update corporate governance watch

Australia’s robust corporate governance structure, still leading when compared to Asian markets, has been dulled by revelations in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, according to the latest assessment in Corporate Governance Watch. The report, published every two years by Hong Kong-based broker and investment house CLSA and the not-for-profit Asian Corporate Governance Association, shows a general lift of standards across the Asian region. The trend follows a fundamental policy position that higher standards of corporate governance lead to more competitive markets and companies.

“To varying degrees, regulators across the region have sought to push, persuade or cajole market participants of all kinds towards higher levels of transparency, accountability and fair treatment of consumers and shareholders,” the Corporate Governance Watch says.

Australia, a regulatory model for many Asian markets, scores well ahead of the rest of the region with an overall ranking of 71 per cent, a long way from Hong Kong in second place and then Singapore at 60 and 59 per cent respectively. But Australia has slipped from 78 per cent in 2016.

“Australia has been tarnished by bank scandals that have gone from bad to worse and political infighting in the federal government,” the report says. “The lack of a national ICAC is emerging as an important issue, while the reputation of financial regulators continues to take a beating (not entirely justified).”

In the region, a commitment to quality and better practices over the past 20 years is being undermined by a more localised, divisive way of thinking.

“While a belief in the value of transparency and accountability remains largely intact, at least in official statements, some governments are showing a striking lack of interest in the third principle: fairness,” the report says.

It notes the rise of dual-class shares (DCS): “In the face of stiff competition from the US for listings of Asian companies, mostly so-called new-economy firms from China, certain governments have pushed aggressively for dual-class shares as necessary to ‘maintain competitiveness and fund innovation’.”

Country rankings are aggregated from scores across seven categories: Government and Public Governance; Regulators; CG rules; Investors; Listed Companies; Auditors and Audit Regulators; Civil Society and Media.