62880 Global Corporate Governance Forum Better Companies, Better Societies SUMMER 2010 A Progress Report OUR DONOR PARTNERS JAPAN Building on Success: Forum’s Phase Three The Forum is challenged to sustain its momentum while continuing to pioneer new initiatives. In July 2010, the Forum will embark on Phase Three: a five-year plan to meet new demands for assistance and expand the Forum’s groundbreaking work. ABOUT THE FORUM Training Boards: New Efforts Focused on Banks, Dispute Resolution The Global Corporate Governance Forum is the leading Governing Banks focuses on those topics of particular interest to bank directors, including knowledge and capacity-building platform dedicated to corporate governance reform in emerging markets risk management and the economics of banking. Resolving Corporate Governance Disputes and developing countries. The Forum offers a unique will help Institutes of Directors and others provide training in alternative dispute resolution collection of expertise, experiences, and solutions to mechanisms. key corporate governance issues from developed and developing countries. Thought Leadership: Value of Good Governance; Addressing Corruption The Forum’s mandate is to promote the private sector as an engine of growth, reduce the vulnerability of Private Sector Advisory Group (PSAG) member Patrick Zurstrassen examines corporate developing and emerging markets to financial crisis, governance’s value after the financial crisis. Forum Head Philip Armstrong outlines how and provide incentives for corporations to invest and perform efficiently in a transparent, sustainable, countries and companies can address corruption, which has debilitating consequences in the and socially responsible manner. In doing so, the fight against poverty and for social and economic justice. Forum partners with international, regional, and local institutions, drawing on its network of global private sector leaders. Media Training: Improving Coverage of Corporate Governance The Forum is a multi donor trust fund facility located Training workshops help journalists do a better job of covering corporate governance. More within IFC, cofounded in 1999 by the World Bank workshops were held in 2010 than in the year before, with programs in Bangladesh, Brazil, and the Organization for Economic Cooperation and Chile, Jordan, and Vietnam. Development (OECD). Building on Success: Forum’s Phase Three Plan for Advancing Corporate Governance Excellence Since its founding in 1999, the Forum has demonstrated repeatedly its unique value and effectiveness in assisting developing and emerging-market countries with implementation of corporate governance reforms. Financial Summary (Fiscal 2010) REGIONAL DISTRIBUTION OF FORUM ACTIVITIES FORUM ACTIVITIES SOURCES OF FUNDS CENTRAL AND MIDDLE EAST AND SPONSORING RAISING EASTERN EUROPE JAPAN NORTH AFRICA RESEARCH AWARENESS, SOUTHEAST EUROPE CONSENSUS SWITZERLAND AND CENTRAL ASIA BUILDING 4% 2% 4% NORWAY 5% EAST ASIA AND 7% 5% 1% THE PACIFIC DISSEMINATING BEST PRACTICES 5% 7% 10% 27% FRANCE 35% INTERNATIONAL 6% GLOBAL FINANCE KNOWLEDGE MANAGEMENT 8% CORPORATION PRODUCTS SOUTH ASIA 12% 7% AUSTRIA ADMINISTRATION 12% 69% ADMINISTRATION TECHNICAL ASSISTANCE, 9% CAPACITY BUILDING FLANDERS 14% 22% NETHERLANDS 15% LATIN AMERICA 14% LUXEMBOURG AND THE SUB-SAHARAN CARRIBEAN AFRICA Skilled use of leverage, numerous in- As the Forum has achieved results, country and regional partnerships, institutes of directors, governments, and innovative programs and products, and an non governmental organizations, among unmatched global network of private sector others, have sought more of its assistance. leaders are a few of the reasons behind the The current global financial crisis has Forum’s success. also triggered additional requests for the Forum’s immediate intervention. These ever-growing demands require “The Forum is the only global facility of its increasingly sophisticated expertise and kind that provides corporate governance greatly enlarged financial and nonfinancial knowledge and capacity-building resources resources, including intensive and diverse dedicated exclusively to emerging-market partnerships. As a result, the Forum is and developing countries.” challenged to sustain its momentum of accomplishments while continuing to 2010 Independent Evaluation Report pioneer new ideas and initiatives. 2 SUMMER 2010 A Progress Report To fulfill its work and meet new demands for assistance, the Forum will embark on Phase ”Phase Three’s tightly focused approach will Three (fiscal years 2011–15) starting July 1, 2010. This phase will strengthen its global optimize the Forum’s role in harnessing Knowledge Management Platform through three strategic objectives: good practices in corporate governance worldwide and formulating these as 1. Introducing cutting-edge knowledge products. important tools for development.” Thierry Buchs Chairman, Forum Steering Committee The Forum will expand its support of and access to international best practices in corporate governance. These efforts will: ”By creating a large public demand for tools focused on the particular needs governance issues reforms, the current crisis offers another of developing and emerging-market opportunity to improve governance countries arrangements. This opportunity should not the Forum’s academic networks be missed.” Professor Lucian Bebchuk through the Web Harvard University 2. Building the capacity of regional corporate governance centers and fostering South-South cooperation. MEETING CLIENT DEMANDS Between fiscal years 2006 and 2010, These centers will distribute and apply the Forum’s knowledge products locally and the Forum accomplished several regionally while supporting South-South capacity building. Through this approach, the significant achievements: Forum can build scale in its global activities and use its resources more efficiently and cost effectively. The centers can incubate the application of the Forum’s products and tools. reaching nearly 2,600 participants globally, with women accounting for 45 percent of total participation in 3. Developing a monitoring and evaluation mechanism to continually assess the global Knowledge Management Platform’s success. 2009; participants were typically ”satisfied” or ”highly satisfied” This will help the Forum ensure that its knowledge products remain relevant, cutting- edge, and responsive to the beneficiaries’ changing needs. with advice, counsel, programs, and products, with the International Development Association countries’ To meet Phase Three objectives, the Forum’s donors are increasing their support. The participation exceeding 40 percent Forum is also pursuing bilateral funding, cofunding, and cost sharing with client beneficiaries. The Private Sector Advisory Group’s pro bono contributions will also help governance codes meet the demand. governance associations with expertise, advice, and resources Forum’s Steering Committee deliberates in São Paulo. SUMMER 2010 A Progress Report 3 Independent Evaluation Cites Forum’s ‘High Performing’ Achievements The 2010 Independent Evaluation Report The Forum’s success lies with its field- found the Forum to be a “high-performing, tested strengths and competencies: relevant, and impactful” organization Leverage, cost efficiency, proven despite its modest size and resources. effectiveness — The Forum leverages “Its achievements have been considerable, PSAG and other partners in a cost- deeply appreciated, and widely recognized,” efficient manner that maximizes the report said. “Many have expressed cofunding from partner institutions and with passion their belief in the value of spreads cost sharing among beneficiaries. the Forum’s work. Given its record of Innovative global expertise and accomplishments, the Forum can already networks — The Forum has a widely claim to be the pre-eminent knowledge recognized ability to innovate through its management body on practical corporate toolkits and other best-practice guidance governance issues globally.” tools, which draw on its global network of institutions and practitioners in developed and developing countries. “The Forum continues to distinguish Partnerships — The Forum has a widely itself through its record of leveraging acknowledged track record in building with a very broad array of international strategic and tactical partnerships that and local partners, its network of drive its work in a cohesive, coordinated distinguished private sector advisors, approach to development assistance. The and inter-unit collaboration within the Forum facilitates participation of a broad World Bank Group.” range of international, regional, and local 2010 Independent Evaluation