Thailand : Corporate Governance

The Thai Government has paid high attention to the encouragement and promotion of "Corporate Governance" with an objective to create a transparent investment environment in Thailand.  The "Year 2002 Good Corporate Governance Campaign" has been initiated to facilitate the initiative.  The Board of Investment and the recently established, Good Governance Supervising Committee, have been established to oversee and ensure that the campaign can be carried out effectively.

So far, new laws and regulations have been enacted, covering investments, the system of property ownership for non-residents and new taxation schemes.  In addition, all these practices are geared toward the promotion of transparency and disclosure of information to improve the quality of Thai capital for market participants and foreign investment.

NEWS on Corporate Governance Thailand Rating and Information Services (TRIS)

Coperate Governance in Capital Market

The SET has been working on three vital areas to improve the quality of the Thai capital for market participants and to attract foreign investment.: 1) quality of disclosure, 2) an audit committee, and 3) a framework for the development of good corporate governance practices in Thailand.  This section presents a brief description of the measures that SET has implemented.

I. Quality of Disclosure Listed company must procure auditors approved by SEC to review or audit its quarterly financial statements and annual financial statements, both of which are submitted to the SET. Encouraging company directors to clearly define the scope of their responsibilities in reporting their financial statements.  Company directors are responsible for the accuracy, completeness, and transparency of their company's financial reports to encourage shareholder confidence.  Thus shareholders will be assured that the board is accountable for all presented information.

II. Audit Committee Having studied this issue since 1995, the SET announced, in early 1997, that all listed companies were required to establish an audit committee by the end of 1999.The audit committee must consist of at least 3 outside independent directors. The committee's responsibilities are to: Review the company's financial reports to ensure that they present true and fair value, and provide sufficient information to shareholders. Review the adequacy and effectiveness of the company's internal controls system and internal audit functions to ensure their effectiveness and proper risk management. Review compliance with SET Rules and Regulations and any other relevant laws. Consider and propose the appointment of auditors. Prepare and ensure Good Corporate Governance in the audit committee report. Handle any other pertinent needs that may develop.

III. Framework for Good Corporate Governance Practices The SET has issued a Code of Best Practices as a guidance reference for company directors.  Directors are required to disclose in the company's annual report whether they have been in compliance with the Code and to give reasons for any non-compliance. The SET is cooperating with the SEC to set up a Committee on Good Corporate Governance consisting, of representatives from several professional organizations, in order to develop guidelines on good corporate governance for listed companies The outlined framework emphasizes the following points: The number of outside directors should be one-third of the total number of board members in order to ensure effective checks and balances. There is a need for a clear definition of the different roles, responsibilities, and accountability of 1) directors and 2) management. At present there is no clear distinction between these two groups. Given that the effectiveness of internal controls and proper risk management is one of the most important issues in business nowadays, the SET is working with the Accountants and Auditors Association of Thailand to develop guidelines for directors on internal controls. Listed companies should appoint a corporate secretary who will be responsible for coordinating the board's activities.  This secretary will oversee the board and determine whether the board has been in compliance with SET rules and regulations. There is a need for the establishment of a Codes of Ethics for directors, management, and employees. In addition to all of the above, the Institute of Directors (IOD) was established on 1 October 1999, with the support of the SEC, the Bank of Thailand, and the World Bank.  The purpose of the IOD was to promote greater awareness of the roles and responsibilities of company directors as well as to upgrade their professional standards, skills, and knowledge. Finally, the SET has issued guidelines for listed company shareholders' meetings.  This is to make sure that shareholders have sufficient information at hand for making decisions.  In addition, the SET made sure that voting procedures by proxies and their required accompanying information should always be provided by companies.

Code of best practices for directors of listed companies Preparation and Disclosure of Reports on Securities Holding Best practice guidelines for the audit committee