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This report presents the evaluation criteria and scoring template used in the Regional Score Card Initiative for corporate governance in East Asia. It includes the results from the evaluation conducted in Thailand in 2005 and highlights areas for improvement. The report also outlines future plans for expanding the initiative and promoting regional corporate governance.
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Regional Score Card Initiative Private Sector Initiatives and CG in East Asia 13 September 2006
Background • Thai IOD started a CG base-lining evaluation in 2001. • McKinsey & Company assisted in developing the evaluation criteria. • The World Bank provided funding for data gathering and report compilation. • The evaluation criteria and scoring template was adopted by the Philippines, Hong Kong, China and Indonesia.
Evaluation Criteria Based on Five OECD Principles Criteria Weight (%) 2006 2005 2001 • Rights of Shareholders 7 23 23 20 • Equitable Treatment 10 13 13 15 • of Shareholders • C. Role of Stakeholders in Corporate 4 8 9 15 • Governance • D. Disclosure and Transparency 17 32 32 25 • Board Responsibilities 16 42 45 25 • Total 54118122100 • Companies Scored 133371402
Evaluation Method • Based onpublicly available information • (Annual Report, report to regulators, Notice and • Minutes, Website) • Minimize subjectivity in scoring: • - Scoring template, scoring methodology. • - Commission Sasin Business School. • Not dependent on companies’ willingness to participate. • Not as detailed as conducted by a rating agency.
2005 Results - THAILAND 2005 CG Score by Category Average 100 Best CG 97 97 97 92 92 100 83 80 75 69 69 66 60 53 51 48 40 45 37 20 23 0 0 E. Board Responsibilities B. Equitable Treatment of Shareholders D. Disclosure and Transparency C. Role of Stakeholders A. Rights of Shareholders Overall Worst CG
2005 VS 2003 - THAILAND 2003 2005 CG Score by Category Average Best CG + 6 +9 - 6 + 26 +18 + 8 100 83 80 75 72 69 69 69 66 65 60 60 53 45 43 40 20 0 E. Board Responsibilities C. Role of Stakeholders D. Disclosure and Transparency B. Equitable Treatment of Shareholders A. Rights of Shareholders Overall Worst CG
2005 Score by Quartile Overall CG Score Best CG 100 92 90 80 80 75 75 71 68 70 68 66 63 60 63 58 50 40 Worst CG 45 Quartile 0 Q 2 Q 1 Q 4 Q 3
Board Responsibilities Percentage of analyzed Thai companies with best possible evaluation 100% E.18.1 - Appoint Audit Committee. 96% E.12 - Provide risk management policy. 92% E.22 - The company has Non – Executive Directors > 50%. Strong 88% E.17 - Chairman is not also a CEO. 84% E.6 • The internal audit function has a • reporting line to the Audit Committee. E.14 8% - The board conduct annual self assessment. E.23 8% - The company has Independent Director > 50%. Weak • The company conducts annual performance • assessment of CEO. 5% E.15 • The company provides an option scheme with • period over 3 years and price above market. 4% E.26 2% E.8 - The company provides orientation to new directors
2005 - Thailand Average Tobin’s Q Values By Corporate Governance Quartiles Top Quartile 2nd Quartile 3rd Quartile Bottom Quartile Corporate Governance Quartiles
Regional Scorecard • Observation : • Generated awareness and better understanding • of CG practices. • Stimulated companies to enhance their CG. • Endorsement from countries regulators critical • to success. • Provided a common metrics to measure CG progress and synergy in the region.
Regional Scorecard • What next? • Expand companies and countries. • Develop core criteria for a “Regional Score Card” • Raise funds for expansion • Regional Conference and recognition • Consolidated reporting • Regional CG Awards
