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Corporate Governance Country Assessment : ThailandSince 1998, significant corporate governance reforms have been introduced and are underway, including reforms in the structure and function of the board of directors of listed companies, the establishment of the Thai Institute of Directors Association and the Department of Special Investigation, the adoption by the Stock Exchange of Thailand (SET) of 15 principles of good corporate governance, and draft legislation to reinforce the rights of minority shareholders. In addition, the Securities and Exchange Commission (SEC) has improved its monitoring of financial statements of listed companies and stepped up enforcement efforts and increased sanctions for violations. Most recently, the SEC has supported issuance of a Directors' handbook and the establishment of a Director Registry System. The Institute of Certified Accountants and Auditor of Thailand (ICAAT) also has intensified its efforts to improve skills and knowledge of accountants and auditors. Reforms in the legal framework have been slow and need to be expedited. There is a lack of a range of sanctions, criminal, civil, and administrative to facilitate effective enforcement. International financial reporting standards have yet to be adopted. The private sector's awareness of the potential benefits of improved corporate governance may need to be further enhanced. Further steps need to be taken to enhance protection of shareholder rights, including the introduction of cost effective legal channels for shareholders seeking redress. The focus should remain on implementation and on completing the legislative and regulatory agenda, improving enforcement (prosecution process), enhancing financial reporting and disclosure consistent with international standards, and promoting business ethics and best practices.
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Regulatory Governance and Sector Performance : Methodology and Evaluation for Electricity Distribution in Latin AmericaThis paper contributes to the literature that explores the link between regulatory governance and sector performance. The paper develops an index of regulatory governance and estimates its impact on sector performance, showing that indeed regulation and its governance matter. The authors use two unique databases: (i) the World Bank Performance Database, which contains detailed annual data for 250 private and public electricity companies in Latin America and the Caribbean; and (ii) the Electricity Regulatory Governance Database, which contains data on several aspects of the governance of electricity agencies in the region. The authors run different models to explain the impacts of change in ownership and different characteristics of the regulatory agency on the performance of the utilities. The results suggest that the mere existence of a regulatory agency, regardless of the utilities' ownership, has a significant impact on performance. Furthermore, after controlling for the existence of a regulatory agency, the ownership dummies are still significant and with the expected signs. The authors propose an experience measure in order to identify the gradual impact of the regulatory agency on utility performance. The results confirm this hypothesis. In addition, the paper explores two different measures of governance, an aggregate measure of regulatory governance, and an index based on principal components, including autonomy, transparency, and accountability. The findings show that the governance of regulatory agencies matters and has significant effects on performance.
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The Effectiveness of Boards of Directors of State Owned Enterprises in Developing CountriesThis paper aims to shed some new light on the conditions needed to ensure the effectiveness of Boards of Directors of state owned enterprises with a focus on infrastructure sectors. In the case of developing countries, empirical studies have found evidence of positive links between the composition of the Board of Directors and financial performance. Yet the lack of solid theoretical foundations, and in some cases poor data availability, makes the conclusions of most studies weak. Several policy recommendations emerge from the review of the economic literature and evidence from case studies. First, the introduction of a sufficient number of independent directors emerges as an important corporate governance milestone. Empowering them to exercise effective monitoring of management, however, may prove to be a formidable challenge for of state owned enterprises. More attention to board procedures, particularly related to the Board selection and evaluation process, is essential, to produce the necessary insulation of Boards from government interference. Ensuring sufficient continuity of services to directors is particularly crucial to improve corporate governance. In addition, other factors that may reduce directors' ability to monitor corporate activities, such as the age profile and the number of Boards on which they sit, need to be handled more carefully.