Corporate reform in
East Asia
Prof. Stephen Y.L. Cheung
Department of Economics & Finance
City University of Hong Kong
Priorities in promoting corporate
governance in East Asia (I)
Board
Increase the number of independent
directors
Transparent board structure
Heighten fiduciary duty of BoD
Criterion of the board of directors
Priorities in promoting corporate
governance in East Asia (II)
Law and regulations
Stringent regulation to cope with
corruption
Enforce legal framework
Strengthen capital market regulation
Priorities in promoting corporate
governance in East Asia (III)
Disclosure
Timely and sufficient financial disclosure
Adopt an international standard
accounting
Non-financial disclosure

Corporate governance/ ethical/ social
issues
Better risk management
Priorities in promoting corporate
governance in East Asia (IV)
Shareholders
Strengthen minority shareholder
protection
Educate the public shareholders

Exercise their rights
Encourage participation of institutional
and shareholders in monitoring
performance
Comparison of corporate governance
in East Asian Economies (I)
Criterion of the board members
Hong Kong
Japan
Malaysia
Very general guideline.
e.g. level-headed, relevant
management experience and
knowledge, etc.
Singapore
South Korea
Thailand
Age, background, qualification
Comparison of corporate governance
in East Asian Economies (II)
Separation of chairman and CEO
Hong Kong
Not discussed
Japan
Dual roles are allowed with
explanation
Malaysia
Singapore
Dual roles are NOT allowed
South Korea Not discussed
Thailand
Not discussed
Comparison of corporate governance
in East Asian Economies (III)
Board size
Hong Kong
Not discussed
Japan
No maximum/ minimum is set.
The size should be decided by
the Board.
Malaysia
Singapore
South Korea
Thailand
No less than 5
Comparison of corporate governance
in East Asian Economies (IV)
Independent directors (IDs)
Hong Kong
Japan
Malaysia
Singapore
South Korea
Thailand
No max. / min. is set
At least 1/3 of the board
Max. of 1/3 or 2 IDs
At least 3 IDs
Listed co.: at least 1/4
FIs: at least 1/2
At least 2 IDs
Comparison of corporate governance
in East Asian Economies (V)
Remuneration review
Hong Kong
Not discussed
Japan
Remuneration committee
Malaysia
Executive directors’ links with
corporate/ individual performance
IDs’ reflects level of responsibilities
Fair evaluation
Singapore
South Korea
Thailand
In accordance with Articles of
Association
Comparison of corporate governance
in East Asian Economies (VI)
Assessment of board performance
Hong Kong
Not discussed directly
Japan
Malaysia
Nominating committee
Singapore
South Korea Fair evaluation
Thailand
Not discussed
Comparison of corporate governance
in East Asian Economies (VII)
Communication with institutional and retail investors,
and information disclosure (I)
Hong
Kong
- Disseminate price-sensitive information in a timely
manner
- Clarify any unusual price movement or rumours
Japan
-BoD and management are responsible for providing
accurate, substantive, practical and reliable information.
- Fund managers, analysts and major shareholders
receive privileged information
- Adopt the international standard accounts
- Introduce the quarterly reports
Malaysia
-Encourage direct contact and monitoring by
institutional investors
Comparison of corporate governance
in East Asian Economies (VIII)
Communication with institutional and retail investors,
and information disclosure (II)
Singapore
- Communicate with shareholders effectively and
fairly
- All the material information should be fully
disclosed to the public before disseminating to
others.
South Korea Monitoring corporate performance by institutional
investors is encouraged
Thailand
- All the financial and corporate information should
be disclosed.
- All the connected transactions are disclosed.
Comparison of corporate governance
in East Asian Economies (IX)
Board meetings (I)
Hong
Kong
Full board meeting:
- No less than every 6 months
- Involve matters with conflict of interest
Japan
Not discussed
Malaysia
- Meet regularly and prepare minutes
- Disclose number of meetings held per
year and details of attendance
Singapore - Meet regularly
Comparison of corporate governance
in East Asian Economies (X)
Board meetings (II)
South
Korea
-At least once every 3 months
-Follow the Board Operating Regulation
-Independent directors:
- collect and review all related information
- listen to the opinion of the shareholders
Thailand Company secretary is appointed:
- ensure compliance with the relevant laws
and regulations
