Asian governments, regulators and companies have "taken their eye off the ball" over corporate governance during the current economic boom, a study released yesterday said.
The complacency at many levels of the region's financial system has made it vulnerable to any reversal of the strong stock market performance, the report by brokers CLSA and lobby group Asian Corporate Governance Association found.
Many of the region's firms have also avoided seriously grappling with the issue of climate change, often perceiving it as simply a problem for heavy polluters, the report said.
"There has been a palpable lessening of the pressure for [corporate governance] reform around the region ... and many governments, regulators and market participants have taken their eye off the governance ball," it said. "Indeed, certain regulators are positively complacent about what they have achieved in the past decade, recounting with pride how much their stock markets have risen, and saying that all they need do now is to refine their rules and improve implementation of best practices."
"This implies a degree of regulatory perfection that does not yet exist in any Asian market," it said.
The report studied 582 listed companies in 11 Asian markets and examined the governance performance based on discipline, transparency, independence, responsibility, accountability, fairness and environmental responsibility.
It found that the average corporate governance score for companies in Asia, not including Japan, only rose by 1.2 points, a much smaller increase than in previous years.
"There is less pressure on companies and countries for corporate governance when the economies of the region are strong and this is quite clear in the results of our survey," said Amar Gill from CLSA, the author of the report.
Companies have also refused to acknowledge their impact on climate change.
"It has not yet sunk in for most corporate managers in Asia that whatever business one is in, it will have a carbon footprint," the study said.
"Every business consumes electricity, involves travel and will have other impacts on the environment," it said.
"With a carbon footprint comes the responsibility to minimize, if not actually negate the cost of carbon emissions," it said.
Gill said that unless companies recognize their role in carbon emissions, they could be caught out by consumer activism in western countries placing pressure on companies they supply to conform to higher standards.
The report said large companies from Japan, Taiwan and South Korea were the most environmentally active, and singled out Korea's technology giant Samsung, global banking leader HSBC and Japan's NEC for special praise.
Hong Kong took the top spot in the regional ranking, taking over from Singapore. India was in third place followed by Taiwan and Japan.
The Philippines and Indonesia were ranked the lowest of the 11 countries assessed.
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