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OECD’s study on Corporate Governance Frameworks in Asia

OECD’s study on Corporate Governance Frameworks in Asia

The Organisation for Economic Co-operation and Development (OECD) is a Paris based intergovernmental economic organisation whose objective is to stimulate economic progress and world trade. It provides a forum in which governments can work together to share experiences and seek solutions to common problems. India is at present only a member of various committees of the organisation. One of the main objectives pursued by the OECD is to disseminate accurate and up to date information on prevailing standards and practices on various issues.

In May 2016 the OECD undertook a comprehensive survey on corporate governance frameworks across 14 Asian countries. This survey reflected the Asian perspective in terms of evolution, standards and practices of corporate governance policies in countries such as Bangladesh, China, Taipei, Hong Kong, India, Indonesia, Korea, Malaysia, Mongolia, Pakistan, Philippines, Singapore, Thailand and Viet Nam.  A snapshot of the survey:



OECD Survey result




Regulatory framework



All 14 Asian countries have laws and other regulations which are constantly updated. In India, there is the Companies Act, 2013, SEBI laws relating to LODR and stock exchanges Acts.




Ownership structure at

company level


Listed companies in most Asian countries had concentrated ownership structures. Of the participating countries, only China and Viet Nam had companies with substantial state ownership. All other countries including India maintained significant family ownership structures.


Custodian / Regulators of codes and principles


All countries have a structured set up of custodian and or regulators of codes and principles. Most bodies are governed by Chairman, Board members and members. Of the 14 Asian countries, 11 countries had regulators which are public initiative. While in 7 countries the regulatory bodies have public funding, the remaining had either private funding or mixed funding. In India, while the Ministry of Company affairs is central government initiative which is publicly funded, the SEBI is an independent watch dog is self-funded.


Other organizations that promote improvement of Corporate Governance


All Asian countries except Bangladesh, China, Taipei, Hong Kong and Mongolia have ad hoc agencies or other entities that promote CG policies of the government. However only Bangladesh and Viet Nam have special courts to litigate CG matters. In India the National Foundation of Corporate Governance propagates the CG policies of the government.


Implementation mechanism



The laws relating to CG compliance have continuously evolved from 2006 onwards. While China, Indonesia, Korea have adopted the CG procedures voluntarily, most other Asian countries are bound to comply with the CG laws. All countries except Indonesia have to disclose CG related compliance in the company annual report or Corporate governance report. India is governed by the Corporate Governance guidelines.


Self-listing of

stock exchanges and mode of funding


75% of the participating Asian Countries are not self-listed stock exchanges. This includes India also. Only countries like Hong Kong, China, Malaysia, Philippines and Singapore are self-listed. 71% of the countries’ stock exchanges are self-funded. In India, both NSE & BSE are self –funded.


Key shareholder rights


Available as per respective laws of all participating Asian countries.

·         Minimum prior notice for convening shareholder meeting minimum of 7 days (Thailand) upto 30 days (Mongolia).  In India it is 21 days

·         Shareholder voting rights

Available in most participating Asia countries.



Disclosure of related party transactions and approvals


All participating countries have stringent laws relating to disclosure of related party transactions with varying thresholding limits. In all jurisdictions, related parties are required to abstain from voting on interested transactions. So far as approvals are concerned, Indonesia, Malaysia and Singapore require only shareholder approval while Pakistan and Philippines require only Board approval. All other countries including India require approvals from Board and shareholders.


Board structure, size; committees


Most Boards are one tier or unitary Boards. Only China, Indonesia and Viet Nam have two tier dual Boards. The Size of Boards vary across countries from a minimum of 2 upto a maximum of “no limits”.  All countries have regulations to form various committees – Audit, Nomination, Remuneration, Risk management. Few countries have CG, HR & RPT committees.


Directors’ qualifications



Fit & proper test – all Asian countries contain provision like disqualifications if found to be of unsound mind, insolvent etc.


Minimum education & training; Professional experience – only Bangladesh, Taipei, Indonesia, Malaysia, Mongolia, Pakistan, Philippines, Viet Nam & Singapore prescribe education qualification.


Disclosure of director’s compensation


Majority of participating Asian countries have requirement in their laws to disclose director’s compensation. Only Bangladesh, Korea, Malaysia and Singapore do not have mandatory requirements.


Women on Boards and in senior management



Bangladesh, Mongolia, Pakistan & Viet Nam was not covered under this. The country with the lease representation on the Board as well as in the senior management was Korea. Malaysia had the maximum number of women representation on the Board. India stands reasonably behind Malaysia.


The OECD originally developed principles of corporate governance in 1999 and updated subsequently in 2004 and 2015. In 2016 it undertook the survey which threw light on the evolution of legal, regulatory and institutional framework for corporate governance practices of listed companies of 14 Asian countries. The survey is exhaustive and objective as OECD has built on the expertise of securities regulators, institute of directors, corporate governance centres, stock exchanges, listed companies. The OECD survey reiterates importance given to CG compliance by emerging and developed economies alike. Almost all economies endeavour to keep pace with the dynamic corporate governance laws. The principles have been adopted as one of the key standards for sound financial and compliance systems. They have been used by the World Bank in their country wise reviews. They also serve as the basis for guidelines on corporate governance.



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