Corporate Governance and Corporate
Social Responsibility: Issues for Asia
Richard Welford*
University of Hong Kong
ABSTRACT
An increasingly important aspect of CSR is the recognition that sound practices
are often based on good standards of corporate governance. Good corporate
governance provides the foundations of good CSR by creating value-creating
relationships with all stakeholders. This article seeks to review corporate governance
issues from an Asian perspective. Ownership and control of many companies in
the region differ from those commonly seen in the West and there are therefore
specific issues that need to be addressed in this context. It is argued that the fact
that so many Asian companies are dominated by controlling shareholders (often
families) means that corporate governance may have to be even stronger in the
Asian region than elsewhere. Copyright © 2007 John Wiley & Sons, Ltd and ERP
Environment.
Received 12 October 2006; revised 22 November 2006; accepted 11 December 2006
Keywords:corporate governance; shareholders; regulation; stakeholder dialogue; transparency
Introduction
A
N INCREASINGLY IMPORTANT PART OF DEBATES SURROUNDING CORPORATE SOCIAL RESPONSIBILITY(CSR) practices revolves around the need for good corporate governance in the Asia-Pacific region. It is clear that a weak institutional framework for corporate governance is incompatible with sustainable financial market development and that poor governance is a barrier to inward investment.
Good corporate governance also increases investor confidence, and there is evidence that suggests that where companies introduce good governance practices share prices rise. However, corporate gov-ernance is also about creating value-creating relationships with all stakeholders, including creditors, employees and the wider community and environment. This article seeks to review corporate gover-nance issues from an Asian perspective. Ownership and control of many companies in the region differ
* Correspondence to: Professor Richard Welford, Centre of Urban Planning and Environmental Management, University of Hong Kong, Pokfulam Road, Hong Kong. E-mail: rwelford@hkucc.hku.hk
from those commonly seen in the West and there are therefore specific issues that need to be addressed in this context.
Controlling Shareholders
One key characteristic of Asia is that many of the largest companies in the region are owned and con-trolled by major controlling shareholders. These are often individuals or families and sometimes the state. Controlling shareholders have strong incentives for monitoring the company and its management and can often have a positive impact on the governance of the company. On the other hand, their dominance also means that they can force a company to operate in their own interests and this can have negative impacts on smaller minority shareholders.
There is therefore a potential conflict arising when dominant controlling shareholders decide to extract private benefits from a firm to the detriment of minorities. One aspect of corporate governance im-portant in the region is to make sure that powerful individuals and their families do not damage the interests of minority shareholders.
It is clear to see therefore that poor corporate governance can be costly to minority shareholders. On the other hand, controlling shareholders can also suffer from poor governance structures in the form of lower stock valuations, restricted access to equity finance and difficulties in getting credit.
Even large listed companies in Asia more often than not have a controlling shareholder. Indeed, it is estimated by the OECD that 87% are under such control (defined as having 20% or more of the voting rights). Table 1 provides an overview of the situation with respect to publicly traded companies in a number of Asian locations.
It can be seen therefore that the great majority of controlling shareholders are families or individu-als. In some cases it is the state, a financial institution or foreign multinational. In such circumstances, it is assumed that the controlling shareholder has enough votes to prevent unwanted takeovers, appoint directors and determine the outcome of a normal vote at a general meeting of the company. Control-ling shareholders rarely need 50% of the vote. In most cases, in combination with ‘allied’ shareholders and passive voters, who do not vote at all, control can be exerted with 30% or less of the voting rights.
However, the situation in Asia is sometimes that controlling shareholders actually have even smaller proportions of equity than this but use a number of devices to get themselves even greater voting rights. One way of doing this is to use stock with ‘special’ voting rights, which is allowed in some countries,
Country Shares Family State Controlled by Controlled by
widely held controlled controlled finance sector overseas corporation
Hong Kong 7.0 66.7 1.4 5.2 19.8 Indonesia 7.1 71.5 6.2 2.0 13.2 Korea 43.2 48.4 1.7 0.6 6.1 Malaysia 10.5 67.0 13.1 2.6 6.7 Philippines 19.8 44.4 2.0 7.6 26.7 Singapore 5.4 55.5 23.4 4.1 11.4 Taiwan 26.2 48.5 2.3 5.4 17.3 Thailand 6.7 61.8 7.8 8.5 15.4
Table 1. Distribution of shares in Asian listed companies OECD estimates, 2005, supplemented by various sources.
but a more common way of gaining control over a whole group of companies is to make use of so-called ‘control pyramids’.
