Western crisis has given Asia more room to adjust

Calls for structural reforms in the East no longer hold the force they once did, argues Geoffrey Williams

Corporate governance in Asia has been, and continues to be, a thorny issue for investors, companies and regulators alike. A comparison of Asian corporate governance frameworks shows a huge variety of approaches in the region, due in large part to their history and development.

This has led to British-type systems in Singapore, Hong Kong and Malaysia, a Dutch-influenced system in Indonesia, and elements of Japanese approaches in Korea. There are also multiple local variants, and family-run businesses or dominant shareholder structures are common. The insistence of international and local stakeholders has led to changes in the corporate governance regimes of many Asian countries, and to some extent these have reduced the divergence from international norms.

However, good systems do not guarantee good practice, and criticisms of Asian corporate governance from Western observers have been manifold. Corporate governance in many companies in Asia has been characterized as lacking in transparency and having governing bodies and boards of directors that are dominated by non-independent directors influenced by personal incentives.

There are also claims of an absence of clear board committees and systems for audit and control, as well as a legal mapping of responsibilities and accountability remedies.

These limitations frustrate the control of managers by shareholders and investors alike. The role of shareholders in the control of companies often highlights the effectiveness of voting systems at general meetings, proxy voting and minority shareholder protection as key areas of concern.

But since the global financial crisis of 2008 these criticisms have begun to lose traction in the light of egregious corporate governance failures in the West and the clamour for reform there. This has taken the spotlight off corporate governance in Asia, first because – by and large – Asian companies did not suffer the same failures, and second because the reforms in Asia are now more properly understood as part of a global rather than a regional or country-specific problem.

This new swell of global concern offers Asia an opportunity to consider corporate governance reform in a more balanced and less reactive way in the context of wider global efforts to improve company management at board level. The journey remains difficult, but it is no longer one that Asia must tread alone.

Geoffrey Williams is chief executive of OWW Consulting in Malaysia, and the editor of a new book, Responsible management in Asia: perspectives on CSR, published by Palgrave Macmillan (ISBN: 0230252419)