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Corporate Governance Disclosure in Emerging Markets. Statistical Analysis of Legal Requirements and Company Practices

Report by UNCTAD, 2011

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While this report finds that disclosure requirements in emerging markets are relatively strong, there are still generally fewer requirements than in more developed markets and compliance gaps tend to be larger. There is a clear need to improve, promote and enforce disclosures and in some instances make them mandatory in order to strengthen reporting regimes and help enterprises improve their communication with shareholders and other stakeholders. There is still much work to do. This report integrates and compares four years of UNCTAD‟s cross country comparative data on corporate governance disclosure in emerging markets. This work will assist policy makers in identifying regulatory gaps, comparative best practices, and priorities for capacity building.


UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT




Corporate Governance


Disclosure in


Emerging Markets
Statistical analysis of legal requirements and


company practices


















UNITED NATIONS


New York and Geneva, 2011




ii Corporate Governance Disclosure in Emerging Markets


Note


Symbols of United Nations documents are composed of


capital letters combined with figures. Mention of such a


symbol indicates a reference to a United Nations document.






The designations employed and the presentation of the


material in this publication do not imply the expression of any


opinion whatsoever on the part of the Secretariat of the United


Nations concerning the legal status of any country, territory,


city or area, or of its authorities, or concerning the delimitation


of its frontiers or boundaries.






Material in this publication may be freely quoted or reprinted,


but acknowledgement is requested, together with a reference


to the document number. A copy of the publication containing


the quotation or reprint should be sent to the UNCTAD


Secretariat at: Palais des Nations, CH-1211 Geneva 10,


Switzerland.


























UNCTAD/DIAE/ED/2011/3


UNITED NATIONS PUBLICATION





Key Messages iii


Key Messages


Published in 2006, and developed by UNCTAD‟s Intergovernmental Working
Group of Experts on International Standards of Accounting and Reporting (ISAR),


UNCTAD‟s Guidance on Good Practices in Corporate Governance Disclosure provides
a benchmark (“UNCTAD ISAR benchmark”) of more than 50 corporate governance
disclosure items. This benchmark has been a key measurement tool in UNCTAD‟s multi-
year research programme on corporate governance disclosure.


This report integrates and compares four years of UNCTAD‟s cross country
comparative data on corporate governance disclosure in emerging markets. This work


will assist policy makers in identifying regulatory gaps, comparative best practices, and


priorities for capacity building. It includes:


 A comparison of mandatory corporate governance disclosure requirements in
emerging markets and an assessment of the extent to which large emerging market


enterprises comply with these requirements; and


 An overview of common challenges and pitfalls in the design of corporate
governance disclosure regulations, along with recommendations for addressing these.


Key findings and recommendations of the report are:


1) A policy challenge faced in many countries is how to make disclosure based
regulation work. The findings of this report indicate a three-fold approach:


a. increase the number of required items;


b. increase the clarity of disclosure regulations; and


c. ensure that the information reaches the general public.


2) There are troubling gaps in the disclosure of Audit related issues with some of the key
UNCTAD ISAR benchmark disclosure items in this category largely missing both in


regulation and in company practice. Given the importance of auditing disclosure in


assessing the quality of a company‟s governance, regulators should consider new
disclosure requirements in line with international best practices.


3) More disclosure is almost always welcomed by investors, but there are good
arguments for avoiding excessive disclosure: reporting can be costly and not all


information is useful information. Regulators should focus on a core set of mandatory


disclosure items.


4) Companies do not always comply with mandatory disclosure rules. In most countries
direct enforcement by government of disclosure rules is impractical: there are too


many individual disclosure points to check. Policy makers should consider focusing


on a smaller set of leading enterprises, or conducting random reviews. Periodic


checks, combined with moderate fines, could send a signal that regulators take


disclosure seriously.


5) Regulators cannot do everything; investors must play an active role as market
participants and communicate with investee companies about disclosure gaps. Policy


makers should promote responsible investment and active ownership by investors.


Investors should be encouraged to engage in dialogue with companies to ensure they


meet regulatory requirements and voluntary best practices.




Preface v


Preface


Today‟s global economy relies upon the stable functioning of large
enterprises. When governance mechanisms break down, the impacts are felt not only


in the home country but around the world. For over 25 years, improving corporate


transparency through the development of practical tools and informative research has


been a major focus of UNCTAD‟s Intergovernmental Working Group of Experts on
International Standards of Accounting and Reporting (ISAR). In recent years,


UNCTAD‟s work in this area has produced the broadest comparison of corporate
governance disclosure requirements and practices in emerging markets available.


Such a detailed cross country examination of governance disclosure is unique and fills


an important void in the existing literature.


The status of the implementation of national reporting requirements also sheds


light on an important policy area. A number of studies have examined the subject of


government regulations in the area of corporate governance at a macro level,


examining institutions and laws. Detailed examination of specific disclosure rules is


less common. Examination of compliance with those rules is less common still.


While this report finds that disclosure requirements in emerging markets are


relatively strong, there are still generally fewer requirements than in more developed


markets and compliance gaps tend to be larger. There is a clear need to improve,


promote and enforce disclosures and in some instances make them mandatory in order


to strengthen reporting regimes and help enterprises improve their communication


with shareholders and other stakeholders. There is still much work to do.


While we must continue to build capacity on the part of policy makers and


regulators in the design, implementation and review of corporate governance


regulations, it is also important to recognize the shared role that enterprises and


investors play and encourage them to contribute proactively to efforts to build more


transparent, responsible and sustainable markets.








Supachai Panitchpakdi


Geneva, Dec 2011 Secretary-General, UNCTAD




vi Corporate Governance Disclosure in Emerging Markets


Acknowledgements


Corporate Governance Disclosure in Emerging Markets was prepared by


Anthony Miller, Economic Affairs Officer, Accounting and Corporate Governance


Section, under the overall supervision of Tatiana Krylova, Head, Enterprise


Development Branch, Division on Investment and Enterprise, and Jean Francois


Baylocq, Chief, Accounting and Corporate Governance Section.


Richard Frederick, UNCTAD resource person on corporate governance,


played a valuable role in reviewing the data in the report and contributing to the


report‟s analysis and discussion. Crucial editing, drafting and data management
support was provided by research assistant Leonie Goodwin.


This consolidated report was prepared by the UNCTAD secretariat on the


basis of data compiled over several years by a dedicated team of UNCTAD research


assistants including: Albertine Azar, Natalie Djodat, Cheng Feng, Arthur Louche,


Yalan Lui, Yusuke Nakazawa, and Bo Zhao. The data was further corroborated by


independent research conducted by Dr. Kevin Campbell director of the CFA Program


Partner MSc in Investment Analysis at the University of Stirling, United Kingdom,


and a visiting professor in the Faculty of Management at the University of Gdansk,


Poland. Research assistance was provided to Dr. Campbell by Yung-Hsiang Teng and


Barbara Tschirnich.


Valuable comments and suggestions were provided by Jackie Cook,


UNCTAD resource person on corporate governance, and UNCTAD staff members


Yoseph Asmelash and Richard Bolwijn.