These sorts of ‘control pyramid’ are widespread. In Malaysia, the Philippines and Taiwan over 35% of listed companies are controlled with a pyramid structure. In Indonesia and Singapore, it is well over 50%. Sometimes they are very useful to bring a group of companies together under one well known brand, but this separation of ownership and control has important implications for the companies’ minority shareholders.
As noted previously, in many cases controlling shareholders have an interest in seeing a well managed company and can be effective in overseeing the corporate governance of the company, but at other times controlling shareholders are in a position to take actions that benefit themselves at the expense of other shareholders. The treatment of minority shareholders is therefore a big issue for corporate governance in the region. The solution is to credibly signal to existing and potential shareholders that their inter-ests will be upheld. There are a number of voluntary ‘comply and disclose’ codes of conduct that can be adopted by companies and credibly audited. However, such codes, common in the London and New York stock exchanges, for example, have seen a much poorer uptake in Asia. It may well be, therefore, that in this region there need to be measures introduced that are backed up by strong legal protection. There are a number of issues connected with controlling shareholders that have to be addressed through such measures. In Asia, in particular, the most common controlling shareholder is the family. This raises big issues when it comes to succession planning and the management and control of com-panies. When the family founder decides to step aside for example, we may see that another family member takes over the leadership role even when the interests and attributes of the relevant family member would normally dictate otherwise. In this case a poor governance structure means that the company might be managed by less than fully competent personnel. In addition, a company with poor governance might actually find it difficult to recruit professional management to run the business group. Companies have considerable discretion about what dividends will be paid to shareholders. Share-holder buy the shares of companies looking for financial benefit in terms of both the dividend income and capital gains associated with the share price. They need assurance that fair dividends will be paid (since this also impacts on share price). Moreover, they need to know that their interests as share-holders will not be discriminated against in favor of other shareshare-holders. In particular, it is important that controlling shareholders are not allowed to get money out of the company in other ways that suit their own interests.
One way in which this often occurs in emerging market economies is through the practice commonly known as ‘tunneling’. This is the situation where company ‘insiders’ take the assets for themselves. Tun-neling comes at the expense of shareholders and other stakeholders and in the process erodes investor confidence, retards capital market development, reduces access to equity finance and ultimately creates slower growing and less stable economies. Like corruption more generally, it destroys confidence in a whole economy, stifles inward investment and makes the poorest parts of society even poorer.
Tunneling can be easily done by controlling shareholders, who can often transfer money and other assets out of a company, benefiting themselves and harming minority shareholders, employees and local communities. These activities can severely damage a company and even lead to bankruptcy. There have been cases where controlling shareholders have intentionally ‘hollowed out’ the company, leaving debts unpaid and workers without jobs.
There are a number of forms of tunneling that exist. The first relates to acting on privileged infor-mation for personal gain. Additional purchases of shares by a controlling shareholder or members of the family or associated businesses can be done prior to an announcement of a deal that will send the share price higher. Such insider dealing is illegal in many Asian countries but many see it as prevalent and largely unchallenged.
Asset transfers on overly favorable terms to other companies owned by controlling shareholders is another tunneling tactic. Granting of specific contracts to particular companies on favorable terms and the transfer of liabilities can all benefit controlling shareholders over minority ones. Transfer pricing tactics between companies owned by the same controlling shareholder can exploit both minority share-holders and creditors.
One way in which controlling shareholders can tunnel a company relates to capital increases. It is not uncommon for new shares in a company to be issued and sold either directly or through a related party to the controlling shareholder on favorable terms. This not only provides a built-in premium for the dominant party, but also decreases the holding of minority shareholders. We return to this issue below. In kind contributions to controlling shareholders can also extract resources from a company even before they reach the bottom line, reducing profitability and dividends to be paid. Cars, houses, yachts, luxury ‘business travel’ and other perks may be given to controlling shareholders but not others. In addi-tion, the controlling shareholder, along with friends and relatives, may also have management positions for which they are overcompensated. Investment decisions may reflect the personal interests of the con-trolling shareholders and low profit subsidiaries of the company created in order to satisfy the whims of children of the founder.
The greatest opportunity for minority shareholders to come together and have their voices heard is the general meeting of the company, where (in theory) shareholders can use their fundamental rights as owners of the company to participate in decision-making. Unfortunately, such meetings often do not live up to this promise. There have been cases in some Asian countries of shareholders actually being kept away from meetings, meetings being held unannounced, locations changed at the last minute and not communicated and security checks being so tight as to not allow members past doors into the meeting.
