ASEAN Corporate Governance Improves

Posted by Reading Time: 4 minutes

Corporate governance among some of ASEAN’s top public companies improved significantly last year, according to a report released last week.

The ASEAN Corporate Governance Scorecard, a joint initiative of the Asian Development Bank (ADB) and the ASEAN Capital Markets Forum (ACMF), surveyed 529 publicly listed companies (PLCs) from Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. 67 percent of the companies surveyed had a market capitalization of more than US$1 million.

The scorecard used two levels in order to accurately assess the corporate governance performance of the PLCs. The first level related to the basic expectations in five areas of OECD principles – rights of shareholders, equitable treatment of shareholders, role of stakeholders, disclosure and transparency and responsibilities of the board – as well as the laws, rules, regulations and requirements of each country. The second level allocated bonus points in the case of good practice or imposed a penalty in the case of poor governance.

Across the six ASEAN countries represented in the survey, the mean score increased from 53.66 points in 2012 to 64.02 points in 2013, an increase of 19 percent. However, this was partly due to the deliberately higher allocation of bonus points in the second level of the survey this year, a decision made in order to incentivize companies to improve standards. The mean score for the first level, for which the scoring remained the same, increased from 54.32 points in 2012 to 60.09 points in 2013, an increase of 11 percent.

Thailand retained its place at the top of the scorecard, with a score of 75.39 points compared with 67.66 points in 2012. Thailand was followed by Malaysia, which scored 71.69 points, a considerable increase from the 62.29 points it received in 2012.  Singapore saw the largest improvement in the survey, with a 29 percent increase year-on-year from 55.67 points in 2012 to 71.68 points in 2013. The Philippines and Indonesia had reasonably similar scores, with 58 and 54.44 points each, up from 48.91 and 43.29 points respectively in 2012. The lowest-scoring country was Vietnam despite an increase from 28.42 to 33.87 points. A perfect score in the survey is 142 points.

When the results are broken down into areas representing the five OECD principles, Thailand scored the highest in  ‘rights of shareholders’ and ‘equitable treatment of shareholders’, whereas Malaysia scored the highest in ‘role of stakeholders’, and Singapore scored the highest in ‘disclosure and transparency’ and ‘responsibilities of the board’.

The ASEAN Corporate Governance Scorecard unifies the previous national scorecards held by Malaysia, the Philippines, Thailand and Vietnam.  The common methodology facilitates the decision-making process for foreign investors by providing them with easily comparable key data and also assures investors that the ASEAN countries are taking corporate governance seriously and striving to raise standards. This is particularly important in light of the lessons learned following the 1997 Asian financial crisis, which exposed inadequate corporate governance in the region and resulted in plummeting investor confidence.

As well as improving the corporate governance standards and practices of ASEAN PLCs and making these companies more investable, the scorecard is also part of a broader ACMF strategy to encourage regional integration.  With the ASEAN Economic Community (AEC) coming into effect on December 31, 2015, at which point ASEAN capital markets will be integrated and stock exchanges will be linked, it is especially important for ASEAN countries to increase the visibility of good corporate governance practices and promote the region as an attractive asset class.

The establishment of a set of corporate governance standards among the ASEAN countries will also lead to further intra-ASEAN investment, help companies expand their markets and simplify cross-border operations.

“This is a significant milestone towards ASEAN integration, as the effort has moved beyond national boundaries. The ASEAN Corporate Governance Scorecard supersedes national scorecards,” said Shigeko Hattori, Director of Public Management, Financial Sector and Trade division in the Southeast Asia Department of the Asian Development Bank (ADB), when the inaugural report was released last year.

“This corporate governance initiative, which complements other initiatives under the ACMF, reflects the collective and strong commitment by ASEAN member countries to achieve convergence as an ASEAN Economic Community by 2015,” said Datuk Ranjit Ajit Singh, Executive Chairman of the Securities Commission Malaysia.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email or visit

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

Related Reading

Are You Ready for ASEAN 2015?
ASEAN integration in 2015, and the Free Trade Agreements China has signed with ASEAN and its members states, will change the nature of China and Asia focused manufacturing and exports. In this important issue of Asia Briefing we discuss these developments and how they will impact upon China and the Global Supply Chain.

ASEAN Corporate Governance Scorecard 2012

New Companies Ordinance Takes Effect in Hong Kong

Asia-Based Companies Report Highest Level of Business Optimism in Two Years