Contents vii


Contents


Key Messages .................................................................................... iii


Preface ................................................................................................. v


Acknowledgements ........................................................................... vi


Overview ............................................................................................ ix


UNCTAD’s role in encouraging better corporate governance.......................................................... ix


The role of disclosure in improving corporate governance ............................................................... ix


Major findings ..................................................................................................................................... x


Policy implications ............................................................................................................................. xii


CHAPTER I: Regulatory requirements and company


practices .............................................................................................. 1


A. Introduction ..................................................................................................................................... 1


B. Statistical overview .......................................................................................................................... 3


C. Analysis of disclosure requirements ............................................................................................... 4


D. Analysis of company disclosure practices .................................................................................... 10


E. Compliance with disclosure requirements ................................................................................... 14


F. Conclusion ..................................................................................................................................... 17


CHAPTER II: Main challenges and policy recommendations ... 19


A. The ‘comply or explain’ principle: challenges in application ..................................................... 19


B. Models of mandatory and voluntary disclosure regulation ......................................................... 21


C. Disclosure chain: does the information get to the public? .......................................................... 23


D. Other challenges ........................................................................................................................... 25


E. Conclusion ..................................................................................................................................... 27


ANNEXES......................................................................................... 29


Annex I. Methodological notes for chapter I .................................................................................... 30


Annex II. List of disclosure items in the UNCTAD ISAR benchmark ............................................ 34


Annex III. List of information sources by market ............................................................................ 36


Annex IV. List of enterprises included in the study by market ........................................................ 41


Annex V. Number of enterprises that disclose by market ................................................................. 44




viii Corporate Governance Disclosure in Emerging Markets


List of Tables


Table I.1. Disclosure requirements and practices in emerging markets............................. 4


Table I.2. Corporate responsibility issues least required ................................................... 8


Table I.3. Gap analysis of disclosure requirements in 25 emerging markets and


three large established markets .......................................................................... 9


Table AI.1. The 25 markets included in the study .............................................................. 31




List of Figures


Figure I.1. Disclosure requirements vary greatly by category and market.......................... 7


Figure I.2. Comparison of company disclosure practices by market ................................ 12


Figure I.3. Higher consistency coincides with higher disclosure levels ............................ 13


Figure I.4. A 25% compliance gap with mandatory requirements .................................... 15


Figure I.5. A high compliance rate does not necessarily indicate more CG disclosure .... 16


Figure I.6. Auditing category suffers from the largest disclosure gap .............................. 17


Figure II.1. Models of voluntary and mandatory disclosure regulation ............................. 21


Figure AI.1. A diverse range of industries examined .......................................................... 32






Overview


UNCTAD’s role in encouraging better
corporate governance


In 2006, UNCTAD published its Guidance on Good Practices in Corporate


Governance Disclosure. This guidance was based on the consensus of the ISAR


expert group and makes recommendations with respect to what enterprises should


disclose regarding their governance practices. It also helps countries to structure their


corporate governance (CG) reporting requirements.


Since publishing the guidance, UNCTAD has distilled its recommendations


into a benchmark of 52 disclosure items covering five broad categories (hereafter the


UNCTAD ISAR benchmark). The UNCTAD ISAR benchmark has been used to


measure the regulatory requirements of individual countries, and to benchmark the


disclosure practices of companies. Over the years, it has been used to evaluate the


disclosures of more than 500 enterprises and the disclosure requirements of more than


45 countries. This work has allowed UNCTAD to draw conclusions regarding the


impact of the regulatory framework on company practices and on the level of


compliance with corporate governance disclosure requirements.


UNCTAD‟s work and this report specifically, represent the broadest
comparison of corporate governance disclosure requirements and practices currently


available. It is also unique in the examination of areas in which UNCTAD holds


special expertise: audit and financial reporting.


The role of disclosure in improving


corporate governance


Why should one care about the disclosure of governance practices? The


bottom line, after many years of debate and study, is that good corporate governance


benefits companies, investors and markets. Governance practices affect company


performance, and are an important element in analysts‟ evaluations of risk both for
individual companies and for markets. From the perspective of policy makers, better


corporate governance has the potential to enhance the efficiency of companies and


markets, reduce the cost of capital, and encourage innovation. In short, corporate


governance is important.


Disclosure is important because reporting is widely viewed as the most


effective tool that regulators have to encourage better corporate governance.


Reporting puts information in the hands of the markets. And markets and investors


make investment decisions based on this information. The markets function best when


they have access to sufficient information to properly assess governance. Good


information helps the markets ascertain the degree to which companies respond to


shareholder needs; it reveals risks, and shows the quality of future cash flows.




x Corporate Governance Disclosure in Emerging Markets


One should note that this report and the studies that it is based on do not


measure the substance of the reporting, that is the quality of the disclosure or the


quality of the underlying corporate governance practices of the enterprise. Such an


evaluation would have been highly complex and largely subjective. The approach that


was taken in this report was both simpler and more objective, focused on the content


of corporate public disclosures. The report asks three simple yet important questions:


1. Is a particular disclosure item from the UNCTAD ISAR benchmark
required at country level;


2. Do enterprises make the disclosures suggested by the UNCTAD ISAR
benchmark; and


3. Do enterprises make the disclosures that are required in their own home
country?


Thus, what is being measured is not the substance of the reporting, but


whether a reporting process occurred and how that process conforms to both


international best practices and national requirements. This is important since the


reporting process is an indicator for whether companies:


 subject themselves to internal examination;


 subject themselves to external examination; and


 consider the impact that reporting will have on the public.


The process of self-examination and reporting can be viewed as more


important in encouraging better corporate practices than encouraging specific


governance practices such as, for example, requiring a specific number of independent


directors on a board. Self-examination and assessment can be seen as a necessary


precursor to any attempt at improvement.


Major findings


This report combines the results of five major studies on corporate governance


disclosure (annex I.A) conducted by UNCTAD‟s Intergovernmental Working Group
of Experts on International Standards of Accounting and Reporting (ISAR).


Chapter I provides an inventory of mandatory disclosure requirements (based


on national regulations) for publicly listed firms in 25 emerging markets, and then


compares company practices within 22 of these emerging markets to this inventory, in


order to make some generalizations about compliance with national regulations.


Chapter II analyzes different models of corporate governance rule making,


summarizes some of the main challenges regulators in emerging markets face in


design and implementation and provides policy recommendations. The remaining


discussion below in this Overview is a summary and synthesis of the findings and


policy implications found in chapters I and II.


Disclosure requirements


Most of the 25 emerging markets analyzed make considerable use of


mandatory disclosure: 18 countries (nearly three quarters of the sample) require


disclosure of two thirds or more of the 52 items in the UNCTAD ISAR benchmark.




Overview xi


The categories of disclosure most subject to mandatory national requirements relate to


Ownership Structure and Exercise of Control Rights and Financial Transparency.


There is considerable variability in the level of mandatory requirements in the


category of Board and Management Structure and Process with some countries


requiring a large number of items to be disclosed and others relatively few. This


appears to reflect the difficulty in defining precisely which board practices are


fundamental to good governance.


The two categories with the least number of mandatory disclosure


requirements are Auditing and Corporate Responsibility and Compliance. The lower


frequency of mandatory disclosure for corporate responsibility issues may be a result


of the relative novelty of environmental and social issues within the broader area of


traditional corporate governance subjects. More surprising is the lesser frequency of


mandatory disclosure requirements on auditing issues, since auditing is widely


recognized as a crucial area of corporate governance. Nevertheless, many of audit


related disclosures are also relatively new, with most emerging as international best


practice only in the last decade following the infamous Enron-era corporate scandals


and strongly influenced by the 2002 Sarbanes Oxley Act in the United States.