However, the ultimate question is whether the shareholder general meeting even matters if there exists a controlling shareholder. By definition, the controlling shareholder can muster enough votes to control the outcomes of the meeting. However, there are ways of overcoming this built-in bias. One is to use super-majority requirements for certain major transactions of important strategic company deci-sions. A threshold of achieving at least two-thirds or even 75% of the vote might be introduced in such circumstances.
Major transactions, in particular, require special treatment when it comes to developing corporate governance guidelines, because these can have a huge impact on the company, its employees and share-holders. In addition, so called related-party transactions that directly involve the interests of members of the board, management or the controlling shareholder must be subject to special provisions. Company law and, with respect to disclosure, security regulations should normally have additional governance requirements for such transactions. It may well be that where there is a personal benefit to be gained from a transaction, that beneficiary (including controlling shareholders) should not take place in the decision-making surrounding it.
In Singapore, accounting standards require the disclosure of party relationships, and related-party transactions have to be published with financial statements. They require immediate reporting of transactions exceeding 3% of the company’s book value and details of all parties that have an interest in the transaction. For related-party transactions that exceed 5% of the issuer’s book value, shareholder approval is required.
Where a major transaction is enacted in a company then good corporate governance should grant shareholders appraisal rights linked to that transaction. This means that, through a fair and accurate (and often independent) appraisal, shareholders should be able to confirm that a transaction was good for the company and not biased in favor of one interested party. In many countries access to appraisal rights is being broadened, but in others the process is still dependent on shareholders going to court or
petitioning regulators to get one carried out. Getting a fair and accurate appraisal is however a challenge if the company chooses who carries it out.
Some countries, most notably Korea, also provide shareholders with dissenter rights if they vote against a particular proposal at the general meeting but it is still pushed through by a majority of the voters. Under such circumstances dissenting shareholders have the right to sell their shares back to the company at the price prevalent before the decision was taken (assuming that is higher), for example.
In many countries proxy voting is being encouraged so that the full force of the minority share-holders can be felt. Too often non-attendance at meetings simply allows the controlling shareholder to dominate the decision-making, but if smaller shareholders can act more collectively then this power can be somewhat mitigated. Another alternative is to introduce a system whereby the controlling share-holder cannot participate in some decisions. For example, a provision to have two directors elected by only minority shareholders may be beneficial. Alternatively, non-executive directors being appointed by minority shareholders alone might be seen as good corporate governance.
As noted above, one of the common strategies often adopted by companies in the region is the use of capital increases. Such increases to finance profitable investment opportunities can add significant value to a company, above and beyond the initial investment if there are strong synergies involved. However, controlling shareholders can also use changes in share capital to dilute the equity of minor-ity shareholders. Often a controlling shareholder (or other insider) will arrange for new shares to be sold at a discount for themselves and/or associated parties. In particular, in kind share contributions where equity is issued in return for assets (often from an associated company of the controlling shareholder) are often used to dilute the holdings of minority shareholders.
The very nature of capital increases and their potential for abuse means that access to this kind of strategy needs to be the subject of tight control and scrutiny with the corporate governance framework. Shareholder approval should be required and shareholders should often be given appraisal rights, par-ticularly when in kind share issues are being used. Many countries now also have pre-emptive rights that give all shareholders the right to participate in a capital increase on equal terms, although this may still be a problem when minority shareholders lack access to further funds.
One of the biggest impacts on shareholders involves the change of the control of a company. So-called control transactions can include the sale of the controlling interest in a company by the controlling shareholder, the sale of the whole company and a ‘tender offer’ where a third party buys up enough dispersed shares to become the controlling shareholder. A change in the control of a company is a serious issue for governance because of a perception of unfairness when a controlling shareholder benefits more than other shareholders. This applies, in particular, when a controlling shareholder is able to sell the controlling shares at a premium above the market price for the shares, precisely because the new owner get control of the whole company and not just the share block. This may not make other shareholders worse off in the short run, but it is quite likely that the new owner will want to recoup some of the price paid through some degree of tunneling or other more direct financial transfer.
The sale of the whole company, where minority shareholders are simply forced to sell their shares or exchange them for shares in the purchasing company, is common in emerging markets as industry con-solidation occurs. Such deals should normally be subjected to super-majority voting. However, where a company is being sold to another company owned by the majority shareholder (often in order to de-list it) there has to be special protection for shareholders. If shares are transferred from a publicly listed company to a private de-listed company then they can be difficult to sell. In such circumstances they may have to be written guarantees for the controlling shareholder to buy out minority shareholder at pre-purchase prices.
