WASHINGTON -- Officials of the World Bank hope improved corporate governance standards in developing countries will help attract private investment capital to those nations. "Our main objective is to reduce poverty in our member countries, and to do that we're relying on the private sector to create growth," said Magdi R. Iskander, director, private sector development department at the World Bank.
Speaking at the Institutional Shareholder Services annual conference in Washington, he said corporate governance problems have been highlighted by the Asian crisis.
For 10 years, the World Bank has worked "hard on external factors such as the regulatory systems and privatizing public enterprises, but that has not been enough," he said.
The World Bank, in conjunction with the Asian Development Bank and the Asia-Pacific Economic Cooperation organization, is conducting a survey of South Korea, Malaysia, India, the Philippines, China, Thailand, Mexico and Chile and the corporate governance standards followed by companies there.
The study will review the corporate governance framework in those countries, what progress has been made since the Asian crisis began and what future reforms would be most effective. It is to be ready in June.
In response to the Asian crisis, the World Bank is assisting countries in structural reforms that include measures to strengthen corporate governance.
The World Bank is a member of the Organization for Economic Cooperation and Development's Task Force on Corporate Governance, which is drafting voluntary international guidelines and principles for countries that want to improve their corporate governance practices.
The set of principles is expected to be published by June.
The principles are based on a preliminary report from the OECD Business Sector Advisory Group on Corporate Governance, which was chaired by Ira Millstein, senior partner of Weil, Gotschal & Manges, New York. The group began its work in 1996 and sent its report to the OECD in April 1998.
The Millstein report focused on four rules it said would be most helpful in attracting capital for member and non-member countries.
* Fairness. Assurances to shareholders that their assets would be protected against fraud;
* Transparency. The disclosure of accurate, timely information on corporate performance;
* Accountability. Shareholders, directors and managers need a clear understanding of their roles, rights and responsibilities; and
* Responsibility. Corporations observe the standards of the societies in which they operate and governments provide a framework that can support and protect individuals in adjusting to the impact of market forces.
The preliminary draft of the OECD report includes five principles on which corporate governance should be based. They are:
* The framework should protect shareholders rights;
* The equitable treatment of all shareholders, including minority and foreign shareholders, should be guaranteed;
* The framework should recognize the rights of stakeholders and encourage cooperation between corporations and stakeholders in creating wealth and jobs;
* Timely and accurate information should be disclosed on matters regarding the financial situation, performance, ownership and governance of the company; and
* The framework should ensure strategic guidance and effective monitoring of the company by the board, and the board's accountability to the company and shareholders.