Status & Plan

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Enhancement of CG becomes national agenda: National CG Committee

Existing laws and regulations cover most points in the US Sarbanes-Oxley Act

Disclosure standards close to international levels: some language barrier exists - some documents e.g. Form 56-1 are disseminated only in Thai version

Measures include both carrot and stick : incentives and tightening enforcement

CG disciplines built from 3 dimensions to achieve protection of investors' right, board accountability and transparency

Regulatory Disciplines



Market Disciplines	Self Disciplines

For investors: Need more communication - preparation for assessment from international agencies e.g. participation in the ROSCs program of the World Bank and IMF

Self Disciplines

Principle: Good CG has to come from within

Issuance of principles and best practice

Disclosure of compliance & non-compliance to principles in annual report

Setting up of CG Center to advise listed co.

Training programs

- Directors: IOD

- voluntary with SET sponsored, 400 directors passed 5-day course

- CFO: ICAAT to start training in early 2003

- Other seminars

II.

Market Disciplines

Increasing roles of investors

- Investors Association: set up on May 9, 2002 to monitor companies and exercise rights in shareholders' meeting

- Institutional Investors Club: established on July 22,2002 for declaration of members to use CG as part of investment factors to promote their own fiduciary duties to clients

- Government Pension Fund: active player in CG of listed co.

- Asset management co.: SEC to require disclosure of how CG is used in investment decision and voting policy

Promotion of CG rating : first in Asia

Awards and Recognition:

- Disclosure Award: In 2002, SEC awarded 40 listed companies for good disclosure

- Board of the Year Award: SET and IOD to award listed co. for having outstanding board of directors

- Q-Mark : Chamber of Commerce and Industry Federation to award logo to "good ethics" co.

III.

Regulatory Disciplines

Regulatory power: quite flexible - can compensate weaknesses in the laws

Shareholders' rights: existing company law or SEC/ SET regulations covers most OECD principles e.g.

- All basic shareholders' rights - ownership, voting, etc.

- Facilitation of voting by proxy - independent director as proxy, 2-way proxy, detailed disclosure of agenda

- Material decision requires shareholders' resolution

- new share issue, ESOP, major acquisition, takeover defense device, material connected transactions, etc.

- Voting power

- interested shareholders be abstained, minority shareholders' veto rights in various issues, e.g. ESOP, whitewash, share issuance below market price, etc.

- Insider trading closely monitored - lists of cases fined

- Class Action Law is being proposed

Accountability of Board of Directors

- Audit Committee required in all listed co.ุ

comprise at least 3 independent directorsุ
review the reliability of financial statement
comment whether connected transactions are fair and in the best interest of the company prior to commitment
review sufficiency of internal control system

- Due care and loyalty required by law - breaching can lead to derivative suit

- Company and securities laws are being amended to further increase accountability of director and management

Transparency & Disclosure

- Thai GAAP consistent or similar to IAS

- Timely disclosure of financial statement (audited annual F/S within 60 days and reviewed quarterly F/S within 45 days) - leader among Asian countries

- Auditors be in SEC approve list - subject to regular monitoring and serious sanctions for malpractices e.g. suspension of auditors from Big 5.

- Information disclosed in annual report up to international level - includes business background, risk factors, management structure and CG policies, connected transactions, MD&A

- Regular and stringent SEC monitoring

I.	Thai listed companies are family-owned and managed
	1. Shareholding structure
		Large differentiation among listed companies : average free float - Overall market : 37%
		- Large companies (SET 50) : 49%
		- Non-SET 50 : minimum of 15%
		Large companies (SET 50) accounts for 75% of market cap
	2. Management structure
	McKinsey survey (April 2002) of top 130 companies found strong performance in board practices e.g.:
		76% of surveyed companies had a board with a majority of non-executive directors
		68% of companies had boards that comprised 25-50% independent directors
		22% of companies had an independent chairman, compared to 15% in the US
	3. Cross shareholding & Intra-group transactions
		Less problems in large firms
		Subject to disclosure requirements
		Loans to directors prohibited under company law
		Shareholders' approval required for transactions of over 3% of net tangible asset with view from independent financial advisor (FA subject to SEC supervision)
		"Unjustifiable" transactions are monitored and discouraged prior to commitment
		Revised connected transactions rules to be in force by Q2 2003

II.	Governance of Privatized State-Owned Enterprises
	Government as major shareholder of SOEs fully realizes that CG has direct impact on the value of its shares in SOEs. It is, therefore, in the government's own interest to enhance CG and efficiency of these entities to maximize the long term value of its assets. Hence, in making any decision relating to listed SOEs, the government shall give high regards to impact on the share price as well as fairness to the general shareholders.
		Intervention of business policies?
		- Sort SOEs with social objectives out of privatization programs
		- Cabinet resolution not to intervene business policies or management of listed privatized companies e.g. PTT
		- Require large SOEs to use electronic procurement to increase transparency and reduce cost - TOT, THAI
		- Policy to reduce government guarantee to SOEs' loans - needs for SOEs to improve efficiency
		Appointment of directors & CEO
		- Clear government policy to appoint only competent and professional persons
		- Management of appointed persons has to be transparent and subject to checking mechanism
		- Appointment of key positions in major SOEs go through independent nomination committee
		- Policy to have ESOP in privatized companies and large proportion of share distribution to the public to counter balance state ownership
	Information disclosure for listed SOEs
		- Companies with share allotment to foreign investors has to issue IAS financial statement audited by independent auditing firm
		- Annual reports prepared in Thai & English
		- Company's website for investor information
		- Encourage CG rating

III.	Lack of Law Enforcement
	Enforcement was actual weakness i.e. no management of listed companies has been jailed, but
		Wrongdoings have been sanctioned by other means
		Administrative sanctions: SEC has been active and quite effective in making changes, e.g
		- Suspension of professionals that failed to meet their due professional standards - auditors, financial advisors
		- Blacklisting wrongdoers from being management of listed companies or companies seeking to offer securities
		Financial penalties: fines imposed on long list of important cases like insider trading. Wrongdoers included large investors, reputable businessmen in the top wealthy families, politicians, minister, etc.
		Criminal punishment: Takes time and involves many parties but changes are happening.
		- Short-term: Order that decision whether to prosecute important financial cases be made collectively by police officer, public prosecutor and regulator (SEC/ BOT /MOF as the case may be) - Long-term: (a) law amendment to expedite process and let a special unit/regulators have more investigative power (b) increase administrative and civil sanctions

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