As we have seen, it is families in Asia that are most often the controlling shareholders of large listed (and other) companies, but there is another type of controlling stakeholder leading to some consider-able concerns about corporate governance, and this is the state. The state is the controlling shareholder in hundreds of publicly listed companies in China and India and even amongst many of the largest com-panies in Singapore. These are often some of the largest comcom-panies by revenue, assets and employment and commonly have a strategic function in the economy (e.g. air travel, communications, banking and utilities).
Many governments have maintained ‘golden shares’ in privatized companies in order to influence the major decisions of companies that are perceived to be natural monopolies or have large public impacts. In theory, privatizing a company and keeping a ‘golden share’ can ensure high levels of corporate governance in a business environment where there may be an incomplete regulatory framework, while giving the company financial independence. However, in Asia, government representatives sitting on boards of companies have been part of some serious cases of corruption and dishonesty such that the interests of minority shareholders have been abused. Such abuse of controlling state interests in priva-tized companies remains a major challenge in the region.
Laws and Regulations
Increasingly, in the Asia-Pacific region we are seeing many countries introducing new laws and regulations that seem to offer strong protection of shareholders and other stakeholders. However, such laws and regulations are only effective if enforced. The fact that a regulatory environment has been introduced does not therefore necessarily result in good corporate governance practices being introduced. There is a need therefore to strengthen the role of regulators, including security regulators.
It is, of course, ultimately the role of the judiciary to uphold the law, but in an Asian context it is the judiciary itself where the problem arises. Corruption within the judiciary is commonplace in some coun-tries and politically appointed judges do not make for independent arbiters. This is clearly an area requir-ing considerable attention. Notwithstandrequir-ing a weak judicial system in some countries, however, there is still the potential to use the law to force companies to improve their corporate governance practices. One way in which the legal system might be effectively used is to empower shareholders by allowing them to act collectively against companies that damage their interests. Lawsuits filed again board members are becoming more common, and in some countries frameworks are being put in place to make this easier. For example, in China the Supreme People’s Court has recently allowed for share-holder suits in cases of fraud. The duties of directors are clearly being spelled out in India, Malaysia, Singapore and Hong Kong to provide clear guidance as to what represents unacceptable behavior within the company.
In mainland China and in Taiwan (and also being considered in Korea), class action lawsuits are now allowed to be taken out by shareholders against companies. This allows for direct payment of damages to shareholders. Although this is a mechanism capable of protecting the interests of minority share-holders, the introduction of class action lawsuits remains controversial. The main worry is about the abuse of such a system by so-called ‘green-mail’, where lawyers, not shareholders, seek to uncover all the mistakes of directors and file class action lawsuits seeking fees and out of court settlements for cases of dubious merit.
As mentioned previously, there is a need in the Asia-Pacific region to further develop security regulations and increase the power of security regulations. Regulators have important advantages over the judiciary because they can potentially be more flexible than judges in making decisions about long
standing company law. Regulators may be better able to examine changing market conditions and control both shareholders and corporate insiders more effectively. Moreover, regulators, whose career prospects might be linked to their ability to penalize corporate misdemeanors, may have more incen-tive to confront companies than judges. Security regulators can normally bring both criminal and civil actions against companies and their executives that can be effective in preventing misbehavior, stopping wrongdoing and compensating shareholders.
There is also an increasing role for stock exchanges in the region. Through listing requirements, the stock exchange can have a substantial influence on the corporate governance of the listed company. At listing, companies can be forced to disclose information about corporate governance structures. They should also be forced to provide information about all significant risks. However, in cases where this practice is commonplace, research shows that ongoing information provision and reporting is often weaker. Increased reporting and disclosure requirements that include non-financial reporting (particu-larly risk based) are still to be developed, however. At the moment there is a heavy reliance on volun-tary reporting initiatives.
If companies do not comply with good corporate governance practices dictated by stock exchanges, then the exchanges must be prepared to enforce requirements, discipline companies that do not obey them and ultimately suspend trading or de-list the company. However, de-listing can harm the very minority shareholders that exchange requirements were trying to protect in the first place. Some stock exchanges are therefore looking at innovative solutions surrounding alternative dispute resolution. Binding arbitration between companies, their officers and shareholders presents itself as an alternative to the court system.
It may be this sort of alternative dispute resolution could open up other possibilities as well. Binding professional arbitration to facilitate redress for employees and other stakeholders might be something that open and engaged companies might well be willing to consider.