Report institutions in its work. In the view of one local partner, the Forum is effective because it “listens a lot,” The evaluation report found that “the emphasizing: “That’s very important; the Forum draws on a global/local view, Forum responds to real needs…. They state-of-the-art expertise, an extensive adapted, listened, and tried to provide what professional network, dedicated PSAG we asked for.” advisors and staff, and high-quality A PSAG member adds, “The Forum has toolkits” to accomplish its goals. However, been extraordinarily successful in bringing warns the report, “The potential for together thought leaders from around the replicability of project interventions is high world — it contains a very large share of while current capability for scaling-up is the leading lights in corporate governance. severely resource-constrained.” (To learn Having such a remarkable collection more, read the report and Lessons Learned of people who provide their services on the Forum’s website: www.gcgf.org.) on a pro bono basis is an extraordinary The review concludes that the Forum achievement.” “is engaged in delivering an array of The independent evaluation repeatedly worthwhile and needed services of a stresses the Forum’s emphasis on local high quality in a remarkable variety of ownership of corporate governance situations.” Most experts view the Forum’s initiatives. “The Forum staff, consultants, work as being even more relevant in and PSAG advisors are mindful of the the aftermath of the financial crisis as need to interact with local partners governments promote economic recovery. and participants, not in a top-down or ‘West knows best’ manner, but in ways which acknowledge local capabilities and circumstances. Projects are designed with, rather than for, local actors.” 4 SUMMER 2010 A Progress Report “Congratulations on a fine report and a very strong record of accomplishment. We are very pleased to be associated with the Forum’s work and will be looking forward to working with you over the next years.” John D. Sullivan Executive Director Center for International Private Enterprise (CIPE) The report cites many examples of the Forum’s “snowball effect”— the MENA Corporate Governance Codes multiplier effect of corporate governance reform efforts initially made possible by Since its founding, the Forum has Khalid Deeb, director general of the Abu Forum interventions. These include code actively participated in efforts to develop Dhabi Center for Corporate Governance, development in the Middle East and corporate governance throughout said the Forum “helps the efforts of North Africa, the Corporate Governance the MENA region. The Independent various countries to develop and enhance Board Leadership Training Resources, and Evaluation cited this example to illustrate the corporate governance and business and the program with the Southern Africa the Forum’s impact. (See Lessons Learned: environment.” Development Finance Institutions. Implementing Corporate Governance Codes in MENA on the Forum’s website: The report warns, however, that because www.gcgf.org.) of the increasing demand for its assistance, the Forum’s pace of growth may not be This highly successful program: ”Good corporate governance today sustained by the present combination constitutes the most important of governance and management reform process — while effectively element in guaranteeing the healthy arrangements. “The changes required preserving national ownership — during development and growth of companies, to resolve funding and administrative the launch of 14 national codes from protecting them from the repercussions placement difficulties do not have to be a baseline of just two countries with of any local or international crisis, major ones but they are necessary and they codes in the entire region attracting foreign investment, improving carry some urgency.” general performance, and boosting local These challenges include obtaining comprehensive technical assistance to and international confidence in them.” secure and adequate funding, expanding MENA members Adnan Kassar the secretariat’s staff, revising PSAG’s Minister of Economy and Trade governance structure to maximize its Lebanon a reputation for professionalism, and benefits, and investing more effort in strong brand recognition “contextualizing” the Forum’s training materials so that they are more relevant to the issues and environments in which the training participants work and live. The Forum is working with its donors and partners to address these challenges through Phase Three initiatives. ”The Forum fights hugely beyond its weight. It has created an environment for corporate governance to flourish and for the corporate governance advocacy community to get traction.” PSAG member quoted in 2010 Independent Evaluation Report The Moroccan Corporate Governance Commission asked the Forum to provide technical assistance to guide development of a corporate governance code. SUMMER 2010 A Progress Report 5 Corporate Governance Ensures Accountability, Drives Performance Forum PSAG member Patrick Zurstrassen is the founder and honorary chairman of The Directors’ Office, the leading practice of independent directors in Luxembourg. Mr. Zurstrassen is an independent director or board member for several investment funds and companies, with extensive experience in the Luxembourg and European banking and fund management industry, including chairmanship of both the Association of the Luxembourg Fund Industry and the European Fund and Asset Management Association. He spent 30 years with the Crédit Agricole Indosuez Group, after which he founded The Directors’ Office. He is president of the Management Committee of MDO Services. He has lectured the Luxembourg Institute of Directors. Given your extensive involvement in how bad a financial collapse could be, corporate governance, what do you given the long stretch of prosperity and think are the lessons that can inform extraordinary market performance post the Forum’s work? World War II. As we learn more and more about the In one way, our lesson is a simple one, reasons why the financial crisis occurred, but in another way, a very difficult one to and as we continue to worry that we achieve and sustain. Directors must do due may confront a new round of problems diligence to ensure that risks are managed caused by different circumstances, this and that the evidence to prove this point time perhaps triggered by sovereign debt is valid and understandable. If they lack problems, corporate governance has come expertise in understanding their role, core under attack by some as a failure. concepts in corporate governance, key But I would say that it was not corporate accounting terms, and their companies’ governance itself — the principles and best balance sheets, they should take the time practices — that were the problem. Rather, to learn and eliminate those intellectual it was its implementation by boards and weaknesses. the seeming willingness to blindly trust The Forum realized the value of building strategies, including high exposures to the capacity of board directors through risk, because those strategies were highly its Corporate Governance Board Leadership profitable. Training Resources. Through its Phase Once the “perfect storm” hit, initially in Three, it plans to intensify those efforts by focusing on building the capacity of bubble burst, it became increasingly clear regional centers for developing corporate that the risk-management approaches governance excellence. boards set up in financial institutions To summarize, then, the lesson learned is were failing for many reasons, including that companies must have in place policies inappropriate risk-measurement processes and practices in accordance with best and lack of informed risk governance. practice, that directors actively monitor Reckless risk taking was too often the those policies and practices, and seek accepted norm. Few saw the implications reforms, and that directors, also, make of the many interdependencies within sure they are well-versed in what they need financial markets worldwide. to know, including leadership skills, to Directors ignored the warning signs, be effective directors. In those companies didn’t understand the technical aspects of owned by shareholders, investors must financial instruments, or couldn’t grasp do their work, too, in holding directors accountable. 