It was found that in most countries a majority of disclosure requirements are


explicit and direct, yet indirect or implicit disclosure rules still persist to a greater or


lesser extent in all countries. Explicit requirements can be viewed as being more


effective regulatory tools since they leave less room for interpretation, and fewer


opportunities for error and gamesmanship. Disclosure rules could be made stronger by


making disclosure requirements clearer and more explicit. A comprehensive listing of


disclosure requirements in every market might bring further clarity to the reporting


process, assist enterprises in preparing their reports, and help investors in


understanding what information can be expected from companies.


Finally, it was found that some companies consider that they make public


disclosure when they submit documents to regulators. Upon examination, however,


none of these disclosures were found to be readily accessible to the public. Further


steps might usefully be taken by both companies and regulators to provide better


access to the corporate governance information found in the regulatory filings of


companies. These could include, for instance, maintaining a centralized database of


reports, and/or making information accessible via the internet. For their part,


companies may wish to improve disclosure by including in their direct


communication to shareholders the corporate governance information that has already


been prepared for regulatory filings.


Company practices


With respect to the disclosure practices of the sampled companies, on average,


enterprises disclose around 70% of the UNCTAD ISAR benchmark. It is also noted


that many emerging market enterprises are disclosing more information than some


enterprises in developed markets. Six of the emerging markets reviewed had


enterprises disclosing an equal or greater number of items than enterprises in the most


developed markets. This finding may reflect the fact that some companies have


multiple listings, one in the local market and another in an international market which


may have more stringent reporting requirements.


Whether companies disclose specific items or not corresponds very closely to


whether these disclosures are mandatory. The data shows clearly that mandatory




xii Corporate Governance Disclosure in Emerging Markets


requirements yield more disclosure. A number of the least prevalent disclosures by


companies fall into the scope of accounting and auditing. Perhaps one of the most


troubling gaps is the lack of requirements to disclose and lack of disclosure on the


“Impact of alternative accounting decisions”. Additional gaps are disclosures on:
“Rotation of audit partners” and “Board confidence in the independence and integrity
of external auditors” and “Auditors‟ involvement in non-audit work and the fees paid
to the auditors”. These disclosure items represent many of the lessons learned from
the earlier Enron-era corporate failures, yet failure to require such disclosures, or for


company to not disclose such information, is to risk repeating the history of those


earlier corporate scandals.


Compliance


The report approaches the issue of compliance in two different ways. First, it


illustrates the variability in reporting practices within countries. Second, it compares


the items that the sampled companies actually disclose to the items that are required


by national regulation or stock exchange listing rules. The report also examines


compliance by counting the number of required disclosures made by companies.


Overall, 75% of mandatory disclosures are made. However, gaps in compliance exist.


For some countries these gaps are relatively small. In others they are quite large. In


the case of the latter, this report should serve as impetus to re-examine enforcement of


disclosure requirements.


Policy implications


A number of important policy questions are raised by the report. One of these


is how to strengthen disclosures so as to complement the existing regime, whether


disclosure-based or substantive. Substantive regulation requires companies to comply


with laws that prescribe certain actions. Disclosure-based regulation mandates the


disclosure of information and relies on the markets, particularly investors, to assess,


reward or punish the company in the marketplace. Almost all financial markets rely


on both substantive and disclosure-based regulation to varying degrees.


A strong disclosure-based regulatory regime shifts some of the responsibility


for monitoring and enforcement from regulators, (who are often under-resourced), to


the markets. Reliance on substantive regulation, on the other hand, requires


considerable monitoring and the effective application of regulatory enforcement


mechanisms. While disclosure-based regulation is neither perfect nor a panacea, the


trend in emerging markets is clearly towards this form of regulation. Therefore a key


policy question is how to make disclosure-based regulation work better. The findings


of this report indicate a three-fold approach to improving corporate governance


disclosure in emerging markets: increasing the number of required items; increasing


the clarity of disclosure regulations; and ensuring that the information reaches the


general public.


Increasing the number of required disclosure items raises the question: what


elements of corporate governance disclosure should be subject to mandatory


requirements? International best practice, as identified in the UNCTAD ISAR


benchmark, is a good place to start. Priority areas are Auditing and Board and


Management Structure and Process. In many countries, some of the key disclosure




Overview xiii


items in these categories are largely missing both in regulation and in practice. This is


an area of concern as these topics are so closely linked to the quality of corporate


governance.


When deciding what disclosure should be required, it is also important to


strike a balance in the quantity of required disclosures. More information and more


disclosure is almost always welcomed by investors and the markets, and bemoaned by


companies. There are good arguments for hemming in excessive disclosure for both


since reporting can be costly and not all information is useful information. Focusing


on a core set of mandatory disclosure items will help countries strengthen their


disclosure regimes and help companies better tailor their disclosure to what is


important.


The report shows the frequency of reporting in a number of areas, and it would


be tempting to mandate disclosure of only those items on which there is a broad


international consensus. However, it would be an error to construe items that are not


commonly disclosed as being unimportant. One of the least reported items in this


report (whistle blower protections) has been made the subject of much attention in the


United States in the wake of the 2008/2009 financial crisis. It may in fact be those


items that do not typically garner attention that may be the greatest weakness to the


system.


Policy makers must also recognize that while mandatory items are much more


likely to be reported, companies do not always comply with mandatory rules. This


means policy makers should also consider issues of enforcement. In most economies,


direct enforcement by governments of disclosure rules is impractical: there are simply


too many individual disclosure points to check and too little resources with which to


check them. Policy makers may consider focusing oversight on a smaller set of


leading enterprises, those that make up the largest contribution to total market


capitalisation. In many emerging markets, a few dozen companies can account for


more than 50% of the market capitalization of the entire country. Periodic reviews of


leading companies, combined with moderate fines for noncompliance, could send a


signal to companies that regulators take disclosure seriously. Rewarding and


highlighting of good practices could also be an incentive.


Policy makers should also work on promoting responsible investment and


active ownership by investors. Investors must play an active role as market


participants and communicate with the companies in which they invest, especially as


regards disclosure practices. There is an ongoing need for strengthening awareness


among both company directors and investors about the obligations and benefits of


corporate governance disclosure and the need to strengthen disclosure in certain areas.





CHAPTER I: REGULATORY REQUIREMENTS AND


COMPANY PRACTICES


A. Introduction


This chapter provides a statistical analysis of regulatory requirements and


corporate practices related to corporate governance disclosure in more than twenty


emerging markets. These regulatory requirements and corporate disclosure practices


are compared against each other and against UNCTAD‟s ISAR benchmark: a list of 52
specific corporate governance disclosure items


1
which has been used by UNCTAD as


an international benchmark in a series of national and international studies on


governance disclosure.
2


Understanding what corporate governance disclosures are required, how


requirements vary from country to country, and how requirements ultimately


influence firm-level disclosure, is important for clarifying the regulatory environment


and helping policy makers better define regulatory agendas.


