Regional Score Card InitiativeRegional Score Card Initiative

Private Sector Initiatives and CG in East AsiaPrivate Sector Initiatives and CG in East Asia

13 September 2006 13 September 2006

BackgroundBackground

Thai IOD started a CG baseThai IOD started a CG base--lining evaluation in 2001lining evaluation in 2001..

McKinsey & Company assisted in developing the McKinsey & Company assisted in developing the

evaluation criteriaevaluation criteria..

The World Bank provided funding for data gathering The World Bank provided funding for data gathering

and report compilationand report compilation..

The evaluation criteria and scoring template was The evaluation criteria and scoring template was

adopted by the Philippines, Hong Kong, China and adopted by the Philippines, Hong Kong, China and

Indonesia. Indonesia.

Evaluation CriteriaEvaluation Criteria

A.A. Rights of Shareholders Rights of Shareholders 7 23 7 23 23 23 20 20

B.B. Equitable Treatment Equitable Treatment 10 10 1313 13 13 1515

of Shareholdersof Shareholders

C. Role of Stakeholders in Corporate 4C. Role of Stakeholders in Corporate 4 88 9 9 1515

GovernanceGovernance

D.D. Disclosure and TransparencyDisclosure and Transparency 17 17 32 32 32 32 25 25

E.E. Board ResponsibilitiesBoard Responsibilities 16 16 42 42 45 45 25 25

TotalTotal 5454 118118 122122 100100

Companies ScoredCompanies Scored 133133 371371 402402

CriteriaCriteriaBased on Five OECD PrinciplesBased on Five OECD Principles

20012001 20052005 WeiWeigghtht ( (%%)) 20062006

• Based onBased on ppublicly ublicly aavailable vailable iinformationnformation

((Annual Report, report to regulators, Notice and Annual Report, report to regulators, Notice and

MinuteMinutes, s, WebsiteWebsite))

• Minimize Minimize subjectivity in scoring:subjectivity in scoring:

- Scoring template, scoring methodology.- Scoring template, scoring methodology.

- Commission Sasin Business School.- Commission Sasin Business School.

• Not dependent on companies’ willingness to participateNot dependent on companies’ willingness to participate..

• Not as detailed as conducted by a rating agency.Not as detailed as conducted by a rating agency.

Evaluation MethodEvaluation Method

Overall

2005

Average

100100

8080

6060

4040

2020

00A. Rights of A. Rights of

ShareholdersShareholders

B. Equitable B. Equitable Treatment of Treatment of ShareholdersShareholders

C. Role of C. Role of StakeholdersStakeholders

D. Disclosure and D. Disclosure and

TransparencyTransparency

E. Board E. Board

ResponsibilitiesResponsibilities

6969

9292

4545

6666

77556969

8383

5353

9797

3737

9797

5151

100100

00

9797

4848

9292

2323

2005 Results - 2005 Results - THAILANDTHAILAND

Worst CG

Best CG

CG Score by Category

CG Score by Category

2005

Average

100100

8080

6060

4040

2020

00

Worst CG

Best CG

69696666

75756969

8383

5353

Overall A. Rights of A. Rights of

ShareholdersShareholders

B. Equitable B. Equitable Treatment Treatment

of Shareholdersof Shareholders

C. Role of C. Role of StakeholdersStakeholders

D. Disclosure and D. Disclosure and

TransparencyTransparency

E. Board E. Board

ResponsibilitiesResponsibilities

6060

72726969

4343

6565

4545

2003

2005 VS 2003 - THAILAND2005 VS 2003 - THAILAND

+ 9 - 6 + 6 + 26 +18 + 8

Worst CG

Best CG

Overall CG Score

Q 1

4040

00Q 2 Q 3 Q 4

92 92

75 75

75 75

6868

68 68

6363663 3

45 45

80

71

66

585050

6060

7070

8080

9090

100100

2005 Score by Quartile2005 Score by Quartile

Quartile

2005 TOP Quartile2005 TOP Quartile Companies–By SectorCompanies–By Sector

Sector No. of Companies Top Quartile %

Resources&Energies 13 10 77 %

Technology 36 15 42 %

Financials 59 21 35 %

Services 69 16 26 %

Property & Construction 55 14 25 %

Industrials 41 7 17 %

Consumer Products 38 5 13 %

Market for Alternative Investment (MAI)

8 1 13 %

Agro & Food Industry 41 3 7 %

2005 Results Thailand2005 Results Thailand

38 43 4658

26

4651

4337

1103

0%

20%

40%

60%

80%

100%

Q1 Q2 Q3 Q4

SET 50

Small Mkt. Cap.

Others

Weak

Percentage of analyzed Thai companies with best possible evaluation

Board ResponsibilitiesBoard Responsibilities

- Appoint Audit Committee.- Appoint Audit Committee.

- Provide risk management policy.- Provide risk management policy.

- The company has Non – Executive Directors > 50%.- The company has Non – Executive Directors > 50%.

- Chairman is not also a CEO.- Chairman is not also a CEO.

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

- The board conduct annual self assessment.- The board conduct annual self assessment.

-The company conducts annual performance The company conducts annual performance assessment of CEO.assessment of CEO.

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

- The company provides orientation to new directors- The company provides orientation to new directors

- The company has Independent Director > 50%.- The company has Independent Director > 50%.

Strong

E.18.1E.18.1

E.12E.12

E.22E.22

E.17E.17

E.6E.6

E.14E.14

E.23E.23

E.15E.15

E.26E.26

E.8E.8

100%100%

96%96%

92%92%

88%88%

84%84%

8%8%

8%8%

5%5%

4%4%

2%2%

1.151.07

1.04

0.86

0.00

0.20

0.40

0.60

0.80

1.00

1.20

Top QuartileTop Quartile 2nd Quartile2nd Quartile 3rd Quartile3rd Quartile Bottom QuartileBottom Quartile

Corporate Governance QuartilesCorporate Governance Quartiles

Average Tobin’s Q Values By Corporate Governance QuartilesAverage Tobin’s Q Values By Corporate Governance Quartiles

20020055 - - ThailandThailand

Companies ScoredCompanies Scored

2003 2004 2005 2006

CHI - -100

(Top 100)

100

(Top 100)

HKG 168 - - 174

IND - -61

(Top 61)-

PHI - -49

(Top 49)

64

(Top 64)

THAI 337 - 371 402

Countries ScoredCountries Scored

OverallRights

of Shareholders

Equitable Treatment of Shareholders

Role of Stakeholders

Disclosure

and Transparency

Board Respon-sibilities

CHI(2006)

56 37 69 21 81 46

HKG(2005)

71 71 72 40 90 70

IND(2005)

67 46 88 69 75 64

PHI(2006)

54 45 74 39 67 36

THAI(2005)

69 66 75 69 83 53

Observation :Observation :

• Generated awareness and better understanding Generated awareness and better understanding

of CG practices. of CG practices.

• Stimulated companies to enhance their CG.Stimulated companies to enhance their CG.

• Endorsement from countries regulators critical Endorsement from countries regulators critical

to success.to success.

• Provided a common metrics to measure CG Provided a common metrics to measure CG

progress and synergy in the region.progress and synergy in the region.

Regional ScorecardRegional Scorecard

What next?What next?

• Expand companies and countries.Expand companies and countries.

• Develop core criteria for a “Regional Score Card”Develop core criteria for a “Regional Score Card”

• Raise funds for expansion Raise funds for expansion

• Regional Conference and recognitionRegional Conference and recognition

• Consolidated reportingConsolidated reporting

• Regional CG AwardsRegional CG Awards

Regional ScorecardRegional Scorecard