6 SUMMER 2010 A Progress Report “The lesson learned is that companies must have in place policies and practices in accordance with best practice, that directors actively monitor those policies and practices and seek reforms, and that directors, also, make sure that they are well-versed in what they need to know.” Monitoring Corporate Governance To Patrick Zurstrassen’s point about the importance of ensuring code compliance, PSAG Deputy Chairman Christian Strenger offered the following counsel at the launch of the Bulgarian National Corporate Governance Commission in September 2009: You singled out the Forum’s board Where would you like to see the Forum Monitoring corporate governance is director training as one initiative that be in the next few years? essential for achieving good governance is particularly relevant now. What are They are starting Phase Three of their quality. some of the other Forum initiatives that development, which will expand their These benefits can be achieved with you believe are essential? knowledge management platform. This is efficient monitoring by the various parties. For a small organization, they have a lot of the appropriate way forward for them, as For example: ground to cover and are doing so extremely the 2010 Independent Evaluation Report well by leveraging the resources they have. confirms. enforcement can be achieved only by Corporate governance code development They have well established themselves excellent cooperation and division of is another important area for the Forum. with regard to the products they have labor (instead of duplication) by the Codes provide a structure for companies produced and the reputation they’ve public regulatory and supervisory bodies and other organizations to follow — achieved. Their challenge now is to build for the capital markets. standardization enables investors, for on that foundation. By working with example, to compare more easily how regional corporate governance centers, supervision, enforcement, and court different companies adhere to transparency, they can help countries and regions more procedures significantly increase accountability, and so on. effectively replicate well-proven approaches the expertise in the complex market Code development and implementation — to corporate governance reforms. supervision process. this has been a successful endeavor for the Their role as a thought-leader, too, is However, it is no box-ticking exercise Forum, in part because they have let leaders becoming more prominent, as the Forum and should not be left to a single in the country “own” the process rather draws on diverse experiences worldwide authority. The German experience shows than rely on others to do the work. By from the public and private sectors. Those that although the “comply or explain” owning the process, they have a stake and practical insights are very beneficial to approach provides companies with learn more about the code and how it will directors, policymakers, and others, who necessary flexibility, good governance affect businesses, since they are involved in can benefit from those on the frontier quality can be achieved only by a forging the compromises to arrive at a final of corporate governance reforms and concerted monitoring effort of all public, code. development. semi-public, and private bodies. Once the code is written and put into Also necessary for good governance practice, the next challenge is the use of quality is a close alignment of monitoring mechanisms to ensure that the code is and enforcement. Although a sound being followed. The Forum is encouraging, legal background is necessary, sufficient for example, the use of scorecards, which is compliance with the code and the relevant also being met with much interest. legal provisions can be achieved only with PSAG Deputy Chairman Christian efficient enforcement that is not shy to Strenger has been a champion of sanction wrongdoing. scorecards. (See sidebar with Strenger’s thoughts on enforcing corporate governance codes.) SUMMER 2010 A Progress Report Resolving Corporate Governance Disputes: Training for Board Directors Although less common for well-governed over the long term. Just as boards have examples, and practice.” The overwhelming companies, most companies experience crisis management plans, so, too, should number of participants said they were “very corporate governance conflicts or disputes. they develop and adopt dispute resolution satisfied” or “satisfied” with the overall Left unresolved, these disputes can strategies, policies, and processes. (See: quality of the course and unanimously paralyze the board, harm the company’s Mediating Corporate Governance Conflicts enjoyed the role-play exercise. performance, and deter investors. and Disputes. Focus 4, by Eric M. Runesson Implementing effective dispute resolution and Marie-Laurence Guy, November 2007. processes for preventing and resolving corporate governance disputes is thus publication is on the Forum’s website: essential if the company is to succeed www.gcgf.org.) To help boards achieve this goal, the Forum is developing a new toolkit, Resolving Corporate Governance Disputes. This product shows directors how to prevent and efficiently resolve corporate governance disputes by drawing on consensus-based alternatives to court adjudication. In May, the Forum launched pilot dispute resolution training. Hosted by TECHNO CASE STUDY the OECD, this half-day training course This case explores how the personal was attended by 50 members of Brazil’s problem of the company’s CEO — selling Institute of Corporate Governance (IBGC), her shares of Techno Ltd. to pay her Board leadership training. including board directors of Brazil’s largest divorce settlement — may affect the companies. The session’s objective was to share value of Techno Ltd. and trigger a build awareness on: covenant that could end the company’s What Are Corporate Governance credit facility. This case draws out other Disputes? issues, including the succession plans of and how they differ from other types of Corporate governance disputes involve the founder/chairman after his retirement disputes corporate authority and its exercise. and one board director’s skepticism of Governance disputes involve the the value of an external dispute resolution board’s powers and actions or its they can affect all types of companies expert. In the role-playing exercise, failure or refusal to act. These conflicts participants consider how to solve the may arise between the board and its corporate governance disputes efficiently issues involved in using best practices for shareholders, or between directors alternative dispute resolution. The roles and executive management. They may are: Founder/Chairman Paul Schmidt; his costs, and risks associated with corporate also involve issues among the directors daughter and CEO Rosemary Schmidt; governance disputes themselves and between the board independent board Director John Doe; and other stakeholders. A governance and the external dispute resolution expert dispute implicates the board in one way resolution processes and techniques, and J. Alfred Peacemaker. or another as a party, or as an active the limits of litigation Applying this case study, participants participant, and requires the directors’ learn to: concurrence to resolve the conflict. preventing and addressing corporate governance disputes governance disputes AHEAD (assisted by a role-play exercise) external dispute resolution experts Once published in the summer, the toolkit The participants considered the course a Resolving Corporate Governance Disputes success overall. One said, “What I liked will be rolled out through regional corporate governance dispute best about the course is the way it was training programs worldwide. resolution policies conducted. A great balance between theory, SUMMER 2010 A Progress Report Bank Training Module Launched with Indonesia’s Institute The Forum has developed Governing The Forum partnered with the Indonesian Banks as a training resource for bank Institute for Corporate Directorship to board directors in emerging-market introduce Governing Banks in Indonesia as countries. This supplement is based on an a platform for further rollout in Asia and Workshop discussion to evaluate extensive review of literature, international globally. and validate the new Governing Banks consultations, peer reviews, and interviews supplement. Business leaders, corporate governance with directors, bankers, chief risk officers, experts, and practitioners from Indonesia’s regulators, and independent experts, who banking sector participated in the official reflect perspectives from all regions. Working with the Forum, the centers will launch event in March. accomplish two goals: Governing Banks forms an integral part of Globally, the project will be implemented the Forum’s Corporate Governance Board by regional centers. By offering