Interpreting the Value of Corporate Governance

1. Corporate Governance Interpreting the Value of Corporate Governance 3rd Asian Roundtable on Corporate Governance Singapore, 4 April 2001

2. 210301LNZXT376TSMW-P1 Investor Opinion Survey respondents’ characteristics • Three surveys covering Asia, Europe, Latin Americaand the U.S. • Views sought from local and international investors • Investors range from money managers to pension funds • Aggregate assets under management are approximately US$3.25 trillion

3. More • Same • Less 210301LNZXT376TSMW-P1 Quality of governance is a key concern when evaluating investments • % • “In evaluating Asian companies for potential investment, how important is the quality of board practices relative to financial issues?”

4. Quality of corporate governanceScale • Premium investors are willing topay for a well governed company% • Verypoor • Verygood • Japan • Taiwan • Korea • Thailand • Malaysia • Indonesia • U.S. (estimate) • U.S.18% • Asia24% 210301LNZXT376TSMW-P1 Investors’ views on the quality of governance in Asia

5. Venezuela • Indonesia Columbia • Thailand • Korea • Malaysia Brazil • Italy Mexico • Germany Argentina • Taiwan • France Chile • Japan • Spain • Switzerland • 0 • Latin America • Asia • Continental Europe • US • UK • Anglo-Saxon 210301LNZXT376TSMW-P1 Average premium investors would be willing to pay for a well-governed company • Average % 30 28 26 24 22 20 18 16

6. Latin America Europe/U.S. • Negative impact • Negligible impact • Moderate impact • High impact • -1 • 1 • 2 • 3 • 4 • 5 • Majority of independent outside directors • n/a • Formal CEO evaluation by the board • Separate CEO from chairman position • Formal annual evaluation of board • Formal annual evaluation of directors • Higher proportion of outside director compensation paid in stock/options • Have a ‘lead’ director • Greater use of board committees • n/a • Outside directors’ meeting with large investors 210301LNZXT376TSMW-P1 Investors’ views on how to improve board performance • Average response

7. “I do not need to raise capital anytime soon. Why should I worry about corporate governance?” – Chairman, $2b market caplisted company “I would rather have a higher cost of capital than the higher taxes that I would be forced to pay under greater disclosure.” – Chairman,listed multi-business company “More transparency means more opportunity for the government to favour my crony competitors.” – CEO, listed family-owned company “We’ve tried. We’ve placed the best independent directors on our board. But they would not dissent” – Chairman, tightly-heldlisted company 210301LNZXT376TSMW-P1 Asian business leaders are wary of the benefits

8. Dispersedownership Non-executivemajority boards • Shareholder environment • Independence and performance Highlydevelopedinstitutionalinvestment Aligned incentives OECD Principles • Institutional • context • Corporate context Active privateequity market(incl. IPOs) Highdisclosure Active marketfor corporatecontrol Clearlines ofaccountability • Capital market liquidity • Transparency and accountability 210301LNZXT376TSMW-P1 The Anglo-Saxon governance system

9. Concentratedownership ‘Insiderboards’ • Shareholder environment • Independence and performance Reliance onfamily and statefinance Incentives aligned withcore shareholders OECD Principles • Institutional • context • Corporate context Under-developedand illiquidinvestment market Limiteddisclosure Limited marketfor corporatecontrol Inadequateminorityprotection • Capital market liquidity • Transparency and accountability 210301LNZXT376TSMW-P1 The Asian governance system

10. Anglo-Saxon governance system • Asian governance system 210301LNZXT376TSMW-P1 Managing the transitional challenge