DFIs Implementation of the Approach Statement: Where Do We Stand?

1. DFIs Implementation of the Approach Statement:Where Do We Stand? ___________________________ DFI Working Group on Corporate Governance Rio de Janeiro, Brazil November 10, 2009

2. Outline • Introduction • DFIs Approach Statement on Corporate Governance • DFIs Practices in Corporate Governance • Current Initiatives • Future Improvements • Conclusion & Next Steps

3. Introduction

4. DFI Corporate Governance Network Background 1st Conference: Paris- June 2004 • Hosted by: IFC • Objectives: Highlight the importance of corporate governance in the DFIs work • Outcomes: Introduction of the DFIs work on CG (including the IFC Corporate Governance Methodology) & an increased collaboration among DFIs: FMO, IFC, SIFEM

5. DFI Corporate Governance Network Background 2nd Conference: Amsterdam - March 2007 • Hosted by: FMO & IFC • Objectives: Proposal of a Common Approach Statement on Corporate Governance among DFIs • Outcomes: • Acknowledgement of the importance of corporate governance to DFIs • Creation of the “DFI Working Group on Corporate Governance” • Signature of the “Corporate Governance Approach Statement” (Washington, DC – October 2007 by 30 DFIs)

6. DFI Corporate Governance Network Background 3rd Conference: Tunis - October 2008 • Hosted by:AfDB • Objectives: • Assessment of where DFIs stand in implementing the Approach Statement • Sharing lessons learned • Strengthening collaboration & synergies among DFIs • Outcomes: • Further cooperation among DFIs in this area

7. DFI Corporate Governance Network Background 4th Conference: Rio de Janeiro – November 2009 • Hosted by:CAF & BANDES • Organized by: the DFI Working Group on Corporate Governance • Objectives: • Assessing where DFIs stand in the implementation of the Approach Statement • Discussing the obstacles & challenges of this implementation • Sharing best practices in nominee directors’ management • Agreeing on the way forward

8. DFI Working Group on Corporate Governance An open group, currently including: - CAF - Michael PENFOLD and Andres ONETO - EBRD - GianPiero CIGNA - FMO - Frederik VAN PALLANDT - IFC - Sanaa ABOUZAID • IsDB - Julio ESTRADA • AfDB – Mohamed BOURENANE

9. DFI Approach Statement on Corporate Governance

10. Common Corporate Governance Definition Corporate Governance is the system by which companies are directed and controlled. Cadbury Code, UK, 1992 Corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined. OECD Principles, 2004

11. DFI Approach Statement on Corporate Governance 5 Approach Statement Elements focusing on: 1. Corporate governance guidelines 2. Corporate governance training 3. Observance of local corporate governance codes 4. Use of Internationally recognized financial reporting standards 5. Collaboration with other DFIs

12. DFI Approach Statement on Corporate Governance Statement 1: Each signing DFI endeavors to: “Develop or adopt guidelines, policies or procedures on the role of corporate governanceconsiderations in its due diligence and investment supervision operations…”

13. DFI Approach Statement on Corporate Governance Statement 2: Each signing DFI endeavors to: “Provide or procure training on corporate governance issues to its investment and supervision staff”

14. DFI Approach Statement on Corporate Governance Statement 3: Each signing DFI endeavors to: “Encourage companies where it invests in (whether directly or indirectly) to observe local codes of corporate governance in the spirit of best international practice. Engage company management and board members in a dialogue to foster improvement in those cases where corporate governance practices are weak”

15. DFI Approach Statement on Corporate Governance Statement 4: Each signing DFI endeavors to: “Promote the use of internationally-recognized financial reporting standards and encourage investee companies to adopt or align their accounting principles and practices to such standards”

16. DFI Approach Statement on Corporate Governance Statement 5: Each signing DFI endeavors to: “Collaborate with other DFIs on an ongoing basis, and when appropriate with its partners, to further advance the cause of good corporate governance”

17. DFI Approach Statement on Corporate Governance The following 30 DFIs signed the Corporate Governance Approach Statement in Washington on October 19th, 2007: 17

18. DFIs practices in Corporate Governance

19. DFIs Corporate Governance Practices Methodology: • Requested “profiles” from signing DFIs • Response rate of about 87% (26 replied) • Analyzed the received information and made an approximate evaluation of the practices of each DFI according to the 5 components of the Approach Statement

20. Statement 1: Corporate Governance Guidelines Current Practices:

21. Statement 1: Corporate Governance Guidelines Work in progress: 58 % of respondents are working or would like to adopt specific corporate governance guidelines for assessing corporate governance of their clients 21

22. Statement 2: Training of Staff Current Practices:

23. Statement 2: Training of Nominee Directors Current Practices: 23

24. Statement 2: Training of Staff & Nominee Directors Work in Progress: DFIs expressed interest in…

25. Statement 3: Encouraging Clients to Improve their Governance Current Practices:

26. Statement 3: Encouraging Clients to Improve their Governance Work in Progress : 39 % of DFIs would like their support to clients in improving their corporate governance to become more systematic

27. Statement 4: Promoting the Use of Internationally-Recognized Reporting & Accounting Standards Current Practices:

28. Statement 5: Collaborating with other DFIs in CG Current Practices:

29. Statement 5: Collaborating with other DFIs in CG Work in Progress: DFIs are or would like to…..

30. Conclusion & Next Steps

31. Conclusion & Next Steps • 77% of signatories do not have CG policies in place or only have basic aspects included in their investment framework (statement 1) • 27% do not offer training on corporate governance to staff and 58% offer no training to nominee directors (statement 2) • 8% have no client encouragement mechanisms (statement 3) • 15% do not encourage the use of international financial standards (statement 4) • 54% do not collaborate with other DFIs on corporate governance (statement 5)

32. Conclusion & Next Steps Where are we heading? • Clear and concrete yearly objectives • Annual meeting to follow-up on the achievement of the pre-set objectives • Group of committed DFIs

33. Thank you!! Questions??