Implementation of Sabarnes-Oxley Act, 2002 in the U.S. A. In response to the public outcry against the recent corporate scandals like, Enron, World Com, etc., a new legislation viz., the Sarbanes-Oxley Act has been enacted on July30, 2003 in the U.S.A. in order to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws. The legislation initiated major reforms in the following areas:
1. Public Company Accounting Oversight Board
2. Auditor’s independence
3. Conflict of interest
4. Corporate responsibility
5. Enhanced financial disclosures
6. Analyst conflict of interest
7. Corporate and criminal fraud accountability
8. White-collar crime penalty enhancements
9. Corporate fraud and accountability
10. Studies and reports
The German government had announced details of comprehensive new voluntary guidelines to improve their corporate governance practices. The code aims at strengthening the rules concerning auditor and supervisory board independence, gives shareholders a limited role in takeovers, recommends that companies disclose board remuneration individually, and requires a company to disclose whether or not they comply with the code.
Irish Association of Investment managers revealed a high level of compliance amongst Irish corporates with the Combined Code on governance implemented by LSE. 97% of firms allow shareholders to vote on re-election of directors every three years. 85% and 79% of them have remuneration and audit committees respectively comprised fully of non-executive directors. 79% of them have separate role for the chairman and the chief executive officer.
Asian and Latin American markets
S&P carried out a survey of 350 Asian and Latin American companies on 10 points based on 98 information attributes grouped into 3 categories: financial transparency and information is closures; investors relation, and ownership structure; and board and management structure and practices. 19 out of 43 Indian companies managed to get score of 4; Infosys scores 7.
Kenya’s Capital Market Authority introduced new guidelines to improve corporate governance practices. The guidelines include: appointment of independent directors, constitution of nomination committee, the role of CEO and Chairman to be separated; limiting the term of director on the board subject to shareholders’ approval and frequent appraisal of the board.
Stock exchange of Thailand is set to introduce a new committee to strengthen corporate governance and make best corporate practice a national priority. Of the 580000 companies, nearly half do not report balances-sheet and a quarter of them do not pay even taxes. Thailand’s SEC has drafted a framework for corporate governance ratings aimed at protecting shareholders’ rights, the quality of directors and the efficiency of internal controls. The Thai SEC will offer highly rated firms bunch of incentives, including a fast-track review of their corporate filings to issue new shares.
Russia’s Federal Commission for Securities Markets introduced new code of corporate governance which includes a number of tax incentives and investor friendly regulations.
Hong Kong’s SFC proposed a rule that executives who intentionally or recklessly, provide false or misleading information in public disclosures, shall face up to two years in prison and a HKD 1 million fine.
Philippines SEC has requested that all listed firms establish an evaluation system to track performance of their boards and executive management. The recently approved code of corporate governance recommends that all public entities and fund raising entities shall adopt the same. Philippines’ SEC is likely to extend new corporate governance code to require even non-listed firms to place at least one independent director on the board.