Following the presentation of statistics in section B, section C analyzes the


corporate governance disclosure requirements of regulators and stock exchanges in 25


emerging markets, and compares their requirements to each other, as well as to


requirements in the three largest markets in the world (Japan, the United Kingdom


and the United States).


The sample of 25 markets is drawn from the MSCI Emerging Markets Index


produced by Morgan Stanley Capital International (MSCI EM Index).

Annex I.B


provides a list of the 25 markets included in the MSCI EM Index in 2007 at the start


of UNCTAD‟s multi-year research programme on this subject.


The analysis applied to this group of markets is:


 Which of the corporate governance disclosure items recommended by the
UNCTAD ISAR benchmark are required to be reported by enterprises


listed on the major stock exchanges of each of the 25 markets studied; and


 How do emerging markets compare with each other and with more
developed markets?




1 One benchmark item was removed from the 2008 and 2009 studies. Prior UNCTAD studies included 53 items . A


disclosure on “Practices on related party transactions where control exists” (previously Item 15) was
removed because of substantive overlap with another item “Nature, type and elements of related -party
transactions” (Item 12). The items in this report have been renumbered accordingly, giving a total of 52
items. The ISAR benchmark is subject to periodic review and change.


2 This publication presents the results of UNCTAD research on disclosure regulations over the period 2007 to 2010


that resulted in a number of separate UNCTAD documents (TD/B/COM.2/ISAR/CRP.6,


TD/B/C.II/ISAR/CRP.8 and TD/B/C.II/ISAR/CRP.9). This report presents a summary overview of the main
results of these studies (see annex I.A).




2 Corporate Governance Disclosure in Emerging Markets


The framework for analysis throughout this chapter is provided by grouping


the 52 disclosure items3 in the UNCTAD ISAR benchmark into five broad subject


categories:


1. Financial Transparency;


2. Board and Management Structure and Process;


3. Ownership Structure and Exercise of Control Rights;


4. Corporate Responsibility and Compliance; and


5. Auditing.


Regulatory practices vary significantly internationally, with some markets


relying primarily on regulatory instruments and others relying on stock exchange


listing rules. Laws and regulatory instruments were examined as well as the listing


requirements of the major stock exchange(s). The specific sources that form the basis


of the examination are contained in annex III.4


It is important to note that this research measures the existence of regulations


related to a particular disclosure item; it does not measure the quality of disclosure.


Note also that the research presents an inventory of mandatory corporate governance


disclosures; it does not take into account voluntary rules or codes. The exclusion of


voluntary codes does not discount their value. Rather, they are excluded in an effort to


better understand the role of law and „hard‟ requirements, and the role that public
policy makers, regulators and stock exchanges play in influencing corporate


governance disclosure. Chapter II provides in-depth analysis on different models of


corporate governance rule making and explains what is considered „mandatory‟ in this
analysis.


The analysis conducted in section C on regulation is complemented in


section D where the ISAR benchmark is used to evaluate company disclosure


practices. Section E compares the findings on regulatory requirements and company


disclosure practices to provide an assessment of the level of compliance from country


to country.


The analysis of corporate disclosures (sections D and E), examines 188


companies from 22 emerging markets.5 The companies included in this sample are


highly representative of the MSCI EM Index as a whole and of the population of the


largest companies within each market. The 10 largest6 enterprises were selected from


each country. In 5 countries, the selected enterprises represented 100% of the MSCI


EM Index weighting. In an additional 10 countries they represent between 80% and


100% of the index weighting. In the remaining 10 countries, the companies


represented between 45% and 77% of the country‟s MSCI EM Index weighting. For a
more detailed analysis of the enterprises and the range of industrial sectors


represented see annex I.C.



3 For a list of the 52 specific disclosure items that form the UNCTAD ISAR benchmark, see annex II.
4 While every effort was made to be thorough in this research, the report cannot claim to have uncovered all applicable laws and


regulations. Furthermore, the results of this report represent a snapshot in time and should be seen as such; subsequent
regulatory developments could have led to significant changes in the current regulatory environment.


5 The markets are the same ones listed in table AI.1 with the exception of Jordan, Pakistan and Taiwan Province of China. See


annex I.C for details.
6 By MSCI EM Index weighting; see annex I. Where countries had less than 10 enterprises in the index, all of the enterprises for


that country were included in the study.




Chapter I: Regulatory Requirements and Company Practices 3


To provide some context and comparison to developed market practices, a


supplementary sample was created of the 10 leading enterprises in Japan, the United


Kingdom and the United States.7 These developed countries have the largest equity


markets in the world.


A complete list of enterprises included in the study is found in annex IV. In


total, this analysis of corporate disclosure considers over 10,000 individual data


points.
8


The first part of the analysis applied to the sample enterprises considered: how


many of the items in the UNCTAD ISAR benchmark are reported by each of the


enterprises? This analysis was conducted by examining a range of publicly available


corporate reports including: annual reports, corporate governance reports, corporate


responsibility reports, exchange filings, and other information available from financial


databases (e.g. Thompson, Reuters, and Bloomberg) and company websites.
9
These


reports were then compared with the 52 items in the UNCTAD ISAR benchmark to


gauge what, within the benchmark, these enterprises were disclosing.


The second aspect of the analysis considered: how do the actual reporting


practices of the selected enterprises compare with the mandatory reporting


requirements of their home countries? To answer this question, the main findings of


the review of company disclosure practices were compared with the disclosure


requirements previously analyzed in section C. The main findings of this analysis are


presented in section E of this chapter with further details presented in annex V.


B. Statistical overview


This section provides an overview of the main findings regarding corporate


governance requirements and company practices (Table I.1). Listed next to each


corporate governance disclosure item in the UNCTAD ISAR benchmark is the per


cent of 25 emerging markets10 requiring disclosure of the item, as well as the per cent


of 188 emerging market enterprises that actually disclose the item. The five categories


are ordered by highest average number of required disclosures. Further, within each


category, the disclosure items are presented in order from most often required to least


often required.




7 This supplementary sample is comprised of 10 of the largest enterprises by market capitalization from the Nikkei


225 (for Japan), and the top 10 enterprises by index weighting from the Standard & Poor‟s 500 index (for the
United States) and the FTSE 100 (for the United Kingdom). The 10 selected enterprises from the Nikkei 225
were chosen from among the top 11 enterprises in that index to avoid reviewing an enterprise that is a


subsidiary of another member of the list.
8 Data points: 52 disclosures in the ISAR benchmark for each of the 218 enterprises in the primary and secondary


samples.


9 As this report is a review of publicly available information, contacting companies directly was not required.


However, when questions of interpretation arose, every effort was made to allow enterprises to clarify their


disclosures. In addition, all of the enterprises in the study were contacted to allow them to review the
preliminary findings for their company and ensure the accuracy of those findings. Feedback was received


from a number of enterprises and their comments and suggestions were incorporated into the final results.
10 See table AI.1 for the list of markets.