the key Leadership Training Resources, which project by involving regulators and elements of a training program in a thought leaders; and has proven to be a major success in its comprehensive package (the supplement, global rollout. It provides comprehensive local contextualization, a network with material and guidance on all key aspects regulators and banking thought leaders, of banking regulators, directors, of board leadership, with particular and training of trainers), the Forum will and training center counterparts (or emphasis on strategy formulation, financial help centers become well-positioned to reinforcing the network should it already controls, supervision and reporting, quickly implement sustainable training exist) to allow more rapid responses to risk management, and corporate social programs for non executive bank directors. any future crises. responsibility. of his new position. The focus of his Governing Banks recognizes that banks induction program is bank risk and are different from other commercial the importance to sound banking of enterprises. Few, if any, other business controlling that risk in a manner that does sectors have such effects on the real not hold the bank back, nor let it proceed economy. Few, if any, other businesses unchecked. Topics reviewed include: have the inherent fragility of banks built into their business models. AHEAD The Forum is partnering with the Nejmeh Bank is conceived as being led by Indonesian Institute for Corporate a unitary board, but that is not to suggest Directorship (IICD) in developing a that this is the preferred model. Empirical training-of-trainers program, to be evidence of the comparative performance convened in September 2010. During Governing Banks takes academic, industry, of European banks during the financial this program, selected trainers will learn and regulatory thinking and creates a how to deploy these materials. This will journey taken by a newly appointed director suggest that either the unitary or dual- then serve as a platform to roll out the of a bank to acquire the understanding, board model increased or decreased program across East Asia through the skills, and insights needed to meet the the likelihood of bank failures. Board Institute of Directors of East Asia Network unique challenges faced by bank directors. practices described in Governing Banks (IDEA.net). Nejmeh Bank is a fictional bank that are applicable to both a unitary board As the supplement is introduced globally, incorporates current practices of real and the supervisory board of a two-tier it will be contextualized to the particular banks that performed well during the board. Executive committee practices market demands and regulatory apply to the management board of the framework where the Forum supports Alex is a newly appointed bank director two-tier board structure. self-sustaining capacity for board training who undergoes a journey to acquire the programs. understanding, skills, and insights required SUMMER 2010 A Progress Report 9 Trainers Assess Board Training Efforts To Guide Institutes For companies to be well-governed, their The Forum gathered IoD representatives boards must fully understand and put into and the international faculty in São Paulo practice corporate governance principles. for a workshop in late February 2010. (See Too often, directors have the business Lessons Learned: Institutes Share Successes acumen but lack a deep understanding and Challenges in Training Board Directors of corporate governance or the leadership to Lead Corporate Governance Reforms skills required to reform policies, practices, and Smart Lessons on the Forum’s website: and behaviors that can undermine a www.gcgf.org.) company’s performance. The workshop set out to: Although good instructional material and curricula have been in place in of development, broaden and strengthen many countries, some training centers, their training programs as demand particularly in developing and transition increases “exponentially,” as one trainer economies, lacked the resources to develop put it their own curricula or had weaknesses in their programs. of disseminating and implementing the Training Resources “5Rs”—Adult Learning Principles These five learning principles provide a solid, flexible framework for encouraging adult Corporate Governance (IBGC) used the learning and leadership: Training Resources from the viewpoint of the institution itself, the trainers, and the Respect responsibility and authority during board directors (the end users) Create an environment that is welcoming participatory group learning. and engaging. Relationships from the IoDs Reason Encourage professional mentoring, Adult learners are goal-oriented. To begin, teambuilding, and networking. The ”The Corporate Governance Board relate common concerns to the learning consensus on norms promotes open, Leadership Training Resources has objectives. A shared understanding of inclusive behaviors and helps to protect revolutionized the way the Institute of challenges provides the rationale for group reputations (“save face”). Directors of Zambia conducts its training cooperation and innovation. Rewards programs in a very positive way.” Roles Formulate action steps and celebrate Victoria Silutongwe Provide opportunities for diverse adults the positive transfer of the training to Executive Director to assume leadership roles. Balance corporate boards. Institute of Directors of Zambia To remedy this problem, the Forum Overall, the workshop participants praised developed Corporate Governance Board the Training Resources for its thorough, Leadership Training Resources for Institutes well-organized curricula and the emphasis of Directors (IoDs) and other organizations on adult-learning techniques. IoDs saw the that train board directors. Forum product as an incentive to interest The Forum’s approach is unprecedented more board directors in training programs in the breadth and depth of its innovative and enhance the institute’s “brand.” curricula, including the use of adult- They also thought the training modules’ learning approaches to maximize the flexibility provided many ideas for offering training’s usefulness and impact. different types of training, some tailored to the specific needs of companies or Since its launch in 2008, more than 300 organizations. trainers from 55 countries have completed the Forum’s “train the trainer” program. Throughout the workshop discussions, To take stock of the two-year effort, the trainers repeatedly emphasized that they, 10 SUMMER 2010 A Progress Report The feedback from the workshop also — and particularly novice trainers. The helped the Forum in developing its Phase practical applicability of the adult-learning Three work program. (See the article on theory provides a major contribution to Phase Three.) IoDs and other organizations wishing to The Training Resources is clearly an market new approaches and skills that help important reference point for IoDs build boards’ capacity to follow corporate governance principles. too, had to “grow” in how they conduct training sessions, “rethinking learning concepts,” and “better understanding the Training Resources — Benefits and Challenges participants’ perspectives.” Benefits Challenges “The Forum/IoDs program pushes trainers out of their comfort zones to develop new training approaches to engage adult material to reflect local “realities” learners,” said Irena Prijović, secretary learners general of the Slovenian Directors’ some programs is too high to use adult- Association. learning approaches organize their curricula The trainers also emphasized that adult- learning approaches demand that trainers updated to reflect news events, recent and continuing education programs create and sustain an animated dialogue case studies, and the latest thinking throughout the training — for example, the sessions should not be “one way” to local situations and trainers’ existing lectures. Further, applying what is learned, curricula not “memorization” of the curricula’s contents, should be the objective. ‘Retraining the Trainers’ for Greater Success ”I have used the ‘Introduction to The Forum helps refresh the skills and Investment Holdings. In addition, courses Corporate Governance’ module in the knowledge of trainers who have been in have been given to civic leaders, non Investment Advisors and Stockbrokers the field for a year or more. One example governmental organizations, and state- course organized by the Securities is the “Refresher Leadership Program for owned enterprises. Exchange Commission, the Lusaka Stock Training of Trainers,” which was held in The participants identified several