Developing Corporate Governance Codes of Best Practice Toolkit

1. Developing Corporate Governance Codes of Best Practice Toolkit Baku, Azerbaijan January 2009

2. Why develop codes: The Paradox Codes SHOULD not be a substitute for legal deficiencies Yet they are part of the overall regulatory environment which means we need to make sure that they don�t contradict with existing laws Compliance with codes tends to be voluntary Yet it is important to ensure compliance � or otherwise what is the point of developing them? Codes should reflect the needs and realties of the local market to be effective But should also follow international guidelines and best practices � or otherwise they will not be appealing to international investors Appointing a project manager. Often the project manager is an employee from the lead organization, who is given a leave of absence to work on the initiative. Appointing the project team. The lead organization may consider providing project members (often on a part-time basis). The lead organization may have secretariat services and meeting facilities that it can provide to the committee at subsidized rates, cost, or (in some cases) at no charge. Appointing a project manager. Often the project manager is an employee from the lead organization, who is given a leave of absence to work on the initiative. Appointing the project team. The lead organization may consider providing project members (often on a part-time basis). The lead organization may have secretariat services and meeting facilities that it can provide to the committee at subsidized rates, cost, or (in some cases) at no charge.

3. Toolkit II- Overview A thoroughly designed instrument created to provide users with practical tools, relevant examples and international best practice to help craft and implement corporate governance codes. Appointing a project manager. Often the project manager is an employee from the lead organization, who is given a leave of absence to work on the initiative. Appointing the project team. The lead organization may consider providing project members (often on a part-time basis). The lead organization may have secretariat services and meeting facilities that it can provide to the committee at subsidized rates, cost, or (in some cases) at no charge. Appointing a project manager. Often the project manager is an employee from the lead organization, who is given a leave of absence to work on the initiative. Appointing the project team. The lead organization may consider providing project members (often on a part-time basis). The lead organization may have secretariat services and meeting facilities that it can provide to the committee at subsidized rates, cost, or (in some cases) at no charge.

4. Examples from the Middle-East and North Africa 1. Egypt: code for state-owned enterprises issued by the Egyptian Institute of Directors (status: passed) 2. Egypt: code for listed companies is to be reviewed by Egyptian Institute of Directors (status: in process of constituting task force) 3. Jordan: code for listed companies issued by the Jordan Securities Commission 4. Lebanon: code targeted to small and medium enterprises (status: passed) 5. Lebanon: code for listed companies (status: in process) 6. West Bank & Gaza: code for listed companies (status: in process) 7. Saudi Arabia: code passed as a regulation by the Capital Market Authority, which now forms part of the stock exchanges listing requirements (status: passed) 8. United Arab Emirates: regulation issued by the Emirates Securities Commission Authority (status: passed) 9. United Arab Emirates: code issued by the Abu Dhabi Securities Market (status: passed) 10. United Arab Emirates: listing rules issued by the Abu Dhabi Securities Market (status: passed) 11. Bahrain: code for listed companies (status: in process) 12. Morocco: code for listed companies (status: in process) 13. Tunisia: code for listed companies (status: in process) 14. Algeria: code for family and state owned enterprises (status: in process)

5. Volume One: Rationale Why focus on corporate governance on the national level? Types of best practice codes The environment of codes of best practice Complying with codes Why are codes useful? Appointing a project manager. Often the project manager is an employee from the lead organization, who is given a leave of absence to work on the initiative. Appointing the project team. The lead organization may consider providing project members (often on a part-time basis). The lead organization may have secretariat services and meeting facilities that it can provide to the committee at subsidized rates, cost, or (in some cases) at no charge. Appointing a project manager. Often the project manager is an employee from the lead organization, who is given a leave of absence to work on the initiative. Appointing the project team. The lead organization may consider providing project members (often on a part-time basis). The lead organization may have secretariat services and meeting facilities that it can provide to the committee at subsidized rates, cost, or (in some cases) at no charge.

6. Volume two: The Process From practical experiences, the Toolkit puts a lot of emphasis on the process; The process of drafting codes, is as important as the codes themselves; The process can solve many of the issues on the effectiveness of codes.

7. Volume Two: Process of Developing Corporate Governance Codes

8. Process of Developing Corporate Governance Codes

9. Initiating and Leading The Process The initiator is the person or organization that is the first to identify the need to improve corporate governance practices within a country. The lead organization is the one that coordinates the code crafting process, whereas the implementing organization is the one that formally adopts the code at the end of the process. The initiator is the person or organization that is the first to identify the need to improve corporate governance practices within a country. The lead organization is the one that coordinates the code crafting process, whereas the implementing organization is the one that formally adopts the code at the end of the process.

