The Private Sector and Building Effective Demand for Corporate Governance

Caribbean Corporate Governance Forum

September 2003

www.cipe.org

Supply and Demand

Supply• Securities

Commissions• Stock Exchanges• Other

Regulatory/Fiscal Authorities

• OECD

Demand• Companies• Shareholders• Investors• Banks

Phases of Developing Demand

1. Initial Assessment 2. Organizational

Development3. Making the Case 4. Building Human Capital5. Public Policy Reform6. Consolidation

Key Institutions Must Function Well

• Procedures for bankruptcy• Property rights• Contract enforcement – judicial system (s)• Enforcement mechanisms• Securities markets• Free press – financial press• Ratings agencies et al • Other systemic checks and balances

1. Initial Assessment

• Assess corporate governance failures• Rate country standards vs. best

practice• Adapt OECD principles (+ national

needs)• Build awareness at senior business

and policy levels• Identify stakeholders

2. Organizational Development

• Private sector associations• Institute of Directors• Investor protection associations (s)• Think tanks and other private sector

institutes• Create corporate governance within

civil society, business, and regulatory bodies (coalitions, national task forces)

3. Making the Case• What is Corporate Governance – country

by country• Codes and tool kits adapted for the

country• Ratings systems for investors• Benefits to stakeholders – investors,

block shareholders, family firms, employees, banks

• Impact on economic performance (cost of non-compliance)

4. Building Human Capital

• Training and certification programs for managers and directors (IOD)

• Investor education• Firm level programs• Journalism education • Professional development programs

for Parliamentarians, regulators, judiciary, accountants, etc.

5. Public Policy Reform

•Policy seminars and conferences•Policy papers and research•Provide experts / case histories•Make specific policy

recommendations•Draft legislation, regulation,

standards•Advocacy campaigns: key contacts,

opinion editorials, public events, petitions, grassroots

6. Consolidation

• Further strengthen shareholder rights groups and Institutes of Directors,

• Risk ranking by ratings agencies. • Reports on Standards and Codes (ROSC)• Legal and institutional enforcement –

tracking and reporting performance by public and private sector.

Evaluation of impacts

Case Study: Columbia Confecamaras

Phase One• Corporate Governance Code• Corporate Governance Survey• Corporate Governance Training• Legal Advocacy• Government Advisors• Diffusion Tools

Case Study: ColumbiaConfecamaras

Phase Two• Corporate Governance: Face to face program

• 10 companies have been helped to adopt Corporate Governance

• Developing Literature• White Book of Corporate Governance: Respond to the lack of

literature in Spanish

• Diffusion Tools• Website, E-Bulletin: 4000 subscriptions • Documentary Center• Corporate Governance Contest

• Legal Advocacy• Corporate Governance for Mutual Funds• Labor Law

• Training Programs• Cali, Medellín and Bogotá• Work with MBA´s of University of Andes

Case Study: PolandToo Much competition?

• Competing interest groups– Insiders:Stock Exchange and Large

Firms– Outsiders : Think tank, Investors

• Competing codes• “Rush to judgment” –premature

ratings• Unclear outcome

CIPE Program for Latin America and Caribbean• New effort supported by USAID• Training• Intra-regional Networking• Small Grants for Institutes and

Business-led initiatives.