4 Corporate Governance Disclosure in Emerging Markets


Table I.1. Disclosure requirements and practices in emerging markets


Inventory of disclosure requirements in 25 emerging markets


and summary of reporting practices for 188 enterprises from 22 emerging markets


(Percentage)


Disclosure Item


% of


markets


requiring


item


(n = 25)


% of
enterprises


disclosing


item


(n = 188)


Ownership Structure and Exercise of Control Rights Average: 96 69


Changes in shareholdings 100 64


Control and corresponding equity stake 100 78


Control rights 100 74


Ownership structure 100 91


Process for holding annual general meetings 100 75


Availability and accessibility of meeting agenda 96 86


Control structure 96 86


Rules and procedures governing the acquisition of corporate control in


capital markets.
92 53


Anti-Takeover measures 84 18


Financial Transparency Average: 85 81


Financial and operating results 100 100


Board's responsibilities regarding financial communications 92 79


Company objectives 92 99


Nature, type and elements of related-party transactions 92 94


The decision making process for approving transactions with related


parties
92 52


Rules and procedure governing extraordinary transactions 80 59


Critical accounting estimates 72 91


Impact of alternative accounting decisions 56 78


Auditing Average: 74 61


Process for appointment of external auditors 92 81


Internal control systems 84 86


Process for interaction with external auditors 84 74




Chapter I: Regulatory Requirements and Company Practices 5


Disclosure Item


% of


markets


requiring


item


(n = 25)


% of
enterprises


disclosing


item


(n = 188)


Process for appointment of internal auditors / Scope of work and


responsibilities
76 56


Process for interaction with internal auditors 76 79


Board confidence in independence and integrity of external auditors 72 44


Auditors` involvement in non-audit work and the fees paid to the


auditors
64 55


Duration of current auditors 60 58


Rotation of audit partners 60 19


Board and Management Structure and Process Average: 71 74


Composition of board of directors (executives and non-executives) 96 99


Governance structures, such as committees and other mechanisms to


prevent conflict of interest
96 93


Role and functions of the board of directors 96 91


Determination and composition of directors` remuneration 92 81


Material interests of members of the board and management 88 69


Composition and function of governance committee structures 84 91


Qualifications and biographical information on board members 80 85


“Checks and balances” mechanisms 76 85


Duration of director's contracts 72 86


Independence of the board of directors 72 79


Risk management objectives, system and activities 68 91


Existence of plan of succession 64 57


Number of outside board and management position directorships held


by the directors
64 83


Existence of procedure(s) for addressing conflicts of interest among


board members
60 62


Types and duties of outside board and management positions 60 82


Professional development and training activities 56 40


Availability and use of advisorship facility during reporting period 48 58




6 Corporate Governance Disclosure in Emerging Markets


Disclosure Item


% of


markets


requiring


item


(n = 25)


% of
enterprises


disclosing


item


(n = 188)


Performance evaluation process 44 64


Compensation policy for senior executives departing the firm as a


result of a merger or acquisition
24 7


Corporate Responsibility and Compliance Average: 36 61


Mechanisms protecting the rights of other stakeholders in business 60 79


Policy and performance in connection with environmental and social


responsibility
56 91


A Code of Ethics for the Board and waivers to the ethics code 40 49


A Code of Ethics for all company employees 36 69


The role of employees in corporate governance 28 39


Impact of environmental and social responsibility policies on the firm's


sustainability
24 61


Policy on "whistle blower" protection for all employees 8 41




C. Analysis of disclosure requirements


The greatest degree of consistency (and the least degree of variance or


variability) among mandatory disclosures is within the Ownership Structure and


Exercise of Control Rights category (Figure I.1). Also noteworthy is the great


variability in the Board and Management Structure and Process category. This


variability may be explained by the difficulty in pinpointing precisely which specific


disclosure items are good indicators of the quality of a board. Another explanation


could be related to the different issues facing single-tier and two-tier boards.11 Single-


tier boards are considered by some to face greater challenges maintaining


independence and may, as a consequence, require more mandatory information on


executive and non-executive directors.




11 A single-tier board is composed of executive and non-executive directors and differs from the two-tier system where


the term “board” can denote the management board, whose members have executive responsibilities, and the
supervisory board, whose members are responsible for the monitoring and supervision of the company‟s
management. See UNCTAD (2006). Guidance on Good Practices in Corporate Governance Disclosure, 11-12.




Chapter I: Regulatory Requirements and Company Practices 7


Figure I.1. Disclosure requirements vary greatly by category and market


Maximum and minimum number of markets requiring disclosure of items in each category


(Start of line indicates minimum number of markets requiring an item in this category, end of


line indicates maximum number of markets requiring an item in this category)


0 5 10 15 20 25


Corporate Responsibility and Compliance


Auditing


Board and Management Structure and Process


Financial Transparency


Ownership Structure and Exercise of Control Rights


Number of markets


Finally, there is a significant difference between each of the prior categories


and the disclosure required in the Corporate Responsibility and Compliance category.


Mandatory disclosure in this category is relatively low as a group and for all items.


This may be explained by the relative novelty of many environmental and social


issues within the broader field of corporate governance. However, this is an area that


is currently expanding in many developed markets and can be expected in coming


years to be the subject of mandatory disclosure requirements in all markets.12 Already


this analysis shows that among the Corporate Responsibility and Compliance items in


the UNCTAD ISAR benchmark, environmental disclosure, specifically “Policy and
performance in connection with environmental and social responsibility” is one of the
most frequently disclosed items.


Nevertheless as a whole category corporate responsibility and the role of


stakeholders and the environment are less subject to mandatory disclosure compared


to other categories. Almost all of the items in the category Corporate Responsibility


and Compliance fall into the group of least required items (Table I.2). “Policy on
„whistle blower‟ protection for all employees” stands out as the least required
disclosure item overall, required in only 2 markets (or 8% of markets surveyed).


It is important to note however, as indicated by the averages for this category


(table I.1) that even though corporate responsibility items are the least required, and


the least reported, the reporting far exceeds the requirements. There is a large surplus


of reporting in this area, indicating that regulations are trailing actual practices. This


can be contrasted with the category averages in the category of Auditing, which reveal


a large deficit of reporting.




12 For a review of trends in this area, see “Sustainable Stock Exchanges: Real Obstacles, Real Opportunities”.


Discussion paper prepared for the Sustainable Stock Exchanges 2010 Global Dialogue, an event co -hosted by


UNCTAD, UN Global Compact and the Principles for Responsible Investment (PRI).
http://www.responsibleresearch.com/Responsible_Research___Sustainable_Stock_Exchanges_2010.pdf




8 Corporate Governance Disclosure in Emerging Markets


Table I.2. Corporate responsibility issues least required


(Number and percentage of markets requiring this item)


Bottom 10 least prevalent disclosure items required


among 25 emerging markets


No. of


markets


(max = 25)


% of


markets


Policy and performance in connection with environmental and


social responsibility
14 56


Professional development and training activities 14 56


Availability and use of advisorship facility during reporting period 12 48


Performance evaluation process 11 44


A code of ethics for the board and waivers to the ethics code 10 40


A code of ethics for all company employees 9 36


The role of employees in corporate governance 7 28


Compensation policy for senior executives departing the firm as a


result of a merger or acquisition
6 24


Impact of environmental and social responsibility policies on the


firm's sustainability
6 24


Policy on "whistle blower" protection for all employees 2 8


Striking are the number of items from the Board and Management Structure


and Process category that are among the least required disclosures with board


performance evaluation processes, the use of advisorship facilities, and professional


development and training for board members all falling into the list of least prevalent


disclosure items. These items may not be considered by regulators to be material, or


may be considered to be of an operational nature, and thus left to the discretion of the


enterprise to disclose or not.