Exchange (LUSE), and the Zambian March in Zambia, under the guidance of professional challenges, including how Insurance Business College Trust. This is a the Institute of Directors Zambia (IoDZ). to entice government officials to attend competency program with an examination for people wishing to be considered as This three-day program enabled the corporate governance training, and how investment advisors and stockbrokers in participating trainers to “take advantage to help journalists learn more about, and the capital market in Zambia. Without of new knowledge and new ideas,” said report on, corporate governance issues. this training, you cannot get a license to Ghita Alderman, the Forum’s project The workshop culminated with participants operate and corporate governance is one leader for the Training Resources and agreeing to the following actions: of the program’s key topics.” Sub-Saharan Africa. Julu Simulu The trainers looked at what has worked Vice Chairman and corporate governance certificate at the and what hasn’t since the initial TOT Zambia Insurance Business College Trust Head of the Education Committee Institute of Directors Zambia ago. They also identified expectations, reviewed the Zambian TOT materials, enterprises utilized adult-learning techniques, applied “The real barriers are not the content but the Malawian module on business and stakeholder engagement as well the teachers,” said Arturo Neves, an IBGC ethics to the training course design, and as corporate social responsibility with Trainer and Amphi Consultant. “We have considered “lessons learned.” financial institutions supervised by our own mindsets. We have had our own Zambia’s central bank The IoDZ has trained nearly 200 persons ways of teaching corporate governance, but since it began using the Forum’s the Training Resources is showing us new product in January 2009. Participating for permanent secretaries, members of ways to inspire participants. Our challenge: organizations include the Zambia parliament, and civic leaders. How can we stimulate trainers to use the Information and Communications new training methods and the information Training Resources as a reference Technology Authority, the Zambia effectively in their training?” point for developing codes for companies. Telecommunications (ZAMTEL), and the Zambia Consolidated Copper Mines SUMMER 2010 A Progress Report 11 Forum Media Training Educates Journalists In its third year, the Forum’s media training program builds the skills and deepens the knowledge of journalists to enable them to do a better job of covering corporate governance. Journalists also hone their investigative skills on corporate governance issues to strengthen their roles as whistleblowers. Their work helps broaden awareness of the value of corporate governance and sheds light on a company’s financial condition and board decisions. Covering Corporate Governance Issues knowledge tailored to financial reporting In his presentations at the training session, Roger Jeal of the Thomson Reuters Foundation corporate governance stories to editors— outlined the role journalists can play in covering issues related to corporate governance. why such stories constitute “news” and interest readers and listeners when they cannot be present. Pay regulators, and absolutely anyone using case studies attention for warning signs when they involved; check comments, and claims do not “Corporate governance has great stories, waiting to be told,” said Jon Lukomnik, a s — investigate support their views, and try to balance principal at Sinclair Capital who is a guest and contrast differing opinions lecturer on investigative business reporting. negligence, incompetence and abuse of “Sometimes, the people involved don’t power add authority and give audiences more want those stories told. They hide behind confidence) statistics and complexity. Your job is not to bite as well as bark, especially where create great stories, just to unveil the ones regulation and the legal system are and educate that are there. Hiding. Waiting.” insufficient or imperfect This year, workshops have been held in Chile, Brazil, Vietnam, Jordan, and Bangladesh. The number of media training Since this program’s founding, some 220 workshops has increased in 2010, and selected journalists have been trained in the program is expected to grow further various regions. with the continuing involvement of the This highly successful initiative partners. Participation may be broadened, demonstrates how the Forum uses too, to include editors and owners of news partnerships with prominent organizations organizations. to leverage its resources and broaden its impact. In this case, the Thomson Reuters FACEBOOK Foundation and Agence France Presse The Facebook-based “Virtual Press Club” (AFP) are the Forum’s partners. Their promotes conversation and networking involvement also enhances credibility. among journalists interested in corporate Thomson Reuters and AFP recruit governance reporting. Participants use journalists, who offer their profession’s the Club to “meet” peers in their own MEDIA TRAINING WORKSHOPS frontline perspective on the challenges countries and worldwide, and to connect of covering and analyzing corporate with corporate governance experts, January 26–27 March 31 – governance issues from local and including the broader Forum community Latin America April 2 international vantage points. The Forum (for example, PSAG). The Club also regional workshop, Vietnam provides trainers with an expertise in provides a channel for members to offer Chile May 3–4 adult-learning techniques to maximize suggestions for the Forum’s Corporate January 29 MENA regional participants’ learning experiences. Governance Media Toolkit. Brazil workshop, Jordan The sessions typically include: The Forum publishes a periodic March 16–18 May 30 – June 1 newsletter, Reporting on Corporate and May 8 Bangladesh industry leaders, capital markets Governance, which focuses on program Malawi professionals, regulators, and foreign updates, corporate governance articles, institutional investors and related news. 12 SUMMER 2010 A Progress Report Latin America Region Workshop Eugene Spiro, the Forum’s senior projects “The workshop has taught me that officer for the Asia Region, said, “Print corporate governance is wider than I media dominate but there is a blend thought. It’s is about the way people in most countries that includes radio, act: using leadership, diligence, television, and online reporters. There is acting transparently and efficiently, also a mix of experience from junior-level among other qualities, to build better to senior-level practitioners. We want to companies.” make the program appropriate for almost Cristina Sevillano del Aguila any audience of journalists and other Workshop participant communicators who have an interest in the Stakeholders Magazine (Peru) subject. “Most important at this juncture,” he added, “is to continue building skills and raising awareness of corporate governance at the editorial level.” He said considerable Vietnam Workshop fine tuning has been done over the past “This is an excellent initiative to help year to make the individual programs journalists improve their knowledge of “more adaptable to the needs and interests corporate governance issues. It provides of journalists working in different them with the tools they need to do environments.” their jobs better. “The reputation of good corporate “Reporters are not well-trained in governance practices attracts more covering financial issues, and often have investments to a country,” said Abul to teach themselves. Nor is the market Kalam Azad, Bangladesh’s Information very transparent in making information Minister, at the journalists training event accessible. But now there is a new in Dhaka. (See article about the program in awareness in Vietnam of the importance Bangladesh.) “Business journalists can help of increased transparency to be able to investors with information at home and attract foreign investment. abroad to make investment decisions.” "Once the journalists understand The media training program will corporate governance issues, they will be be packaged as a Forum toolkit. For able to identify better stories and provide journalists, it will provide background wider coverage.” on such corporate governance topics as Nguyen Van Phu shareholder engagement and pension funds, Managing Editor, Saigon Times and include case studies from different regions on investigative journalism and other subjects. For trainers, the publication will include sample curricula, tips and Middle East and North Africa Workshop tactics for adult-learning approaches, lessons