2002 Ulaanbaatar - Strengthening corporate governance in the Asia Pacific region
Note: This policy statement was issued on the 4th of June 2002 during the 64th CACCI General Council Meeting in Ulaanbaatar, Mongolia.
1. Strong and effective systems of corporate governance are essential to the sustained competitive advantage of commerce and industry, and for a nation as a whole, especially for their capacity to realise the opportunities offered by globalisation.
2. Effective corporate governance builds on three key pillars: pro-market economic and regulatory policies, and robust rule of law: the ability of shareholders to monitor and, when required, intervene in the management of the enterprise; and, the vigour of the market for corporate control, permitting ownership of the enterprise to move to those most capable of delivering superior performance.
3. Corporate law and regulation have an important role to play in facilitating effective and efficient systems of corporate governance by, inter alia, setting minimum standards of accountability, disclosure, responsibility and transparency. Competition, financial, investment and bankruptcy laws can play complementary roles. Universal accounting standards and good auditing practices are also essential for good governance. After all, good governance and universal accounting standards and good auditing practices are integrally related and mutually supporting.
4. CACCI holds firmly good corporate governance principles and practices are held in high regard by reputable firms worldwide, and a legitimate asset in business and commercial affairs which underpin competitive advantage and shareholder value, at home and in the increasingly global market place.
Corporate Governance and National Development
5. All corporate enterprises in all countries should scrupulously adopt corporate governance frameworks. In developing nations, especially for economies-in-transition from centrally-planned to market-based systems, such frameworks enable credibility with foreign investors, owners of intellectual property and international financial institutions. Decisive action to eradicate corruption and other improper practices, which are indicative of corporate and political failure, is imperative.
6. Respected, strong and transparent systems of corporate governance are also influenced by, and in return have a positive influence on, good governance by governments.
7. CACCI believes most strongly that the quality of corporate governance will become even more important in building and sustaining public confidence in, and the legitimacy of, the business sector.
8. Corporate governance, strictly speaking, involves a set of relationships between an enterprise’s Board of directors, management, shareholders and direct stakeholders, through which its objectives are decided and the means for achieving them and monitoring performance are determined.
9. The globalisation of business and the intensifying integration of national markets through highly mobile capital, greater movement of labour and ever more forceful expression of investor demands for more responsive corporate governance must be recognised by governments in setting commercial laws, and companies in their strategic planning.
10. Strengthening the confidence of investors – domestic and foreign, householder and institutional – in the governance of a nation’s businesses will benefit the longer-term competitiveness of those enterprises, and through this the health and vitality of the national economy in the world marketplace.
Boards of Directors
11. The quality, propriety and strength of Boards are key determinants of the effectiveness of corporate governance arrangements, and through this the sustained competitive performance of the enterprise. While executive leadership and management have important roles to play, final responsibility for the performance of the enterprise rests with the Board.
12. Board members must be capable of exercising objective judgement on corporate affairs, both in general terms and specific to the enterprise, competently and independently of management. They are also accountable to shareholders for the sound governance of the enterprise, and must ensure compliance with applicable laws and fair dealings with all groups of shareholders.
13. The primary and overriding obligation of Boards and the executive leadership and management are to pursue, within the rule of law, objectives which are in the longer term best interests of shareholders; in short, to maximise shareholder value. At the same time, due consideration should be given to other stakeholders as well.
14. Shareholders should also be treated equitably, without discrimination between domestic and foreign investors. The rights of minority shareholders must also be taken into account in developing models of corporate governance, to ensure their views are not marginalised but are heard and taken into account in corporate decision-making.
The Role of CACCI
15. CACCI will play a role in promoting good corporate governance by facilitating networking, exchange of information, and consultation among chambers of commerce and companies, including small and medium enterprises, in the region. CACCI encourages its members to cooperate with their respective governments to promote good corporate governance. It will continue to examine and discuss this issue and endeavour to develop frameworks for good governance.