Also noteworthy is the low frequency of required disclosure with respect to


the item “Compensation policy for senior executives departing the firm as a result of a
merger or acquisition”. This item is commonly required in the most developed
financial markets. Its relative infrequency within this sample may be an indication of


the level of merger and acquisition activity or of different attitudes towards explicit


disclosures of executive compensation in emerging markets.


A gap analysis of the data reveals areas of strong international consensus on


which items should be required (Table I.3). For example, disclosure of items in the


Ownership Structure and Exercise of Control Rights category can be seen to be


largely mandatory everywhere. These findings can help policy makers to decide what


items should be required in their country based on international best practices.


However, policy makers should be careful to avoid seeing items that are not


commonly required as being unimportant. For example the area of Corporate


Responsibility and Compliance is the subject of the fewest requirements, yet many of


the items in this category relate to strategic issues of systemic stability (e.g. whistle


blower protection) or long term sustainable development (e.g. impact of


environmental and social responsibility policies).






Table I.3. Gap analysis of disclosure requirements in 25 emerging markets and three large established markets


Empty squares indicate that the disclosure item is not required. Shaded squares indicate that it is. Disclosure items from the UNCTAD ISAR benchmark are


numbered 1 through 52. The name of individual disclosure items can be found under annex II.


Disclosure


Market Items


(total number


of required items)


Ownership Structure Financial Transparency Auditing CR & Compliance Board and Management Structure and Process


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52


United Kingdom (52) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


United States (50) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Japan (39) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


South Africa (52) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Philippines (48) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Hungary (47) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Malaysia (46) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Brazil (45) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Thailand (45) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


India (44) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Russian Federation13 (43) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Poland (43) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Taiwan, Province of China (41) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Israel (40) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Indonesia (39) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


China (39) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Egypt (39) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Pakistan (39) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Korea (38) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Jordan (37) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Peru (36) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Argentina (34) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Mexico (31) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Morocco (31) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Czech Republic (27) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Turkey (25) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Chile (25) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1


Colombia (17) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1




13 In 2009 Item 49 was listed as a required item by the Russian Federation but upon further revision this has been corrected.


C
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ter I: R


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u


lato
ry


R
eq


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irem


en
ts an


d
C


o
m


p
an


y
P


ractices 9




10 Corporate Governance Disclosure in Emerging Markets


The comparison shows that one emerging market (South Africa) has


mandatory disclosures that are equivalent to the UNCTAD ISAR benchmark and


exceeds two of the three developed country markets. It also demonstrates that the


majority of emerging markets require disclosure of most of the items in the UNCTAD


ISAR benchmark. Twenty one markets (84%) require disclosure of 30 or more items,


and 10 markets (40%) require disclosure of 40 or more items. Only four markets


(16%) require disclosure of less than 30 items.


The large number of mandatory disclosure requirements in the United


Kingdom and United States could be explained by the size and development of their


equity markets. However, a greater reliance on disclosure-based regulation may also


be linked to their legal systems. The relatively lesser use of disclosure in civil law


countries may reflect a greater reliance on merit-based (or substantive) regulation, i.e.


the desired substantive outcome is required by law (but not necessarily enforced


through disclosure) versus disclosure based regulation, (which focuses less on the


substantive outcome but on transparency to the financial markets). Mandatory


disclosure is most prevalent in the United Kingdom and the United States (both


common law countries) and in South Africa (a bi-juridical mix of civil law and


common law).


D. Analysis of company disclosure practices


The averages in the far right column of table I.1 above (see section I.B)


summarize 9,776 individual data points in the form of individual company disclosures.


In total, 70% of the disclosure items in the UNCTAD ISAR benchmark were disclosed


by the sample group of 188 emerging market enterprises (6,882 out of 9,776 possible


disclosures). This suggests that corporate governance disclosures along the lines


suggested by the UNCTAD ISAR benchmark are, indeed, a common element of


corporate reporting.


The Financial Transparency category has the highest average level of


disclosure, followed by the Board and Management Structure and Process category


and the Ownership Structure and Exercise of Control Rights category. Auditing and


Corporate Responsibility and Compliance disclosures are, on average, less prevalent


than other categories of disclosure.


Among the ten most prevalent disclosure items, the preponderance of


disclosures (5 items) is made in the category of Board and Management Structure and


Process followed by the category of Financial Transparency (4 items). Only one item


appears from the Ownership Structure and Exercise of Control Rights and the


Corporate Responsibility and Compliance categories. The only category in which


there is no item among the ten most prevalent disclosures is Auditing.


As touched on in section C, somewhat surprising is the relatively high


frequency of disclosure of the item “Policy and performance in connection with
environmental and social responsibility”, since disclosure and requirements in the
Corporate Responsibility and Compliance category tend to be weak. This item is


found among both the most commonly disclosed items, as well as among the least


frequently required items. As noted above this indicates a disclosure surplus, i.e.


corporate disclosure that exceeds regulatory requirements. This may reflect the role of




Chapter I: Regulatory Requirements and Company Practices 11


other factors in driving disclosure, such as the demand for information from


shareholders and other stakeholders. The relationship between disclosure requirements


and actual disclosure practices is explored in more detail in section E below.


Among the ten least prevalent disclosures, least common are the categories of


Auditing and Corporate Responsibility and Compliance (with 3 items each). It is also


noteworthy that three of the ten least disclosed items relate to takeover activities.


These types of disclosures are more likely to be found in developed markets with more


pronounced merger and takeover activity.


An analysis of the average number of items disclosed by a large enterprise


within a particular market provides a view of differences between reporting for


particular categories (Figure I.2). For example, the Brazilian, Chinese, Polish and


Turkish enterprises display almost the same total level of reporting, yet show


differences in category reporting: the Brazilian and Turkish enterprises tend to report


more in the area of Corporate Responsibility and Compliance, while the Chinese


report more on Board and Management Structure and Process and Polish enterprises


tend to report more in the category of Financial Transparency.


For comparison purposes, data on the disclosure practices for the 10 largest


enterprises in Japan the United Kingdom and the United States has also been included


in the analysis. Large companies in the United Kingdom and the United States, two of


the world‟s most highly developed markets, make on average the highest number of
disclosures (46). The great preponderance of companies make between 35 and 45


disclosures, with a smaller group of companies in five (5) countries making below 35.


This suggests that, on average, companies disclose about 35 items or two thirds of the


UNCTAD ISAR benchmark in the preponderance of countries.




12 Corporate Governance Disclosure in Emerging Markets


Figure I.2. Comparison of company disclosure practices by market


(Average number of disclosures per top 10 company per country)
a


0 10 20 30 40 50


Morocco


Egypt


Israel


Republic of Korea


Russian Federation


Chile


Mexico


China


Brazil


Turkey


Poland


Indonesia


South Africa


India


Philippines


Colombia


Japan


Argentina


Malaysia


Czech Republic


Hungary


Peru


Thailand


United Kingdom


United States


UNCTAD ISAR benchmark


Board and Management Structure and Process


Ownership Structure and Exercise of Control Rights


Auditing


Financial Transparency


Corporate Responsibility and Compliance


Number of disclosure items (max = 52)



a
Note: Some sampled countries include less than 10 enterprises per country, these were Argentina,


Colombia, Czech Republic, Hungary, Morocco and Peru. See annex I.C for complete details.