learned, and training discussion “The workshop was a good mix of the pointers. theoretical and the practical. It taught us how to ask questions on corporate governance. Before, I thought that CG was bad for companies or at least provided limitations without much benefit. But now I learned how beneficial CG is to companies.” Hala Al Hadidi PETRA SUMMER 2010 A Progress Report 13 Latin American Institutes of Corporate Governance Share Ideas, Discuss Future Of Local/Regional Efforts As Institutes of Corporate Governance Next steps (presented by the Forum within Latin America grow in number and and OECD) influence, opportunities to meet regionally Discussion throughout the meeting focused to exchange experiences and expertise are on operational and philosophical topics, more important. with strong interest in how to strengthen In Panama City, representatives from the work of the institutes and partner eight national institutes, and three other organizations under the Forum’s guidance. countries as observers, met in May to Participants’ recommendations included: discuss issues affecting the management and sustainability of the institutes and synergies the Forum’s support to the Latin America network initiative, which was launched at the OECD, IFC, Forum 2009 Latin by international organizations American Roundtable in Chile. The meeting was sponsored by the Forum and event speakers hosted by Panama’s Institute of Corporate Governance (IGC-Panama). “There was considerable discussion about regional and national differences,” said ”The Forum has made a great effort in Santiago Chaher, the Forum’s senior getting 11 Latin American countries consultant for the region. “Some countries together for two days of discussion. Thank have institutes with a high level of you for contributing to the Corporate development while others are just starting Governance Institutes by allowing them to build them, so each experience counts to share successful experiences in each as the new institutions are learning from country.” experience and the developed ones are María Elena de la Fuente Tovar learning new ideas.” Manager Centro de Excelencia de The Forum and OECD also asked some Gobierno Corporativo (México) institutes to offer recommendations on priorities in each of their countries for improvements to boards on both a policy-making and a practical level. These Presentations centered on key topics in recommendations will be discussed at the institutions’ sustainability: next OECD/IFC/Forum Roundtable in Brazil. Sustainable income sources for institutes (presented by IGC-Panama, Participants agreed that private corporate CEGC/Mexico, and IBGC/Brazil) governance initiatives are more productive, although in several countries, government Access to closed companies and regulatory agencies are often innovators corporate governance (presented because they see the value of corporate by CGCyDM/Chile, CEGC, and governance reform. In other countries, Confecamaras/Colombia) the authorities support reform but do not Future of corporate governance in provide funding or resources for institute Latin America (moderated by IGC/ and partner projects. Instead, funding Costa Rica) comes from sponsors and multilateral Challenges presenting new products agencies. (presented by IBGC, IGC, IAGO, and CGCyDM/Chile) 14 SUMMER 2010 A Progress Report Next Steps Bottom line: The institutes feel strongly Participants were interested in the future that without the Forum’s involvement they of their respective and collective enterprises will be unable to accomplish as much as and how they can partner with the Forum. they would like with regard to their goals There was agreement that the Forum and missions. needs to take the lead on behalf of the “The Forum’s leadership is essential for institutes, with continued development and the institutes’ integration by merging their dissemination of its toolkits, newsletters, interests and objectives and aligning their commentaries, reports, and other products missions,” said Adriane Almeida, Head of Participants also saw a great need for in Spanish, Portuguese, and other IBGC’s Knowledge Center. training company and government leaders languages. to understand more about corporate governance and how it can be effected cooperatively by private and public interests. E-learning was viewed as an important delivery mechanism that allows for greater numbers of organizations and individuals to take part, but always taking into account that the person-to-person exchanges are important in business. Also, corporate governance call centers are needed where companies can ask for advice and counsel as well as information and training. Another solution is collaboration with universities so that future generations of graduates, especially those in business, can be introduced to the impact of sound corporate governance in creating jobs, strengthening economies, and making better societies. The Future of Corporate Governance Companies cannot continue to rely Discussion throughout the meeting focused on strengthening the institutes’ work and on bank financing, according to the developing partnerships. discussion. Brazil and Mexico, for example, have had to go to the stock market. Having good practices in place has managed to influence all companies. The private Perspectives on Forum’s Value sector had to lead in making transparency a reality, according to one participant, “This initiative is fundamental to develop “This initiative is very important to develop Roberto Truque, president of the Costa corporate governance in the region. corporate governance in a systematic and Rican Institute (IGC-CR). It will permit us to accelerate and strategic way in the region.” homogenize its implementation.” Francisco Javier Prada Alvaro Clarke, director of the Chilean Oscar Rivas General Manager, Confecámaras (Colombia) Institute (CGCyDM), said that Chile General Manager is demanding transparency in the Fundación Bursátil (El Salvador) “This initiative allows the Institutes to share management of public companies, common needs and to satisfy them by independent directors, and increased “It has been very interesting to be able to benefitting from diverse points of view social contribution. Progress in corporate share all the challenges and experiences and realities.” governance helps bridge the distance with of the institutes. The core idea — that all Gerardo Gonzales the financial sector. of us are trying to keep good corporate General Manager governance as a voluntary practice — is Procapitales (Peru) The trend is away from self-regulation, the one that motivates us to learn and some participants said, but for most it is the compare with what others have already only viable mechanism to make businesses invented.” sustainable over time. Julieta Rodríguez Molina Director Instituto de Gobierno Corporativo (Panamá) SUMMER 2010 A Progress Report 15 Peter Dey Honored for Lifetime Achievements The London-based International Corporate Governance Network honored PSAG Chairman Peter Dey with its Lifetime Achiever Award at its three-day summit in Toronto Miguel Marques to Head in June. Forum’s Steering Committee Dey was recognized for his role in developing governance guidelines in 1994 for companies on the Toronto Stock Exchange, and later helping develop global governance guidelines for the OECD and working with the Forum as PSAG’s chairman. During his remarks in accepting the award, Dey raised concerns about the “trend for Miguel Marques (pictured on the right) shareholders to try to involve themselves in assumed the chairmanship of the Forum’s issues which, under our corporate model, incentives you should include in your Steering Committee in June at the annual should be within the purview of the board. compensation system to make sure that review and planning session. To perform that job properly, you really strategy is achieved. For a shareholder, have to understand the corporate strategy, that’s an impossible thing to do.” Marques, a Luxembourg national, is a and then you have to understand what senior advisor with the Luxembourg Ministry of Finance. He is also the Alternate Director for Belgium, Luxembourg, and Slovenia at the European Bank for Reconstruction and Yale Honors Forum’s Santiago Chaher Development (EBRD) in London, where he has represented Luxembourg’s interests As ‘Rising Star’ since 2005. Thierry D. Buchs (pictured on the left) The Millstein Center for Corporate Governance and Performance at the Yale School served as chairman of the Steering of Management awarded Santiago Chaher, the Forum’s senior consultant for the Latin Committee for three years. Buchs was American region, the “Rising Star