Wide Global Divergence Incorporate Governance Requirements
KPMG (one of the big four accountancy firms) and Association of Chartered Certified Accountants (global professional accounting body) conducted a joint study highlighting the importance of principles of Organization of Economic Co-operation and Development (OECD) in determining requirements of Corporate Governance (CG) in twenty five markets.
Effective and adequate corporate governance is essential in assisting managements and boards to cope with uncertainties in global business world.
The joint study showed that there is a lot of difference between requirements of corporate governance across twenty five markets including Australia, Singapore and China etc.
The head of risk consulting KPMG Singapore, Irving Low, said that well applied CG increases the confidence in capital markets which is specifically vital in the context of emerging markets like in Asia region. He added that we still have a lot of work to do given the differences in CG requirements across markets as revealed by the study. He hoped that this study will help in improving the CG requirements worldwide.
The study assessed the corporate governance requirements among twenty five markets in terms of level of implementation, type and number of instruments and clarity. The top three markets identified by study were United Kingdom, Unite States of America and Singapore followed by Malaysia, India and Australia getting combined fourth position. The worst performing countries were Japan, Vietnam, Myanmar, Brunei and Laos. 6 out of 10 top positions represent developed markets demonstrating that the maturity of markets affects the need of corporate governance requirements.
The study showed strong alignment of CG requirements with OECD principles. It was found that sixteen out of twenty five markets have adopted more than eighty percent principles of OECD. However there were markets like Laos, Brunei and Myanmar which have do not contain requirements for more than 50% of OECD principles.
Most of the markets presented codes of corporate governance between the year 1992 and 2004. These codes were changed on average 2.4 times. The top scorer markets revised the codes on average 3.4 times whereas low score markets revised them 1.8 times on average. Seventy six percent of markets have revised their codes since financial crunch in 2008.