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The Private Sector and Building Effective Demand for Corporate Governance

Caribbean Corporate Governance Forum September 2003

Supply and Demand Supply • Securities Commissions • Stock Exchanges • Other Regulatory/Fiscal Authorities • OECD Demand • Companies • Shareholders • Investors • Banks

Phases of Developing Demand 1. Initial Assessment 2. Organizational Development 3. Making the Case 4. Building Human Capital 5. Public Policy Reform 6. Consolidation

Key Institutions Must Function Well • Procedures for bankruptcy • Property rights • Contract enforcement – judicial system (s) • Enforcement mechanisms • Securities markets • Free press – financial press • Ratings agencies et al • Other systemic checks and balances

1. Initial Assessment • Assess corporate governance failures • Rate country standards vs. best practice • Adapt OECD principles (+ national needs) • Build awareness at senior business and policy levels • Identify stakeholders

2. Organizational Development • Private sector associations • Institute of Directors • Investor protection associations (s) • Think tanks and other private sector institutes • Create corporate governance within civil society, business, and regulatory bodies (coalitions, national task forces)

• • • • • 3. Making the Case What is Corporate Governance – country by country Codes and tool kits adapted for the country Ratings systems for investors Benefits to stakeholders – investors, block shareholders, family firms, employees, banks Impact on economic performance (cost of non-compliance)

4. Building Human Capital • Training and certification programs for managers and directors (IOD) • Investor education • Firm level programs • Journalism education • Professional development programs for Parliamentarians, regulators, judiciary, accountants, etc.

5. Public Policy Reform • Policy seminars and conferences • Policy papers and research • Provide experts / case histories • Make specific policy recommendations • Draft legislation, regulation, standards • Advocacy campaigns: key contacts, opinion editorials, public events, petitions, grassroots

6. Consolidation

• Further strengthen shareholder rights groups and Institutes of Directors, • Risk ranking by ratings agencies. • Reports on Standards and Codes (ROSC) • Legal and institutional enforcement – tracking and reporting performance by public and private sector.

Evaluation of impacts

Case Study: Columbia Confecamaras Phase One • Corporate Governance Code • Corporate Governance Survey • Corporate Governance Training • Legal Advocacy • Government Advisors • Diffusion Tools

• • • • • Case Study: Columbia Confecamaras Phase Two Corporate Governance: Face to face program • 10 companies have been helped to adopt Corporate Governance Developing Literature • White Book of Corporate Governance: Respond to the lack of literature in Spanish Diffusion Tools • Website, E-Bulletin: 4000 subscriptions • Documentary Center • Corporate Governance Contest Legal Advocacy • Corporate Governance for Mutual Funds • Labor Law Training Programs • Cali, Medellín and Bogotá • Work with MBA´s of University of Andes

Case Study: Poland Too Much competition?

• Competing interest groups – Insiders:Stock Exchange and Large Firms – Outsiders : Think tank, Investors • Competing codes • “Rush to judgment” –premature ratings • Unclear outcome

CIPE Program for Latin America and Caribbean • • • • New effort supported by USAID Training Intra-regional Networking Small Grants for Institutes and Business-led initiatives.