An analysis of the range of frequency (or the variability) of disclosure of


particular items suggests a high degree of variability among enterprises in different


markets (Figure I.3). This can be a reflection of the different stages of development of


different companies in each market regarding the content of their corporate


governance disclosures. Significant differences in variability within a country can also




Chapter I: Regulatory Requirements and Company Practices 13


be the result of foreign listings, wherein some companies in a market are making


disclosures based on the rules of another market where they are also listed.


Figure I.3. Higher consistency coincides with higher disclosure levels


Variability in corporate reporting practices: range spread analysis


(Length of the bar indicates difference between the company disclosing the lowest number of


items and the company disclosing the highest number of items)




0 10 20 30 40 50


Mexico


Egypt


Morocco


Israel


Republic of Korea


Chile


Russian Federation


Indonesia


Brazil


Philippines


China


Poland


Argentina


Turkey


United States


India


Colombia


Malaysia


South Africa


Czech Republic


Hungary


Japan


Thailand


Peru


United Kingdom


Highest and lowest number of items from
UNCTAD ISAR benchmark reported (max = 52)




The United Kingdom shows the lowest degree of variability in disclosure. In


the United Kingdom, the minimum number of disclosures by any company was 44 and


the highest number was 47 resulting in a range spread of only 3 disclosures. Likewise,


enterprises in the Czech Republic, Hungary, Japan, Peru, and Thailand tend to be


consistent in the number of items they disclose. In contrast, enterprises from Chile,


Egypt, Israel, Korea, and Morocco demonstrate a high degree of variability in their


reporting practices.




14 Corporate Governance Disclosure in Emerging Markets


It is noteworthy that the best enterprises in all of the markets have high rates of


disclosure (over 35 items). In Mexico, for example, the lowest number of disclosures


by a company was only 11 but the highest number was 46, only one less than the


highest number of disclosures in the United Kingdom. Lesser variability and higher


consistency in reporting coincides with higher disclosure levels and also appears to be


an indicator of compliance with national codes and regulations. The issue of


compliance is examined in more detail in section E, below. Lesser variability within a


market also makes it easier to make a general assessment of the quality of corporate


disclosure within the market.


E. Compliance with disclosure requirements


This section focuses on the issue of compliance comparing actual corporate


reporting practices with the disclosure requirements found in national regulations and


listing requirements described in the prior sections. Of the 9,776 disclosure items


examined,14 7,294 are required by local regulators or stock exchange officials and


2,482 are not required (Figure I.4).15 Most corporate governance disclosure in


emerging markets is subject to mandatory requirements though voluntary reporting is


also prevalent.


It is no surprise that mandatory items are subject to a higher rate of disclosure


compared to voluntary items (75% compared to 58%). More striking is the level of


non-compliance with mandatory disclosure requirements which lies at 25%.


Predictably, not required (or voluntary) disclosures are less frequent than


mandatory disclosures. However, the 58% disclosure rate of not required items is


considerable and is not so far removed from mandatory disclosure. Factors that may


encourage this relatively high rate of voluntary disclosure include investor demand,


voluntary codes, and the desire of companies to present a more accurate picture of


their governance. The rise of corporate responsibility reporting, which currently


exceeds regulatory requirements by a wide margin, is also a significant factor in the


relatively high rate of voluntary disclosures. Finally, the practice of foreign listings


can also play a role: companies may disclose information that is considered voluntary


in their home market, but is required in a foreign market.




14 52 items in the UNCTAD ISAR benchmark multiplied by 188 emerging market enterprises.


15 Note: 2008 and 2009 company data was compared against the 2009 compliance regulations (refer table I.4).




Chapter I: Regulatory Requirements and Company Practices 15


Figure I.4. A 25% compliance gap with mandatory requirements


Disclosure compliance for 188 emerging market enterprises


1'436


(58%)


5'446


(75%)


1'046


(42%)


1'848


(25%)


Not Required


(2,482)


Required (7,294)


Disclosed Not disclosed




A significant number of emerging markets have compliance levels that are


equal to or higher than compliance levels in the most developed markets (figure I.5).


However, high compliance does not necessarily indicate more corporate governance


disclosure. Some countries with a higher compliance rate require significantly less


disclosure than other countries. The data sheds no light on how these markets are able


to achieve such high levels of compliance, nor the reasons why some markets have


below-average compliance. An examination of what factors influence compliance


would be a fruitful area for future study.




16 Corporate Governance Disclosure in Emerging Markets


Figure I.5. A high compliance rate does not necessarily indicate more CG disclosure


Average compliance with mandatory disclosure requirements by market


Data from Japan, the United Kingdom and the United States provided for comparison


(Average of required disclosure items – disclosed and not disclosed)


0 10 20 30 40 50


Colombia


Turkey


Chile


Czech Republic


Mexico


Morocco


Argentina


Peru


Republic of Korea


Indonesia


China


Egypt


Israel


Russian Federation


Poland


India


Brazil


Thailand


Malaysia


Hungary


Philippines


South Africa


Japan


United States


United Kingdom


Number of disclosure items (max = 52)


Required and disclosed Required but not disclosed




An analysis of compliance by disclosure category shows the category of


Auditing is subject to the lowest level of reporting among the 188 emerging markets


enterprises and the largest disclosure gap: more than 30% of the required disclosure


items related to auditing issues were not found among the public reports of the


enterprises studied (Figure I.6). For investors, policymakers, auditors and stakeholders


that consider auditing disclosures critical to the overall credibility of corporate reports,


this lack of compliance with auditing requirements should be a cause for concern and




Chapter I: Regulatory Requirements and Company Practices 17


may be a call for stronger measures to promote the observance of corporate disclosure


regulations. Certainly, further examination of the relative weakness of audit related


disclosure is called for.


Figure I.6. Auditing category suffers from the largest disclosure gap


Disclosure compliance for 188 emerging market enterprises: by category


(Required disclosure items only)


0% 25% 50% 75% 100%


Auditing


Ownership Structure and Exercise of Control Rights


Corporate Responsibility and Compliance


Board and Management Structure and Process


Financial Transparency


Disclosed Not Disclosed




F. Conclusion


Corporate governance disclosure along the lines recommended by the


UNCTAD ISAR benchmark is a common element of corporate reporting among


companies in emerging markets (with 70% of the UNCTAD ISAR benchmark items


disclosed by the 188 sampled enterprises). The majority of requirements are


mandatory; however voluntary reporting is also prevalent. Not surprisingly though


mandatory items do have a higher rate of disclosure compared with voluntary items.


Nevertheless the level of non-compliance of mandatory requirements at 25%,


is striking, and calls for the attention of policy makers and oversight bodies. Poor


disclosure performance and compliance in the critical category of Auditing, in


particular, highlights the difference between the adoption and implementation of


disclosure rules. Large compliance gaps, if left to persist, have the potential to


seriously impact the credibility of corporate reporting in the eyes of stakeholders, and


undermine the ability of investors and regulators alike to safeguard against risk of


corporate collapse.


Regulators should continue to focus not only on the development and


communication of effective regulations but also on efforts to promote compliance.