of Corporate Governance Award.” Head of Division for Private Sector “Their work is even more meaningful this Development within Switzerland’s State year given the financial crisis, corporate Secretariat for Economic Affairs. governance failures, and need for reform. “Thierry’s stewardship during a period of We are hoping to foster a Rising Stars rapid growth for the Forum was greatly Network of Excellence going forward.” appreciated,” said Philip Armstrong, Chaher led several programs including the Forum’s Head. “His commitment training institutes that, in turn, help board was tremendous in many ways, from directors build their expertise in corporate the extensive guidance and counsel he governance. (See the article on the regional provided to rendering firm leadership at cooperation in Latin America.) critical moments. The Forum would not This award recognizes global corporate have progressed as far as we have so governance professionals under the age “This award is a reflection of the quickly without Thierry’s support. of 40 who are making their mark as dedication and commitment of all that I outstanding analysts, experts, activists, work with in Latin America,” said Chaher. “We are also appreciative of Miquel’s or managers. “Working with the Forum has been an acceptance of the chairmanship. During extraordinary opportunity to see the his tenure on the Steering Committee, “It is a privilege for the center to honor Miguel’s role has been distinguished by a young and upcoming professionals in region learn about and adopt corporate governance. New centers are opening while deep conviction for advancing corporate corporate governance through this Rising governance to support sustainable Stars award,” said Ira M. Millstein, Senior those that were pioneers, such as Brazil, economic development. As the Forum Associate Dean for Corporate Governance continue to grow in stature in the region embarks on Phase Three, Miguel’s at the Yale School of Management. and beyond.” knowledge and ability to forge consensus among the Forum’s donor countries will be invaluable.” 16 SUMMER 2010 A Progress Report Bangladesh: Report Launches Plan to Guide Corporate Governance Reforms In partnership with the World Bank, IFC Advisory Services, and the Bangladesh Enterprise Institute (BEI), and with the Netherlands government’s support, the Forum Daily Star, June 2, 2010 launched the World Bank’s Bangladesh Corporate Governance Report on the Observance Listed Companies Now Better of Standards and Codes (ROSC) in Dhaka on May 29. At the event, the government Governed Says CEO of announced its support for the report’s recommendations to improve the country’s Dhaka Stock Exchange corporate governance framework and practices. Listed companies are gradually implementing corporate governance David Robinett, the directives set by the Securities and report’s principal author, Exchange Commission (SEC), an official presented the findings. A said yesterday. panel discussion followed with Dr. Mirza A. Islam, a As many as 91 percent of listed former government adviser; companies are following the SEC Shakil Rizvi, Dhaka Stock directives for the size of the boards Exchange president; and, of directors, independent directors Jamaluddin Ahmed, and audit committees, and annual president of the Institute of general meetings, said Satipati Moitra, Chartered Accountants of chief executive officer of Dhaka Stock Bangladesh. The corporate Exchange (DSE). governance of state-owned The directives are meant to ensure enterprises was highlighted transparency in companies’ internal as an area of high concern. operation. Eugene Spiro, a Forum The DSE has conducted a survey of 104 Journalists taking notes during the media training program senior projects officer, out of 241 listed companies, where it in Bangladesh. and Martin Steindl, found that most have complied with the an IFC corporate regulations, he said. More than 100 persons participated, governance officer, outlined their respective including company board members and programs in response to the report’s percent of the surveyed companies have executives, government officials, the media, recommendations, particularly for training complied with the regulations on the size and staff from the Forum, the World Bank, board directors and the media. of boards of directors. and IFC. The special guests were A.M.A. Press coverage of the event was extensive, The number of directors for a listed Muhit, Bangladesh’s finance minister, with online, print, radio, and television company should not be less than five and and Dr. Atiur Rahman, the Bangladesh coverage. not more than 20. Bank governor. Both supported the report The launch marked a valuable example Most companies follow the regulations and emphasized the need to proceed of close coordination among the Forum, on appointing independent directors with the report’s recommendations for IFC, and the World Bank, to be followed and audit committees, organizing annual developing Bangladesh’s capital markets, by project design and implementation with general meetings regularly, Moitra said. attracting foreign investment, and securing input and delivery by the three groups. sustainable economic growth. Opening remarks were given by Farooq Sobhan, BEI President and PSAG member; Alphons Hennekens, ambassador to the Netherlands Embassy; and, Ellen Goldstein, World Bank country director. SUMMER 2010 A Progress Report Thought Leadership All Forum publications are available on the End-of-Phase Two Evaluation of the Private Sector Opinion, Issue 17: Forum’s website: www.gcgf.org . Global Corporate Governance Forum ‘A Corporate Governance Model: Corporate Governance Board This evaluation shows that the Forum is a Building Responsible Boards and Leadership Training Resources User “high-performing, relevant, and impactful Sustainable Businesses’ Review Workshop Proceedings organization despite its modest size and The publication introduces Dr. Yılmaz The workshop gathered IoDs with the resourcing. However, in the face of a Arguden’s “CRAFTED” principles of international faculty and Forum staff rapidly growing, worldwide demand for corporate governance, which help create to assess the effectiveness of the global the Forum’s services, the Forum does face a value and trust for business sustainability. roll-out strategy of the Training Resources. number of challenges to sustain its current Participants shared their challenges, levels of effectiveness and efficiency given AHEAD successes, and “lessons learned.” its prevailing levels of funding and capacity. The evaluation notes that initial steps have In fiscal 2011, Lessons Learned editions OECD Policy Brief on Improving been taken to address these challenges.” will examine the reasons why some Corporate Governance of Banks in the country action plans succeed and others Middle East and North Africa Corporate Governance in Asia, fail, report on the introduction of the Insights by Philip Armstrong Supported by the Forum, Hawkamah new Forum toolkit Resolving Corporate The Forum’s Head shares his opinions Governance Disputes, and share the this publication provides targeted on patterns, challenges, and progress of experiences in using the Governing recommendations to policymakers, corporate governance in Asia in the context Banks training module from the Forum’s banking supervisors, banking associations, of the financial crisis, and how the Forum Financial Markets Recovery Project. and individual banks in the MENA region. is addressing these challenges. Lessons Learned JUNE 2010 sponsor research, and support technical strengthen their reporting about issues Institutes Share Successes and assistance and capacity building. related to corporate governance. The Challenges in Training Board Directors article discusses the Forum's experience FEBRUARY 2010 to Lead Corporate Governance Reforms in running the program and maintaining Improving Banks' Corporate Since its launch, more than 300 trainers a global network of journalists to provide Governance Practices in South East from 55 countries have completed the them continual support after the training Europe Forum’s “train the trainer” program. workshops. Their experiences are summarized in this The financial crisis has severely affected IFC SmartLessons: ‘Learn Before You Lessons Learned to assist IoDs and others the economic growth in Southeast Lead: The Corporate Governance Board in comprehending and applying the core Europe. Shortcomings in bank corporate Leadership Training Resources Kit’ success factors and in overcoming the governance can destabilize the financial system and create systemic risks to the This publication tells how the Forum