its ranking methodology. 5 June Presentation of the ASEAN CG Scorecard at the ICPAS/CPA Australia Dinner Talk by Prof. Mak 10 July Validation exercise with OECD and ICGN 12 July National Directors Conference organised by Thai IOD and attended by Thailand s PLCs 13 July Meeting and discussion with officials of the State Securities Commission of Vietnam 7 August Meeting between Dr Estanislao with Securities and Exchange Commission, and Stock Exchanges of the Philippines 10 August Briefing session to Fellows of Philippines ICD on the ASEAN CG Scorecard 24 August Conference in Ho Chi Minh City ASEAN CG Scorecard, Opportunities and Challenges for Vietnamese PLCs, organised by SSC with support from ADB 29 August Engagement with members of the Philippines GGAPP (Good Governance Advocates and Practitioners of the Philippines ) 11 September Roll out/ Launch of ASEAN CG Scorecard in the Philippines 19 September The Effective Board organised by Indonesian Institute for Corporate Directorship 24-25 October OECD Roundtable on Corporate Governance End Oct/Early Nov MSWG s CG Conference 6
Issues for deliberation Options on project sustainability Legal ownership of the Scorecard Methodology and format for the release of the results from domestic ranking exercise 7
Options on project sustainability The following sustainability options may be explored: a. Option 1: Rotation of the project amongst ACMF Members. Issues pertaining to operationalisation and funding would be addressed by respective regulator who will chair the project for that specific year. b. Option 2: Establishment of a CG taskforce consisting of ACMF Members to decide on the types of activities to lift CG standards in ASEAN and to promote/create awareness on the ASEAN CG Scorecard. Cost sharing amongst members of the taskforce. c. Option 3: Ownership and management of the product to be passed on to a private or commercial entity. Domestic ranking bodies from ASEAN countries could establish a network and jointly own and operationalise the CG Scorecard. An ASEAN CG Award event could be organised to award top ASEAN PLCs. 8
Sustainability of the initiative Option 1 OPTION 1 Rotation of project amongst ASEAN regulators ACMF CG Project Leader (rotating Chairman) Decide on funding & activities Regional Oversight Committee -Regulators, CG Experts, CG champions Advantages Inclusiveness and sharing of hosting opportunity amongst ASEAN regulators. A signal of good cooperative effort Strong messaging and endorsement by ASEAN regulators on the need for good CG practice in ASEAN PLCs. Rotational chairman provides different experiences, value add and perspectives to the committee Domestic Ranking Bodies IOD, ICD, MSWG SAICSA Disadvantages Different operational system and experiences of the host regulator may lead to inconsistency in timelines and may compromise deliverables There is also no formal structure to the effort. Domestic Ranking Exercise conducted by the DRBs Regional Oversight Committee to oversee DRBs and conduct regional ranking exercise 9
Sustainability of the initiative Option 2 OPTION 2 Taskforce of ACMF Regulators Advantages The taskforce would be impartial as it consist of ACMF member countries ensuring independence and credibility of the scorecard. ASEAN CG TASKFORCE (reps. of ACMF Members) Working Committee Decide on funding and activities Taskforce serves as an effective platform for regulators to collaborate, network and share ideas. Regulators have the capacity to push specific CG agenda esp. in relation to regulatory framework towards enhancing CG standards. Signals good collaborative and shared effort amongst regulators CG experts Representatives from ACMF Domestic Ranking Bodies (DRBs) Working Committee will undertake both domestic and regional ranking. Disadvantages Decision making process may be slower given large number of members CG Taskforce consisting of regulators may signal greater emphasize on regulatory discipline. 10
Sustainability of the initiative Option 3 OPTION 3 Project to be operationalised by private or commercial entity: 1) DRBs forming an ASEAN CG Network 2) S&P, MSCI, the Governance Metrics International (GMI). ASEAN CG Network Members: Thai Institute of Directors Indonesia Institute of Corporate Directors Philippines Institute of Corporate Directors Minority Shareholder Watchdog Group Singapore Association of the Institute of Chartered Secretaries and Administrators Advantages DRBs are already familiar with the Scorecard and 3 our of 6 experts are from the DRBs DRBs could extend their business model to advisory /consultancy for the PLCs CG ranking/assessment process seen to be free from any regulator s intervention A dedicated entity allow greater focus in driving coherent and structured initiatives Disadvantages ACMF Members would have to give up control and the operationalisation of the Scorecard. No guarantee on how long the initiative will run as funding may be limited. Pace of development will also depend on strength and drive of the private entity. Different agenda of each DRB making it difficult to pull everyone together and may compromise intended objectives. There may be potential conflict of interest in running the assessment 11
Business plan moving forward Year 5 Year 1 a) Creation of Scorecard b) Domestic assessment ASEAN PLCs. Year 2 a) Enhancement, review, validation of Scorecard b) Promotion, creation of awareness, educating stakeholders c) Domestic and regional assessment of PLCs WE ARE HERE (2012) Year 3 and 4 a) Domestic and regional assessment of PLCs b) Ongoing review and enhancement of the Scorecard c) Stakeholder engagements d) Organise CG Forum to create awareness and to exchange ideas on CG accompanied by award presentation to top ASEAN PLCs with good CG a) Consider the establishment of a permanent entity or structure to continue undertaking the roles and functions. Building of momentum and traction before the establishment of a dedicated entity/structure for ASEAN CG 12
Issues for deliberation Options on project sustainability Legal ownership of the Scorecard Methodology and format for the release of the results from domestic ranking exercise 13
Legal ownership of the Scorecard There is a need to safeguard the intellectual property rights of the Scorecard given the risk of it being replicated and applied by other external parties compromising its quality and impacting ACMF s reputation. Issue raised during the 16 ACMF meeting was that ACMF is not a legal entity and would not be able to enforce ownership rights and legal action on entities which applies the scorecard without prior permission or authorisation. Under the current consultants contracts, ADB legally owns the Scorecard. However, the termination of ADB s technical assistance would impact project operationalisation. ADB is willing to own the copyright of the Scorecard or to transfer it to ASEC or an ACMF Member as advised by ACMF, subject to legal clearance. Operationalisation and usage of the scorecard should be continued by the DRB or any entity authorised by ACMF. We seek direction from the ACMF in relation to the legal ownership of the scorecard 14
Issues for deliberation Options on project sustainability Legal ownership of the Scorecard Methodology and format for the release of the results 15
Methodology and format for the release of the results from domestic ranking exercise The domestic list of top 50 PLCs (except for Vietnam) is targeted to be released by end-november. It would be submitted to the respective ACMF Members and ADB for public release. Options in relation to format for disclosure: 1) Ranked list of top 50 PLCS 2) Clustering / grouping of PLCs within the list i.e. 5 stars, 4 stars or 3 stars 3) Listing of top 50 PLCs in alphabetical order (unranked) Working group members prefer option 2 or 3 as it would still meet the objective of showcasing wellgoverned ASEAN PLCs. Public disclosure of a ranked list of top 50 PLCs may invite scrutiny, challenge and may lead to controversy as the differences in scores may be minimal. We seek endorsement by the ACMF for ADB to release the results of domestic and regional assessment based on format 2) or 3) 16
Endorsement and decision of the ACMF sought with regards to Decisions required in relation to: a) The selected approach to carry on the project in the future b) Copyright/product ownership Endorsements sought with regards to: a) Release of the ASEAN CG Scorecard to Philippines ICD and Singapore s SAICSA for assessment of domestic PLCs b) The format to release results from domestic and regional assessment 17
Thank you 18