Institutions push for change in Asia's family companies

Manila, 11 June 2003

The Asian Development Bank and the OECD are leading the charge to implement rapid improvements in corporate governance across Asia.

Among changes discussed at a meeting of experts here are a relaxation of libel laws that have inhibited journalists from investigating corporate and government wrongdoing, protection for whistleblowers, and a substantial expansion in disclosure requirements.

A white paper published today by the Organisation for Economic Cooperation and Development (OECD) argues that the most serious corporate governance challenge facing the region is the “exploitation of non-controlling shareholders"

Family controlled companies - which account for two out of three public companies in Asia - are identified as a particular problem, where owners tend to create “interlocking networks of subsidiaries and sister companies".

Although the OECD report goes out of its way to stress the positive contribution to economic growth of these companies it says they should operate in a way that is more “transparent and more equitable for non-family investors".

A report from the Asian Development Bank, containing a set of detailed recommendations, is expected to be published in the next few weeks.

Both institutions point out that while many, or even most, Asian countries have come up with new rules or recommendations on corporate governance, they have been slow to put them into practice, partly because of the extent of change needed.

The OECD white paper says: “Such advances in rules must now be matched by their implementation and enforcement, since the credibility of a corporate governance framework rests on its enforceability".

One of the most controversial will be measures to protect journalists from pressure, which has ranged from threats of legal action to physical violence, even death.

“This is going to require not just new laws but reforms to the judicial system", the ADB's corporate governance specialist, Clay Westcott told the ICC.

For an Executive Summary of the OECD white paper click here.

For OECD Review of the Asian Business Landscape click here.