unctad.org | UNCTAD S-G urges stronger corporate governance in wake of financial crisis
UNCTAD S-G urges stronger corporate governance in wake of financial crisis
12 July 2012
Supachai Panitchpakdi UNCTAD Secretary-General
Noting that the impact of the global financial crisis on the world economy has underscored the interconnectedness of the health of large global enterprises and the livelihoods of ordinary people, UNCTAD Secretary-General Supachai Panitchpakdi has called for strengthening of oversight by corporate directors on behalf of their shareholders.

Giving the closing address at the Institute of Directors Conference 2012 in Bangkok, Thailand on 12 July, Dr. Supachai pointed to UNCTAD research that has highlighted, inter alia, the following key points:

  • Multilateral and national financial reform efforts have identified specific areas of corporate governance requiring reform at financial institutions. In particular, reform efforts should focus on:
    a) strengthening board oversight of management
    b) positioning risk management as a key board responsibility
    c) encouraging remuneration practices that balance risk and long-term performance criteria

  • Weak shareholder rights limit the ability of shareholders to hold boards to account, while fairness and transparency in financial markets inspire investor confidence and facilitate increased investment. Regulators can improve the mechanisms through which shareholders are able to influence corporate governance, and also encourage shareholders to take a more active role in the governance of their portfolio companies.

  • Governance-related reform efforts that initially focused on financial institutions have fueled reform efforts targeted also at non-financial institutions. Policy makers can use the momentum created by the financial crisis to address corporate governance problems that prevail more generally.

  • There has been a recent international convergence in thinking about corporate governance problems and remedies, which to a large extent has been driven by multilateral financial reform efforts, such as those of the G20. International standard setting bodies can promote convergence by designing principles-based guidance that is globally applicable but can be implemented in particular national and regional contexts.

  • While the primary targets of governance related financial reform efforts are financial institutions in developed countries, there is the recognition that the governance principles being promoted are applicable to corporations operating in emerging markets. In tailoring reforms for their own markets, policy makers in emerging markets should take into account certain factors, such as concentrated ownership, rights of minority shareholders, problems in enforcement regimes, and the important role of the state as owner.

  • Audit related corporate governance issues are among the least disclosed information by companies around the world, despite a number of corporate failures related to auditing issues. Given the importance of auditing disclosure in assessing the quality of a company’s governance, Directors should review their current practices with an aim to meeting international best practices, and the expectations of international investors as well as local shareholders.

Other speakers at the conference included Professor Kishore Mahbubani, Dean of Singapore's Lee Kuan Yew School of Public Policy, Mr. Richard Lee, Chairman of the Australian Institute of Company Directors, Dr. Jesus Estanislao, Head of Philippine President's Governance Advisory Board, and Professor Sidharta Utama, Chairman of the Indonesian Institute for Corporate Directorship.


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