- prepare the minutes
Comparison of corporate governance
in East Asian Economies (XI)
Disclosure on directors’ remuneration
Hong Kong
Disclosed in full
Japan
-Decided by the board
-Disclosed as business statements and evaluated by
shareholders
Malaysia
- Disclose a formal and transparent policy
- Report in detail
Singapore
-Disclose a clear remuneration policy
-Disclose the remuneration of all directors and top 5
earning executives in detail
South Korea - Disclosed in full
- Fair evaluation
Thailand
Disclosed in full
Comparison of corporate governance
in East Asian Economies (XII)
Corporate governance disclosure (I)
Hong Kong
A statement of compliance with the Code of
Best Practice from 31st December, 1995
onwards
Japan
Wide disclosure, e.g. policy statements,
environment-related reports
Malaysia
- Comply with the Best Practice
- Performance is reviewed by nominating
committee
- Disclose the board structure and advisers,
details of the board meetings and audit
committee meetings
Comparison of corporate governance
in East Asian Economies (XIII)
Corporate governance disclosure (II)
Singapore
-Chairman ensures compliance with company
guidelines on corporate governance
-Detail information of directors and board committee
-Assessment of the board performance and
effectiveness, and contribution of each directors
South Korea -Disclose information of the nominated directors to
the shareholders
-Explanation for any deviation from the Code
-Disclose detailed information on shareholding of
controlling shareholders
Thailand
-Comply with Code of Corporate Conduct and Code
of Ethics
-Statement of the responsibilities of the directors
Comparison of corporate governance
in East Asian Economies (XIV)
Accuracy of information disclosure (I)
Hong Kong
Every director is responsible for the
accuracy of information disclosed
Japan
Not discussed
Malaysia
External auditors report independently
according to statutory and professional
requirements
- covers financial/ operational/
compliance controls and risk
management
Comparison of corporate governance
in East Asian Economies (XV)
Accuracy of information disclosure (II)
Singapore
-Independent internal auditors
-Meet the international standard
-Audit committee reviews the evaluation of the
internal controls by the internal/ external
auditors
South
Korea
Audit committee and auditors are responsible
for the accuracy of financial reports
Thailand
Directors are responsible for the accuracy of
financial reports, minutes and all document
regarding to the board
Comparison of corporate governance
in East Asian Economies (XVI)
Shareholders’ voting rights
Hong Kong
Not discussed
Japan
Election of directors
Malaysia
Election of directors
Singapore
Not discussed
South Korea
Election of directors
Right of profit apportion/ attendance of board
meeting/
Thailand
A list of certain decisions made by the board
require the shareholders’ approval, e.g.
amendments to Memorandum of Association/
Articles of Association, capital changes, etc.
Recent development of corporate
governance in East Asian Economies (I)
Hong Kong
Amendments to Companies Ordinance



Minority shareholders rights
Voting rights
Rules for company annual meetings and
accessibility to corporate records by
shareholders
Recent development of corporate
governance in East Asian Economies (II)
Malaysia
All directors and company advisers are
responsible for violations of rules regarding to
director liability, financial reporting, disclosure
and investor protection from June 1, 2001.
Disclose the responsibility of directors in internal
controls in annual reports
Transform from the rule-based to the disclosurebased regulatory framework
Recent development of corporate
governance in East Asian Economies (III)
Singapore
New Securities and Futures Act

Listed companies will be charged for violation of
disclosure regulations, in either civil or criminal penalty
Publish the first corporate governance code in
April 2001




Disclosure of executive and director remuneration
Board composition (IDs: 1/3 of board)
Audit committee (All IDs)
Fair and Equitable information disclosure
Include the corporate governance practices in
annual reports from January 2003
Recent development of corporate
governance in East Asian Economies (IV)
China
Proposed rules on pre-listing corporate
restructuring and corporate governance structure

Separation from parent companies on operations,
assets, and structure
From 2002, listed firms publish quarterly financial
reports starting
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