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Corporate Governance
means of structure and process that actively protects the rights
of all stakeholders; shareholders, directors, management team,
employees,and customers. In some cases, this may include the
society and environment as well. Each stakeholder has different
needs and expectations, therefore, there are different perspectives
on policies that promote good corporate governance.
Intermediary Institutions in the capital
market means any institutions, which provide services in securities
investment, document preparation, issuing prospectus and tender
offerings. This consists securities companies, asset management
companies, financial advisors and provident funds. Moreover,
the business of intermediary institutions, providing asset management
and services, prepare useful information for investment decisions
and boost investors' confidence toward the capital market.
Thus, good corporate governance of intermediary institutions
in capital market aims to gain investors' confidence in their
service and to protect investors' asset and benefits, which
affect the growth and stability of the overall capital market.
Good corporate governance for intermediary institution needs
three combined disciplines in order to operate effectively.
These are self-discipline --(the willingness of
private companies), market discipline --(support
from related parties in the capital market), and regulatory
discipline --(government legislation). |
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Self
Discipline is a significant motive derived from the determination
of a company to strictly follow the law and cooperate in applying
the code of best practices and business ethics to protect investors.
Management teams play a key role in promoting good corporate governance
in an organization. They do this by understanding the importance of
corporate governance as well as establishing action plans to encourage
everyone in the organization to understand and willingly corporate.
Also,the management team should carefully supervise a compliance unit
to perform its function effectively. |
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Market
Discipline involves exercising the rights of every involved parties
to motivate the intermediary institution to carefully monitor the
market's operations, improve the quality of services and not providing
services to institutions operating transactions that may damage the
confidence of the capital market. |
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Regulatory
Discipline is support from government law-regulating agencies
in making intermediary institutions comply. Most regulations are enacted
to protect investors' right, for example, protection from fraud, security
of customers' asset and investments, information disclosure and security
in securities transfers and payments. Presently, the law and regulation
enactment concerning corporate governancein intermediary institutions
covers the overall operation, strict investigation procedures and
evaluating systems.
From problem analysis of the capital market's current situation, good
corporate governance in intermediary institutions in the past mainly
stemmed from regulatory discipline, while the effects of the other
two disciplines are still unclear. If corporations effectively implement
self discipline and market discipline the organization itself will
lead to the sustainable development of corporate governance. In summary,
promoting good corporate governance in intermediary institutions requires
various policies requiring support from the three disciplines.
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| Build a good corporate culture in
corporate governance Executives play an important role in
encouraging good corporate governance in an organization by
paying attention to the compliance unit to ensure that it operates
independently and by assigning qualified, knowledgeable, and
experienced personnel to work in the unit. Nonetheless, executives
should be accountable in their duties and responsibilities of
the operational unit they monitor. |
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Create a committee manual to acknowledge
their role, duties and responsibilities |
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Specify and announce the roles, duties,
and qualifications of the personnel in the compliance
unit so that they can efficiently and independently operate
their functions. |
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Disclose operational instructions of securities
companies and management teams to the publics. |
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| Establishing investor discipline Investors, as service
clients, can participate in encouraging good corporate governance
in securities companies by understanding their own rights and
duties. Furthermore, they can request excellent services and
can select services provided by a securities company with good
corporate governance. To increase the channels for investors
requesting compensation from unsatisfied services is another
method to improve the efficiency of investor discipline. |
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Provide proper education to investors about
their basic rights related to securities company. |
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Encourage securities companies to willfully
settle disputes of customers by arbitration through the
Office of the Securities and Exchange Commission (SEC). |
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| Perform duties as a financial advisor in order to register
companies with good corporate governance on the SET A financial
advisor is a person whose main duty is preparing a company's
information in order to register the company with the SET and
selling shares to the public. The information will affect the
decision made by investors. In addition, If performing their
duties appropriately, which requires both good knowledge background
and business ethics, financial advisors can select and screen
a listed company with good corporate governance to sell the
company's shares to the public. |
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Conduct the expected duties of a financial
advisor. |
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Motivate companies through education to
practice good information disclosure. |
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Establishing institutional investor discipline In
a developed capital market, institutional investors are disciplined
so that they not only own a large amount of investment funds,
but also play a key role in capital market's operation. The
effects of this investor discipline include promoting investment
in corporate governance, participating in shareholders' meeting
to monitor the performance of listed companies, and encouraging
investment banker to disclose adequate, transparent and timely
information.These all work to improve the capital market's integrity
. Thus establishing an institutional investor discipline is
another way of good corporate governance.
Moreover, some types of institutional investors such as provident
fund , can also act as an intermediary institution in a capital
market. Currently, provident mutual funds collectively own over
200,000 million baht in shares. Significant parties that are
responsible of overall operation of provident funds are provident
fund committees , employer and employee representatives, charged
to oversee the operations of the provident fund.The committee
should perform their duties to their best ability in these matters:
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Provident fund committees
should be honest and ethical. They should not process any transaction
that creates a conflict of interest. |
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Provident fund committee
should carefully protect the fund and the members' benefits.For
example, if a committee would like to invest in a security,
it should hold a shareholders' meeting, where the committee
must exercises their vote, unless using a custodian. There should
also have be a suitable process to elect a custodian. Moreover,
an investment policy should be appropriate for the type of fund
and be clearly defined. |
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The committee should closely
monitor the fund's performance to ensure whether the appointed
custodian asset management companies can manage their fund properly
as contracted. Moreover, when a company needs opinions about
investing securities' prices, the fund committee should be allowed
to disagree and make comments. Additionally, the committee should
also understand which point should be emphasized in the reports
prepared by the custodian company and which issues needs further
discussion with the custodian company. |
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Asset management companies |
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Define the minimum voting rights that shareholders
of asset management company should posses. |
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Educate and encourage the fund committee
to follow good corporate governance according to three
time scales: |
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Conduct seminars in Bangkok
and rural provinces. |
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Promote self-studying by
creating education media in the form of video and VCD to educate
committees together with short seminar for the committees to
ask questions. |
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Initiate a train-the-trianer
program for experts and professionals. The SEC will provide
training for trainers of organizations that want to set up a
training course. |
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Award logos to securities companies participating
in SEC arbitration. This will encourage securities company to
settle disputes with customers to using the arbitration system.
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Educate investors through leaflets about their
rights and duties as customers of securities companies. This
will help them to demand good service and know how to protect
themselves from corruption. |
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Distribute leaflets educating investors about
the necessary qualifications of good investment brokers so they
know what to expect from asset management companies. |
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Conduct four seminar about provident fund in Bangkok
in August September 2002 with 200 participants. The seminars
were also be conducted in rural provinces at the end of November
2002. |
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