1. East Asia and the Pacific Region
THAILAND Report on Observance of Standards and Codes (ROSC) – Corporate Governance Country Assessment
Behdad Nowroozi
East Asia and the Pacific Region
World Bank
Bangkok, Thailand
October 26, 2005

2. Regional Context
All countries in East Asia, particularly higher income countries, are moving forward in reforming corporate governance as part of improving their competitiveness
As countries move toward convergence of basic principles of corporate governance (accountability, transparency and the rule of law), it makes it easier to integrate their capital markets at the regional level

3. Background
What is a ROSC? It is an assessment of actual practices and analysis of effectiveness of the mechanisms for ensuring compliance with international standards and best practices
Corporate Governance
Accounting and Auditing
Creditors’ Rights and Insolvency

4. Background (cont’d.) The main areas of the OECD Corporate
Governance Principles
Effective corporate governance framework
Rights of shareholders
Equitable treatment of shareholders
Role of stakeholders in corporate governance
Disclosure and transparency
Responsibilities of the Board
Methodology (collaborative process)

5. Overall Assessment
Principle-by-principle assessment using OECD principles as the benchmark is, in general, largely/partially observed
Observed means all essential criteria are met without significant deficiencies
Largely Observed means only minor shortcomings are observed, which do not raise questions about the authorities’ ability and intent to achieve full observance in the short term
Partially Observed means that while the legal and regulatory framework complies with the principle, practices and enforcement diverge

6. Thailand Country Assessment
Significant corporate governance reforms have been introduced in recent years
Thailand continues to make progress in improving corporate governance
The reform agenda, however, remains incomplete
Changes in the regulatory framework need to be translated into actual practices

7. Key Findings Investor Protection Disclosure
Basic shareholder rights are protected, but concentrated control limits the influence of minority shareholders
There are some constraints on shareholder participation in the AGM
There is a lack of range of sanctions to facilitate effective enforcement
Disclosure
Thailand accounting standards are not fully consistent with international standards

8. Key Findings (cont’d.) Company Oversight and the Board
Limited understanding of duties of care and loyalty
Boards are dominated by controlling shareholders
Director independence is quite limited, particularly in smaller companies
Legal enforcement remains a major challenge; more aggressive prosecution is necessary

9. Recommendations
Legislation to strengthen minority shareholders rights should be adopted and additional reform to strengthen the corporate governance framework will be required in these areas:
Cost-effective legal channels for shareholders seeking redress
Dismissal of directors
Cross-border voting

10. Recommendations (cont’d.)
Regulatory and self-regulatory action is important, particularly in light of legislative uncertainty
Expand the coverage of the rules on conflicts of interest and self-dealing
Clarify the regulations governing the actions of institutional investors
Increase the accountability of directors and management and further clarify the fiduciary duty of directors
Further strengthen the Audit Committee’s role to increase its effectiveness
Consider requiring the establishment of additional board committees
Require codes of conduct for listed companies
Require establishment of board evaluation procedures

11. Recommendations (cont’d.)
Further improve quality and reliability of financial information and disclosure
Move to full convergence with international accounting and auditing standards
Encourage disclosure by custodians
Establish corporate governance enforcement priorities
Strengthen the independence of the SEC
Improve enforcement for violation of laws
Introduce administrative and civil sanctions

12. Conclusion
Improving corporate governance is a long-term process and requires a collective effort by all market participants, including regulators, creditors, institutional investors, directors, management, accountants, and shareholders.
Thank you