vietnam - emerging d&o trends presentation - aig
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South East Asia & China Regions
Financial Lines Division
Vietnam – Directors & Officers Liability
Emerging D&O Trends in Asia
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AIG S E Asia Pte Limited, Financial Lines Division
Presentation Outline
Driving the need for D&O in Asia
Claims Examples in Asia-Pacific
Corporate Governance Survey in Vietnam
The Corporate Governance Framework
Conclusion
Introduction
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AIG S E Asia Pte Limited, Financial Lines Division
Southeast Asia & Greater China
The next ‘big thing’
Globalisation is at work - creating wealth at a pace unseen since the industrial revolution
Investors view of Asia
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AIG S E Asia Pte Limited, Financial Lines Division
Emerging D&O Trends in Asia
Why the Underlying need for D&O in Asia?
Claims Examples in Asia-Pacific
Corporate Governance Survey in Vietnam
The Corporate Governance Framework
Conclusion
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AIG S E Asia Pte Limited, Financial Lines Division
Foreign Direct Investment Inflows –2005 – USD bn
0 100 200 300 400 500
Africa
Latin
America
North
America
Asia
Europe
Economist – 19th October, 2006
% Change from 2004
99.2
27.4
7.5
3.1
78.3
Source: UNCTAD
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AIG S E Asia Pte Limited, Financial Lines Division
SE Asian Stock Markets at record highs
Source: SGX Annual Report
2006
Singapore Stock Exchange
58.1
138.898.4
159
318.8
0
50
100
150
200
250
300
350
Avera
ge IPO m
ark
et capitalization
FY2002 FY2006FY2005FY2004FY2003
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AIG S E Asia Pte Limited, Financial Lines Division
A Change in the Legal landscape
� Greater economic growth =
� Changes in the legal
framework and
� Higher regulatory standards
Is driving greater expectationfor Corporate Governance Best Practice
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AIG S E Asia Pte Limited, Financial Lines Division
With Wealth comes Responsibility
Asian regulators are
MORE active and are
focusing on:
improving standards of
disclosure
financial reporting
board practices
“Negative assurance”
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AIG S E Asia Pte Limited, Financial Lines Division
Regulators & Legal Reforms powering actions against Directors & Companies
Recent Legislative Reform Impacting Asia
� Enterprise Law – Vietnam, 2006
� Competition Legislation – Singapore,
2006
� China Bankruptcy Law – China, 2006
� ‘Strict Liability’ Regime – Taiwan,
2006
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AIG S E Asia Pte Limited, Financial Lines Division
Investor Interest in Asian Companies is Global - US (ADR) Trading Volumes
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AIG S E Asia Pte Limited, Financial Lines Division
How the Corporate Landscape quickly changes ….
"Business, in many cases, will descend to the lowest common denominator. And if we believe that the market depends upon integrity and fair dealing, then government must step in to make sure that the rules are honored”.
