Introduction to corporate governance

March 31, 2010

In partnership with

Presentation by Juan Carlos Fernandez Zara

IFC Advisory Services, Mekong Region

Definition of Corporate Governance

“Corporate governance involves a set of

relationships between a company’s

management, its board, its shareholders and

other stakeholders. Corporate governance

also provides the structure through which the

objectives of the company are set, and the

means of attaining those objectives and

monitoring performances are determined.”

OECD Corporate Governance Principles, 2004

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What can CG do for a company?

GOOD CG

ACCESS TO

CAPITAL

ACCESS TO

HUMAN

RESOURCES

ALLOW A

COMPANY

ADOPT AND

IMPLEMENT

ITS STRATEGY

ENHANCE

DECISION

PROCESS

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Good CG depends on following factors

Environment•Perception of trust

Institutions•Ability to provide active support

•Ability to effectively monitor

Company•Reliability of Data

•Competences of the management

Courts•Ability to protect investors’ interests

•Ability to enforce decisions

The importance of Corporate Governance varies according to these parameters

Environment : perception of trust

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Environment

Institutions

Company

Courts

Environment: perception of trust

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VN:2.7

CB:2

Laos:2

TH:3.4

Sing.:9.2

China:3.6Environment

Institutions

Company

Courts

Environment: perception of trust

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2008 : Vietnam was at 2.7 ranking 121

2007 : 2.6 / 123

2006: 2.6 / 111

Environment

Institutions

Company

Courts

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Institutions

FACTORS HINDERING

THEIR FUNCTION

Lack of knowledge

Lack of independence

Corruption

Lack of experience

INSTITUTIONS, WITH

MONITORING

FUNCTION

Government linked

Private Sector

SSC

Stock Exchange

Tax authority

Auditors

Bankers

Credit Agencies

POTENTIAL

CONSEQUENCES FOR

COMPANIES’ MINORITY

SHAREHOLDERS

Lack of transparency

Abuse

Non-reliable data

Expropriation

Environment

Institutions

Company

Courts

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Courts

HINDERING FACTORS

Lack of knowledge

Lack of independence

Corruption

Lack of experience

REQUIRED ATTRIBUTES

Predictability

Speed

POTENTIAL

CONSEQUENCES FOR

COMPANIES’ MINORITY

SHAREHOLDERS

Lack of reliability

No protection and

redress

Lack of predictability

Environment

Institutions

Company

Courts

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CG differentiation

Environment

Institutions

Company

Courts

Environment

Institutions

CourtsCompanies

BoardSwitzerland

Vietnam

COMPANIES HAVE A HIGHER INTEREST IN IMPROVING THEIR CG (MOSTLY

COMMUNICATION), WHERE INSTITUTIONAL SUPPORT IS WEAK

Investors and Corporate Governance

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Investors and Corporate Governance

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Investors and Corporate Governance

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