The Responsibilities of Directors and Institutional Shareholders
The responsibilities of the board of directors are an important part of corporate governance. The bottom line is that boards should seek to maximize value for all shareholders, over time, whilst protecting the interests of other stakeholders. However, in keeping with the discussions above, one has to realize than many boards will often be dominated by family members. This type of board can be highly effective in furthering the interests of the family, but this may, of course, conflict with the interests of others.
Controlling shareholders are often in a position to choose the composition of the whole board and directors may therefore feel obligated towards the controlling shareholders. They might even see them-selves as actually representing a family or as someone who votes as directed. Improving the composi-tion of boards and the independence of directors is therefore one very important aspect of corporate governance.
Good corporate governance ensures that the board is accountable to all shareholders and respects the interests of other stakeholders. This often translates into ensuring a good number of independent board members and the use of non-executive directors with specific remits for audits, remuneration policies and even CSR itself. In many countries (including India, Malaysia, Singapore and Hong Kong) board members have a fiduciary duty to act in the interest of the whole company. Here, there is a requirement for them to act with reasonable skill, care and diligence. In Thailand the law states that directors must act with ‘care and honesty’, but elsewhere board members are rarely held accountable for their actions.
The best way to ensure effective boards that act in accordance with good governance principles is to make sure that they are well qualified and trained. They should be incentivized to act in a way that is in the interests of all shareholders and be clear about wider responsibilities to other stakeholders. Direc-tors must at all times reveal potential conflicts of interests and be seen to be independent of, where pos-sible, the controlling shareholders. This is, of course difficult, when many directors of a company may be family members.
There is an important governance role to be played by non-executive directors, and in some locations (e.g. Taiwan and the Philippines) a minimum number of independent, non-executive directors is required by law. In India it must be demonstrated that at least a third of the board is independent and in Korea this rises to one-half. In Taiwan, Korea and Malaysia the law requires some degree of separa-tion between independent directors and controlling shareholders.
A non-executive director should be independent and not a manager or executive. However, experi-ence in Asia shows that this does not always ensure independexperi-ence. Non-executive directors can sometimes still be deferential to management in a wish to maintain their remunerated position. Another problem is that many companies report a shortage of suitable qualified and independent non-executive directors. Non-non-executive directors are too often recruited from a pool of (mostly) men known to a number of the controlling shareholders in a particular location. The ‘old boys club’ remains alive and active.
A key variable for the board is its size. Boards need to have a good range of skills from both execu-tive and non-execuexecu-tive directors so that financial and legal knowledge and knowledge of the industry and its issues are all covered. Increasingly, there should be board members able to take into account the interests of wider stakeholders and be champions for good CSR practices. However, it is important to have sufficient non-executive directors to make the board credible and independent of controlling share-holders and in order to avoid conflicts of interest.
Because of the common nature of company structuring in Asia and the dominance of family based pyramid structures, it is families that are very commonly the controlling shareholders of many companies in the region. As a family unit with strong Asian family values, they are able to work together (and often alongside other families and friends) in making sure that it is their priorities and wishes that are served by the companies they control (but often only own small parts of). They therefore see little need for openness and transparency outside of the family structure.
This represents one of the biggest challenges for corporate governance in the region. Good gover-nance has to be based on increased transparency and accountability. Perhaps it is also good to demon-strate to these families that where companies have taken the lead to improve transparency and the treatment of minority stakeholders then they have often been rewarded by higher share prices. However, there are other trends in the Asia-Pacific region that are going to force companies to engage in better corporate governance practices.
One of these trends involves the increase of institutional investors in the region. Recent years have witnessed a significant growth of foreign investors in emerging markets along with the development of more locally based pension funds, investment funds and unit trust providers. Indeed, the fastest growth is now the domestic institutional investment sector and within this the pension sector. Countries such as Korea and Singapore have taken steps to actually encourage people to take out individual private pen-sions plans in the light of an aging and longer living population. Malaysia has a provident fund with quite strict rules on the holdings of domestic equities.
These institutional investors are replacing the more diverse minority shareholders and are posing challenges for the controlling shareholders. Institutional investors are longer terms shareholders and want more information about companies and risk management strategies. They are simply demanding
more transparency and accountability and are increasingly making good corporate governance part of their investment criteria.
