The value of corporate governance is in question throughout Asia, as it is worldwide, in the wake of the worst global financial crisis we have seen since the 1930s.
Traveling throughout the region, you repeatedly hear one question: “why should we follow the corporate standards of those whose actions led to the collapse that severely damaged our economy, through no fault of our own?”1 My counter to this question is to point out that, it was not the foundations of corporate governance that one should question, but rather the people who were put in charge to ensure that their boards, and the companies they oversaw, abided by best practices. Directors and senior management “failed to understand and manage risk and tolerated perverse incentives,” as the International Corporate Governance Network concluded.
2 Those financial institutions that took excessive risks seem to have approached corporate governance with a “check the box” mentality. To be sure, institutional shareholders, too, deserve some of the blame - and there is much to go around - for having been insufficiently engaged and timid in their demands.
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