1 The Importance of Good Corporate Governance for State-Owned Enterprises Daniel Blume, Principal Administrator, OECD

2 Presentation: two parts 1. The role of the OECD and key conclusions emerging from its 2004 review of the OECD Principles of Corporate Governance. 2. Moto Yufu: How does the White Paper on Corporate Governance in Asia seek to put the Principles into practice in the Asian context? Vietnam can usefully draw upon both.

3 The OECD as global standard-setter OECD is a “club” of 30 developed democracies sharing common approach to market economy. Consultation and co-operative programmes with countries in nearly all regions of world. Corporate governance work a good example: five regional roundtables in Asia, Latin America, Eurasia, Russia and Southeast Europe. Work also starting in the Middle East and North Africa. OECD Principles of Corporate Governance promoted by Financial Stability Forum, World Bank Group, and international dialogue

4 Why does good corporate governance matter? By reducing cost of capital and improving company management, increases economic competitiveness and contributes to private sector-led economic growth. Lowers risk of financial crisis, contributing to global financial stability Contributes to legitimacy of market economy

5 Core Elements of the OECD Principles Ensuring the basis of an effective CG framework The rights of shareholders The equitable treatment of shareholders The role of stakeholders including creditors and depositors Disclosure and transparency The responsibilities of the boards

6 Some key priorities emerging from the review of the Principles New chapter in the Principles emphasises the need for overall framework to support implementation and enforcement. Shareholder rights must be secure and must be exercised, supported by adequate disclosure, to strengthen corporate governance. Boards play a critical role as the fulcrum between shareholders and professional management.

7 The Asian Roundtable on Corporate Governance The OECD and the World Bank Group have combined their efforts to promote policy dialogue on corporate governance and have established the Asian Roundtable. The Roundtable, launched in 1999, comprises policy- makers, regulators, academics and business leaders from 13 Asian countries/economies including Vietnam. Roundtable participants representing diverse interests agreed on White Paper recommendations and priorities specific to the region in The White Paper builds upon the OECD Principles of Corporate Governance.

8 The White Paper Six Priorities Priority 1. Continued awareness raising regarding the value of corporate governance; Priority 2. Effective implementation and enforcement of corporate governance laws and regulations; Priority 3. Convergence with international standards for accounting, audit and non-financial disclosure; Priority 4. Developing effective boards of directors; Priority 5. Protecting non-controlling shareholders; Priority 6. Improving the regulation and corporate governance of banks.

9 Future Work of the Asian Roundtable The next phase of the Roundtable focuses on implementation and enforcement issues; the stock- taking of developments and progress is scheduled in task forces concerning common challenges in Asia will be established to provide policy briefs for the next Roundtable (2005): - corporate governance of state owned enterprises - corporate governance of banks

10 Putting the OECD Principles into Asian context: The White Paper on Corporate Governance in Asia Asia constitutes a diverse region in areas such as legal tradition and regulatory infrastructure. Different jurisdictions may adopt different approaches to the same concerns based on their understanding of national conditions. Based on these understanding, the White Paper distils common policy recommendations in Asia. “National conditions may determine how corporate governance aspirations should be fulfilled, but these conditions do not excuse jurisdictions from fulfilling them.”