The practice of directorship

1
Regional Score Card Initiative
Private Sector Initiatives and CG in East Asia 13
September 2006
2
Background

• Thai IOD started a CG base-lining evaluation in
  2001.
• McKinsey Company assisted in developing the
  
• evaluation criteria.
• The World Bank provided funding for data
  gathering
• and report compilation.
• The evaluation criteria and scoring template was
  
• adopted by the Philippines, Hong Kong, China
  and
• Indonesia.

3
Evaluation Criteria
Based on Five OECD Principles
Criteria
Weight ()
2006
2001
2005

• Rights of Shareholders 7 23
  23 20
• Equitable Treatment 10 13 13
  15
• of Shareholders
• C. Role of Stakeholders in Corporate 4
  8 9 15
• Governance
• D. Disclosure and Transparency 17 32
  32 25
• Board Responsibilities 16 42 45
  25
• Total 54 118 122 100
  
• Companies Scored 133 371 402

4
Evaluation Method

• Based on publicly available information
• (Annual Report, report to regulators, Notice
  and
• Minutes, Website)
• Minimize subjectivity in scoring
• - Scoring template, scoring methodology.
• - Commission Sasin Business School.
• Not dependent on companies willingness to
  participate.
• Not as detailed as conducted by a rating agency.

5
2005 Results - THAILAND
2005
CG Score by Category
Average
100
97
Best CG
97
97
92
92
100
83
80
75
69
69
66
60
53
51
48
40
45
37
20
23
0
0
E. Board Responsibilities
B. Equitable Treatment of Shareholders
C. Role of Stakeholders
D. Disclosure and Transparency
Overall
A. Rights of Shareholders
Worst CG
6
2005 VS 2003 - THAILAND
2003
2005
CG Score by Category
Average
Best CG
6
9
- 6
26
18
8
100
83
80
75
72
69
69
69
66
65
60
60
53
45
43
40
20
0
E. Board Responsibilities
C. Role of Stakeholders
D. Disclosure and Transparency
B. Equitable Treatment of Shareholders
Overall
A. Rights of Shareholders
Worst CG
7
2005 Score by Quartile
Overall CG Score
Best CG
100
92
90
80
80
75
75
71
68
70
68
66
63
60
63
58
50
40
Worst CG
45
Quartile
0
Q 1
Q 2
Q 4
Q 3
8
2005 TOP Quartile CompaniesBy Sector
9
2005 Results Thailand
10
Board Responsibilities
Percentage of analyzed Thai companies with best
possible evaluation
100
E.18.1
- Appoint Audit Committee.
96
E.12
- Provide risk management policy.
92
E.22
- The company has Non Executive Directors gt 50.
Strong
88
E.17
- Chairman is not also a CEO.
84
E.6

• The internal audit function has a
• reporting line to the Audit Committee.

E.14
8
- The board conduct annual self assessment.
E.23
- The company has Independent Director gt 50.
8
Weak

• The company conducts annual performance
• assessment of CEO.

5
E.15

• The company provides an option scheme with
• period over 3 years and price above market.

4
E.26
2
E.8
- The company provides orientation to new
directors
11
2005 - Thailand
Average Tobins Q Values By Corporate Governance
Quartiles
Top Quartile
2nd Quartile
3rd Quartile
Bottom Quartile
Corporate Governance Quartiles
12
Companies Scored
13
Countries Scored
14
Regional Scorecard

• Observation
• Generated awareness and better understanding
• of CG practices.
• Stimulated companies to enhance their CG.
• Endorsement from countries regulators critical
• to success.
• Provided a common metrics to measure CG progress
  and synergy in the region.

15
Regional Scorecard

• What next?
• Expand companies and countries.
• Develop core criteria for a Regional Score
  Card
• Raise funds for expansion
• Regional Conference and recognition
• Consolidated reporting
• Regional CG Awards