challenges. Other “lessons” are derived economy. To promote a sustainable created an interactive and flexible toolkit from the meeting of master trainers in São regional recovery, the Forum, EBRD, and for adult learners on the subject of board Paulo in late February 2010 and IBGC’s IFC are working together to help financial leadership training. It also explores what experiences. institutions and regulators adopt best the Forum and IoDs learned as they MAY 2010 practices for conducting business. applied the Training Resources in their Forum to Expand Global Leadership in director training programs. DECEMBER 2009 New Phase of Initiatives Thomson Reuters Foundation and The report, End-of-Phase Evaluation of Forum Train Journalists to Report on the Global Corporate Governance Forum, Corporate Governance Issues provides insights into what the Forum itself has learned as it worked to raise awareness, The partners jointly developed and now build consensus, disseminate best practices, run a unique program to help journalists SUMMER 2010 A Progress Report Anti-Corruption Issues in Africa By Philip Armstrong Head, Global Corporate Governance Forum This article is an excerpt from Armstrong’s remarks before an April conference of the University of Stellenbosch’s Unit for Corporate Governance in Africa in Cape Town, South Africa. Corruption has debilitating consequences legal and regulatory framework sets the worldwide, especially in the fight against minimum standards for acceptable conduct poverty and for social and economic in doing business. The framework also justice. reflects what society holds as fair and It creates inefficient economies, curtails appropriate behavior by all types and sizes competition, increases business costs, of businesses. weakens public policy, However, in most destabilizes government, developing countries compromises human legislation and freedom, threatens enforcement are not democracy, and easy tasks. Enforcement demoralizes individual alone requires lengthy citizens. and costly procedures, At the corporate level, technical skills, corruption corrodes the infrastructure, and quality of management at mechanisms that all levels, and undermines are often lacking in To learn more about this topic, see The the value and benefits of developing countries. Moral Compass of Companies: Business free enterprise. Even in the best Ethics and Corporate Governance as of circumstances, Anti-Corruption Tools. Focus 7. John D. Corruption in Africa there are many more Sullivan, Executive Director of the Center costs the continent priorities such as health, for International Private Enterprise, is the $140 billion annually, sanitation, food, water, author. and education that take precedence. about 25 percent of the total gross domestic Regulatory enforcement, in particular, falls product in Sub-Saharan Africa. low in the order of immediate concerns. What is Corruption? According to Transparency International’s Not surprisingly, corrupt governments As the OECD defines it: “Corruption Corruption Perceptions Index (CPI), which wholeheartedly oppose reforms that comes in many guises. Bribery, extortion, measures perceived levels of public sector reduce their opportunities for enrichment. fraud, trafficking, embezzlement — but corruption in 180 countries and territories, also nepotism and cronyism — are all corruption is pervasive throughout most of different manifestations of it. Even the Africa. Corporate governance is growing most straight-forward acts of bribery in importance not only as a tool Of the 47 countries reviewed in Sub- need not always involve the exchange that increases business efficiency, Saharan Africa, 31 scored less than 3 out of money. Other gifts or advantages, improves access to capital, and of a possible 10, indicating that corruption such as membership of an exclusive club ensures sustainability, but as a is perceived as rampant by country experts or promises of scholarships for children, tool that supports and encourages and businessmen, while 13 scored between have been used as ‘sweeteners’ to clinch implementation of effective anti- 3 and 5, indicating that corruption is deals. Whatever form it takes, corruption corruption programs and strategies. perceived as a serious challenge. Only three is always a two-way transaction; it countries scored more than 5: Botswana, requires a supply side (the briber) and a Mauritius, and Cape Verde. Evidence indicates that reforms perceived demand side (the one who receives the as an attack on power holders will not be bribe).” Because of corruption, the African continent pays a heavy opportunity cost in implemented or enforced, and even if they trying to build and sustain national and are they will be manipulated by those in regional economic health. power to serve their narrow interests. What can be done about corruption? Effective reform, therefore, requires an understanding of its impact on key players, Fighting corruption requires strong public including domestic governments, before it and private regulatory bodies. A country’s SUMMER 2010 A Progress Report 19 is put in place. This understanding permits Most important, they should confront anti-corruption measures based on our identification of processes and procedures bribery and corruption though open and respective experiences. Titled The Moral that entail governmental as well as social constructive engagement with company Compass of Companies: Business Ethics and benefits while allowing for more judicious managements. Corporate Governance as Anti-Corruption compromise that protects all parties. Tools (Focus 7), the guide was preceded by Recognizing the importance of investors In instances where the powers that be in this regard, the International Corporate a paper in our Private Sector Opinion series, view reforms as not in their interest, the Governance Network — composed mostly Corruption, Economic Development and aim should be to find ways that make the of institutional investors who collectively Governance: Private Sector Perspectives from reforms feasible by reducing the incentives represent funds under management of Developing Countries. of those in power to govern or manage about $9.5 trillion — recently issued a The Forum has also partnered with The things for their private gain and against the statement urging investors to become Global Compact to publish Corporate public good. more active in monitoring company anti- Governance: The Foundation for Corporate General guidelines for more ethical corruption mechanisms. Citizenship and Sustainable Business, and it behavior include a This idea of intervention is taking part in the Principle #10 Working number of different is being taken a Group to clarify and strengthen anti- sources for anti- “Corruption is a formidable step further by the corruption guidelines globally. corruption initiatives. enemy of good corporate Lastly, the Forum is engaged with the Even though all are governance, but it is not Responsible Investment World Bank’s Reports on the Observance noble efforts, most of invincible despite how often of Standards and Codes (ROSC) team on them are fragmented it rears its ugly head.” partnership between initiatives for improving the corporate and therefore not active investors, the governance regulatory framework in helpful. There needs countries engaged in building institutional to be a more unified Programme Finance capacity and improving the quality of approach that satisfies the differences board training and leadership skills. among different markets. Clearly, corruption is a formidable enemy Fortunately, more and more countries are “it is coordinating the adoption of the of good corporate governance, but it is not requiring corporate governance codes as a principles by institutional investors, invincible despite how often it rears its ugly condition of doing business, and a means providing comprehensive resources to assist head. Much is being done to fight it in all to widening the regulatory standards for investors in implementing the principles, its forms. And much more can be done, voluntary, self-regulating codes of conduct and facilitating collaboration among especially in emerging markets where the that exceed the minimum prescribed signatories.” need for preventive action is urgent and the requirements of law. And in partnership with the Center for gains that can be achieved are greatest. Shareholders and investors also have a International Private Enterprise (CIPE), key role in making productive change. the Forum has produced a guide to FPO FSC cert 2121 Pennsylvania Avenue, NW cgsecretariat@ifc.org Washington, DC 20433 U.S.A. www.gcgf.org ©2010 All rights reserved.