Former NY State Attorney
General - Mr Elliot Spitzer
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AIG S E Asia Pte Limited, Financial Lines Division
Emerging D&O Trends in Asia
The Underlying need for D&O in Asia
Claims Examples in Asia-Pacific
Corporate Governance Survey in Vietnam
The Corporate Governance Framework
Conclusion
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AIG S E Asia Pte Limited, Financial Lines Division
“The Ripple Effect” in Southeast Asia
0
10
20
30
40
50
60
70
80
90
100
D&O
2003
2004
20052006D&
O Claims no
tifica
tions
are
increa
sing
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AIG S E Asia Pte Limited, Financial Lines Division
AIG’s SEA Claims Experiences
A 56% increase in the contribution of Regulatory Claims
2006
Reg/Gov't
Body
25%Employee
23%
Misc
14%3rd Party
36%
Shareholder
2%
2005
Employee
20%
Misc
8%
3rd Party
53%
Reg/Gov't Body
16%
Shareholder
3%
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AIG S E Asia Pte Limited, Financial Lines Division
AIG Claims Example - Investigation
A large Asian telecommunication company held a business conference in Hawaii
Subpoenas served requiring key executives to testify before the Grand Jury of the US District Court in Hawaii
Investigation initiated by the US Federal Communication Commission (FCC) in relation to possible violation of anti-trust law
+ USD 4Million in legal costs incurred
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AIG S E Asia Pte Limited, Financial Lines Division
AIG Claims Example - Fraud
The Chairman of a HK Listed Chinese company was arrested and detained as a result of allegedly improper bank loans and property transactions
Additionally two of the company’s directors were also arrested and charged by the ICAC in Hong Kong for ‘improper activities’
Legal defence costs were incurred
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AIG S E Asia Pte Limited, Financial Lines Division
AIG Claims Example - Shareholder
A Bank in the Middle-East was placed into liquidation
Regulator conducted an Investigation
A class-action was filed by shareholders
The Loss exceeded USD 10Million
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AIG S E Asia Pte Limited, Financial Lines Division
AIG Claims Example – Employee Whistle-blowing
An employee complaint triggered an investigation
Criminal proceedings initiated against former D&O’s
Allegations also levelled against some current directors
Defence costs exceeded USD 6Million
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AIG S E Asia Pte Limited, Financial Lines Division
Emerging D&O Trends in Asia
The Underlying need for D&O in Asia
Claims Examples in Asia-Pacific
Corporate Governance Survey in Vietnam
The Corporate Governance Framework
Conclusion
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AIG S E Asia Pte Limited, Financial Lines Division
Corporate Governance Findings in Vietnam
Lack of transparency and disclosure
Weak Internal Controls
Lack of understanding as to shareholder rights
Specific Challenges facing State Owned Enterprises (SOE’s)
‘Corporate Governance in Vietnam: The Beginning of a Long Journey’ –International Finance Corporation (IFC); and Mekong Private Sector Development Facility (MPSDF), 2006
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AIG S E Asia Pte Limited, Financial Lines Division
Emerging D&O Trends in Asia
The Underlying need for D&O in Asia
Claims Examples in Asia-Pacific
Corporate Governance Survey in Vietnam
The Corporate Governance Framework
Conclusion
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AIG S E Asia Pte Limited, Financial Lines Division
Corporate Governance Framework in Vietnam
Can breaches of duties owed by members of the board generate individual:
Civil liability? �
Criminal liability? �
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AIG S E Asia Pte Limited, Financial Lines Division
Corporate Governance Framework in Vietnam
Does Vietnamese law or regulation provide for:
Individual shareholder suits against the board and
management? �
Class action suits against the board and
management? �
Derivative suits against the board and management�
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AIG S E Asia Pte Limited, Financial Lines Division
Emerging D&O Trends in Asia
The Underlying need for D&O in Asia
Claims Examples in Asia-Pacific
Corporate Governance Survey in Vietnam
The Corporate Governance Framework
Conclusion
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AIG S E Asia Pte Limited, Financial Lines Division
Conclusion – D&O Trends in Asia
Competition between countries for investment
Progressive legislative reform
Greater regulatory interest in business affairs
Greater consumer awareness and litigation
Improved Corporate Governance practices
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AIG S E Asia Pte Limited, Financial Lines Division
THE DATA CONTAINED IN THIS PRESENTATION ARE FOR GENERAL INFORMATIONAL PURPOSES ONLY. THE ADVICE OF A PROFESSIONAL INSURANCE
BROKER AND COUNSEL SHOULD ALWAYS BE OBTAINED BEFORE PURCHASING ANY INSURANCE PRODUCT OR SERVICE. THE INFORMATION
CONTAINED HEREIN HAS BEEN COMPILED FROM SOURCES BELIEVED TO BE RELIABLE. NO WARRANTY, GUARANTEE, OR REPRESENTATION, EITHER
EXPRESSED OR IMPLIED, IS MADE AS TO THE CORRECTNESS OR SUFFICIENCY OF ANY REPRESENTATION CONTAINED HEREIN. Copyright © 2007.
THANK YOU
AIG Vietnam