July 26, 2010 by staff
Cfa Institute, FILIPINO companies still have much room for improvement of corporate governance experts said yesterday, citing problems such as lack of transparency in decisions taken by independent directors.
Minority shareholders have virtually no say in the selection of independent directors, experts claimed. There are no revelations about the decisions of the independent directors, “they added.
“The property [of companies] is highly concentrated in a few families in markets like Hong Kong, Malaysia, India and the Philippines, Katrina Tai, director of standards and the integrity of the CFA Institute’s financial markets, said in a conference organized by the Chartered Financial Analyst (CFA) Society of the Philippines.
In the Philippines, the independent directors represent only 30% of corporate board, lower than Singapore and Malaysia 50% and 55% to 70% in the United States and Canada. Therefore, decision making is limited to the owners of the majority, he said.
The decisions of the independent directors should be disclosed so that investors know that if they are representing the interests of minority shareholders, said Jonathan Juan DC Moreno, president and CEO of the Institute of Corporate Directors.
“Minority shareholders should be given enough influence on the nomination and election of directors”, said the CFA Institute Centre for Financial Market Integrity in a report released yesterday.
“Companies need to provide shareholders with all the biographical details of all directors for election,” the CFA Institute.
Companies are reminded that efforts to ensure good corporate governance eventually pay off. Businesses, especially small and medium enterprises SMEs, should practice “good corporate governance” to gain access to cheaper capital and a broader investor base.
“Studies have shown over governance reduces the cost of capital for businesses,” said Matthew M. Orsagh, policy director of capital markets at the CFA Institute in the briefing.
“It will show investors that you are a better risk than other companies,” said Mr. Orsagh.
Mr. Moreno said that SMEs, while mostly family owned, they should practice good corporate governance in order to expand.
The Securities and Exchange Commission already has a Code of Corporate Governance, said.
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