The Stakeholder Perspective
Good corporate governance is also about relationships with other stakeholders and not only share-holders. Indeed, the long term success of any company is increasingly going to depend on its ability to manage relationships with a whole range of other interested parties, but in the Asia-Pacific region such stakeholder management is often lacking and in many cases stakeholders are not protected in the ways that they should be.
In the context of corporate governance an important stakeholder is the company’s own employees. We know that good employee relationships can increase motivation, reduce absenteeism and increase overall productivity. As a minimum, governance practices should ensure that employees are employed in ways that adhere to national laws, yet we know that in the region this is very often not the case, with excessive working hours, poor health and safety and underpayment of staff being quite common. Increasingly, companies are being challenged by their own staff and this is likely to increase with tight labour markets and the implicit support for freedoms of association and collective employee action by some governments in the region.
However, companies can go much further than just obeying the law. Corporate governance can actu-ally be improved through the involvement and participation of workers in good governance practices. In many situations workers’ committees, works councils, supervisory boards with employee involve-ment, employee representation on boards and the active involvement of trade unions can all add to good governance practices.
In both mainland China and Taiwan it is common for some board members to be appointed with the involvement of employees. In both these locations, as well as in India, Korea, Pakistan, Sri Lanka and Vietnam, works councils are mandated by law. In China, India, the Philippines and Vietnam, employee participation in the management of a company is a constitutional right.
Employee shareholders can be great advocates for improved corporate governance and leading com-panies often have schemes to increase this form of participation in the company. Since the company is the source of their livelihood they have a strong interest in seeing that it is run well and is successful into the longer term. Increasingly, employees are also owners of companies through pension funds and as we have seen these have been a major driving force in corporate governance reform.
Interestingly, it is often employees who are the first to know about transactions or other practices that violate the rights of shareholders and other stakeholders. So called ‘whistleblowers’, who reveal such abuses, are an important source of information and thereby protection of the interests of others. However, in Asia ‘whistleblowers’ are rarely protected and may therefore be less willing to reveal infor-mation, or if they do may then be subjected to harmful actions themselves, including being dismissed and ‘blacklisted’ by other potential employers. It is important that both countries and companies them-selves seek to protect ‘whistleblowers’ and see them as an important safeguard mechanism in corporate governance practices.
Another very important stakeholder that needs to be part of corporate governance structures is the creditor. In addition to providing the company with money, creditors are often interested in building longer term relationships with companies. They can be sources of long term capital and in such cir-cumstances can be effective monitors of corporate governance.
Like minority shareholders, creditors need protection from abusive practices such as tunneling. Credi-tors need also to be protected from highly speculative endeavors that might be portrayed as relatively
safe. If risky investments are made at times when net assets are low then the benefits of a risky invest-ment will go to shareholders, but in the case of failure it will often be the creditors that will absorb the losses.
As with other aspects of poor corporate governance, the poor treatment of creditors will have ramifi-cations for both companies and the countries they are in as creditors become less willing to provide loans, reducing investment and growth. We often see low levels of credit in the least developed coun-tries, where risks are seen as high, and this hampers the development process. In Hong Kong for example, the credit to private sector organizations amounts to 152% of GDP, but in Bangladesh it is 22%, Indonesia 23% and Sri Lanka 25%.
There is an even wider context to corporate governance and this involves stakeholders more widely and the broader social context of where the company and its supply chains exist. Civil society groups and others are calling for a greater degree of transparency and accountability and better protection for all stakeholders. Increasingly, NGOs are engaging with the business sector and businesses have a role in protecting both their own interests but also the interests of their partners and part of good gover-nance practices.
The media, in particular, is an important transmission mechanism for information about companies coming to consumers and others. However, in some Asian countries, the media can be quite passive and under huge amounts of influence from the state and associated organizations (including, some-times large companies). More press freedom is therefore an important part of encouraging corporate governance at the country level. Much of this broader stakeholder context parallels many of the debates and good practices associated with CSR and they are discussed at length in this publication and there-fore not pursued further here.
Conclusions
Corporate governance is an important issue in the Asia-Pacific region, where it is generally much less developed than we might find elsewhere. Whilst there are many good practices in the region and well developed laws and regulations in some, in general there is a lot more to do. In particular, the fact that so many Asian companies are dominated by controlling shareholders (often families) means that corporate governance may have to be even stronger in this region than elsewhere.
Corporate governance may be the foundation upon which good CSR practices are built, but good cor-porate governance has a lot to learn from key principles of good CSR. Honesty, openness and trans-parency should be the starting point for the development of all relationships in the firm. A stakeholder approach to dealing with all interested parties in the company is also central.