10. Initiating and Leading The Process The initiator is the person or organization that is the first to identify the need to improve corporate governance practices within a country. The lead organization is the one that coordinates the code crafting process, whereas the implementing organization is the one that formally adopts the code at the end of the process. The initiator is the person or organization that is the first to identify the need to improve corporate governance practices within a country. The lead organization is the one that coordinates the code crafting process, whereas the implementing organization is the one that formally adopts the code at the end of the process.

11. The Role of Government Morocco from the MENA region is an example where the government was closely involved in the code development process along with the private sector. Morocco from the MENA region is an example where the government was closely involved in the code development process along with the private sector.

12. The Role of Private Organizations and Professional Associations The initiator is the person or organization that is the first to identify the need to improve corporate governance practices within a country. The lead organization is the one that coordinates the code crafting process, whereas the implementing organization is the one that formally adopts the code at the end of the process. The initiator is the person or organization that is the first to identify the need to improve corporate governance practices within a country. The lead organization is the one that coordinates the code crafting process, whereas the implementing organization is the one that formally adopts the code at the end of the process.

13. The Role of Private Organizations and Professional Associations The initiator is the person or organization that is the first to identify the need to improve corporate governance practices within a country. The lead organization is the one that coordinates the code crafting process, whereas the implementing organization is the one that formally adopts the code at the end of the process. The initiator is the person or organization that is the first to identify the need to improve corporate governance practices within a country. The lead organization is the one that coordinates the code crafting process, whereas the implementing organization is the one that formally adopts the code at the end of the process.

14. The Role of Business Community and Financial Sector The initiator is the person or organization that is the first to identify the need to improve corporate governance practices within a country. The lead organization is the one that coordinates the code crafting process, whereas the implementing organization is the one that formally adopts the code at the end of the process. The initiator is the person or organization that is the first to identify the need to improve corporate governance practices within a country. The lead organization is the one that coordinates the code crafting process, whereas the implementing organization is the one that formally adopts the code at the end of the process.

15. The Role of Business Community and Financial Sector The initiator is the person or organization that is the first to identify the need to improve corporate governance practices within a country. The lead organization is the one that coordinates the code crafting process, whereas the implementing organization is the one that formally adopts the code at the end of the process. The initiator is the person or organization that is the first to identify the need to improve corporate governance practices within a country. The lead organization is the one that coordinates the code crafting process, whereas the implementing organization is the one that formally adopts the code at the end of the process.

16. Forming the Crafting Committee �When developing a corporate governance code, it is preferable to have the support of the government as well as the business community. This does not mean that a corporate governance code should be enforced by way of statute, but it does mean that the code crafting committee and the various task teams that draft the code need to be handpicked so that business leaders, regulators such as stock exchanges, professional bodies such as lawyers and accountants, labor unions, and organized business such as chambers of commerce are all represented on the committee.� Mervyn King, Chairman of the King Committee on Corporate Governance, South Africa

17. Forming the Crafting Committee Consulting main stakeholders; Appointing a chairman; Appointing a project manager; Appointing the project team; Appointing a secretary and organizing secretariat services and meeting facilities; Securing funding; Organizing pre-meeting discussions between the chairman and individual members of the committee. Appointing a project manager. Often the project manager is an employee from the lead organization, who is given a leave of absence to work on the initiative. Appointing the project team. The lead organization may consider providing project members (often on a part-time basis). The lead organization may have secretariat services and meeting facilities that it can provide to the committee at subsidized rates, cost, or (in some cases) at no charge. Appointing a project manager. Often the project manager is an employee from the lead organization, who is given a leave of absence to work on the initiative. Appointing the project team. The lead organization may consider providing project members (often on a part-time basis). The lead organization may have secretariat services and meeting facilities that it can provide to the committee at subsidized rates, cost, or (in some cases) at no charge.

18. Dealing with Conflicts

19. Process of Developing Corporate Governance Codes

20. Be clear on why develop a code Develop clear terms of reference;

21. Develop a Master Schedule

22. Process of Developing Corporate Governance Codes

24. Process of Developing Corporate Governance Codes

25. Drafting the Code Don�t reinvent the wheel International codes, industry specific guidelines, etc Assessing the country�s corporate governance framework and reform needs World Bank ROSC, OECD roundtables, EBRD country assesments, etc Selecting the main drafter Integrating consultation Appointing a project manager. Often the project manager is an employee from the lead organization, who is given a leave of absence to work on the initiative. Appointing the project team. The lead organization may consider providing project members (often on a part-time basis). The lead organization may have secretariat services and meeting facilities that it can provide to the committee at subsidized rates, cost, or (in some cases) at no charge. Appointing a project manager. Often the project manager is an employee from the lead organization, who is given a leave of absence to work on the initiative. Appointing the project team. The lead organization may consider providing project members (often on a part-time basis). The lead organization may have secretariat services and meeting facilities that it can provide to the committee at subsidized rates, cost, or (in some cases) at no charge.