That said, given the multitude of companies and disclosure items, it is practically


impossible for regulators to be solely responsible for ensuring implementation and


compliance. Despite the best efforts of regulatory regimes, markets must rely to a


large extent on the internal signals between market participants. Thus the




18 Corporate Governance Disclosure in Emerging Markets


responsibility for improving compliance is a burden which must be shared by


regulators, investors and companies. In particular, investors who wish to see more


corporate governance information must demand such information from companies and


give feedback to both companies and regulators about failures to disclose required


information. In this regard, regulators could consider increasing education


programmes aimed not only at companies (about what they should be reporting) but


also at investors (about their role in demanding more information and holding


companies to account for gaps).










CHAPTER II: MAIN CHALLENGES AND POLICY


RECOMMENDATIONS
Regulators in emerging markets face a number of challenges with the design


and implementation of corporate governance disclosure regulations. This chapter


summarizes some of the main challenges, outlines different models of corporate


governance rule making, and provides policy recommendations.


A. The ‘comply or explain’ principle: challenges
in application


The „comply or explain‟ principle is a central element of corporate governance
codes and CG disclosure requirements in many countries. It provides useful flexibility


in code implementation, however its practical application can lead to complexities and


confusion when combined with other factors discussed in this section, such as


voluntary codes and overly generalized requirements.


The „comply or explain‟ principle was first put forward in the Cadbury Code in
the United Kingdom as a practical means of establishing a single code of corporate


governance whilst avoiding an inflexible „one size fits all‟ approach. Cadbury 1992
required that "[L]isted companies… should state in the report and accounts whether
they comply with the Code and identify and give reasons for any areas of non-


compliance."16


Since the advent of the Cadbury Code, many countries around the world have


adopted the „comply or explain‟ principle and implemented it as per the original two
core elements; these are:




 The code applying the „comply or explain‟ principle is „soft law‟, which means
it is non-binding and voluntarily implemented. Listed companies are entitled to


decide if they adopt the code and the degree of compliance with the code.


Deviation from the code does not breach it.


 No matter how listed companies implement the code, or even if they choose not
to implement the code, disclosure concerning compliance or non-compliance is


mandatory, with additional explanation required in the case of non-compliance.


These two core elements can be summed up in the simple equation: voluntary


implementation of the code + mandatory disclosure. Companies can choose what


elements of the code they comply with, but they must explain what they do. This is the


essence of the „comply or explain‟ principles based approach to corporate governance
disclosure.




16 Seidl, David and Paul Sanderson (2009). Applying 'comply-or-explain': Conformance with codes of corporate


governance in the UK and Germany. Cambridge: Centre for Business Research, University of Cambridge,


Working Paper No. 289.




20 Corporate Governance Disclosure in Emerging Markets


1. ‘Comply or explain’ combined with unclear regulations


A challenge arises from the combination of the „comply or explain‟ principle
with unclear regulations. Such situations can create the appearance of contradictions


and generate confusion about whether a code requires mandatory implementation or


not.


For example in one country, the rules state that “The Code should be
implemented by all public companies” which suggests that implementing the code and
all its provisions is a mandatory requirement. Yet the same rules go on to say that


“The Code is to be adopted and implemented according to the „comply or explain‟
principle.” This second statement generates confusion by creating an apparent
contradiction with the first: the „comply or explain‟ principle is normally associated
with voluntary codes and explicitly entails the option of not complying. This leaves


the unanswered question: since the option of not complying exists, is implementation


of the code mandatory?


2. Transparency and disclosure sections within a ‘comply or
explain’ code


Another challenge arises when regulators combine explicit transparency and


disclosure rules within a „comply or explain‟ model. Counter-intuitively, the addition
of explicit disclosure guidance within a „comply or explain‟ code can create confusion.
Because in a „comply or explain‟ code, every provision of the code dealing with
corporate governance mechanisms is also potentially a provision dealing with


disclosure, since companies would typically (under best practice) be required to


explain their compliance with each provision in the code (what can be called an


„itemized statement of compliance‟). If, however, a section on transparency and
disclosure also addresses corporate governance mechanisms covered elsewhere in the


code, this can lead to confusion: two parts of the rules covering similar subjects with


different implications for disclosure.


In the end a number of questions remain: in such a „comply or explain‟ based
code, is it optional to comply with the transparency section of the code? This would


seem to be the case, but is often unclear. Policy makers and regulators could usefully


clarify this point by, for example, indicating in the transparency and disclosure section


of a code a clear list of mandatory disclosure items, and explaining that the disclosure


section itself is not optional.


The next section explores in greater detail various current approaches to the


„comply or explain‟ model (in addition to other models) and some of the frequently
observed issues associated with their implementation.




Chapter II: Main Challenges and Policy Recommendations 21


B. Models of mandatory and voluntary


disclosure regulation


A number of different models of disclosure regulations have been identified


through UNCTAD‟s multi-year research programme on CG regulations. The issues
discussed in this section (illustrated in figure II.1) are based on a distinction between:


 mechanisms of corporate governance, i.e. what governance structures
companies should have, what rules and procedures they should follow;


and


 disclosure of corporate governance practices, i.e. what companies should
report about what they are doing.


Figure II.1. Models of voluntary and mandatory disclosure regulation


(Shaded boxes indicate inadequate disclosure rules)
























a) Relevant regulations other than CG codes, for example: company law, listing rules, etc.


b) Includes explicit CG codes as well as resolutions or legal-decisions specific to CG mechanisms and
disclosure.


c) Refers to the enforcement (binding or non-binding) of the CG regulations.


d) Company discloses compliance with CG code by a general statement, e.g. “I have complied with
the code” or “I have not complied with the code” along with relevant reasons.


e) Company discloses compliance with CG code by providing details of CG mechanisms item by item
corresponding with each provision of the code.


Disclosure Regulations


Embedded Regulations
a)


Corporate Governance Code
b)


Mandatory


Mechanisms
c)


Mandatory


Mechanisms
c)


Voluntary


Mechanisms
c)


Mandatory


Disclosure


Model 1


Mandatory


Disclosure


Model 1


Mandatory


Disclosure
(Mandatory comply


or explain);


Model 2


Voluntary


Disclosure
(Voluntary comply


or explain);


Model 3


Specific


Disclosure


(Itemized)
e)


General


Disclosure


(Statement)
d)




22 Corporate Governance Disclosure in Emerging Markets


Model 1: Mandatory mechanisms + mandatory disclosure


The first model represents conventional command and control rules with


obligatory requirements. Regulations other than corporate governance codes typically


adopt this approach in stipulating disclosure obligations. However some corporate


governance codes also adopt this approach. In this model, a country‟s corporate
governance code is not „soft law‟ rather it is „hard law‟, i.e. a mandatory regulation
like any other government regulation.


Mandatory rules on mechanisms in this case are typically accompanied by


mandatory disclosure requirements. Such regulations normally include text such as


“The listed companies shall publish/report to the public/disclose… (corporate
governance disclosure items)”. For example, an article of one country‟s law states:


(Publishing information on the change in major holdings)


(1) A public company shall be obliged to publish the information contained in


the notice on the change in major holdings …


This is an example of an explicit conventional mandatory disclosure


requirement. In this type of regulation, the disclosure is a legal obligation.


Model 2: Voluntary mechanisms + mandatory disclosure (‘mandatory
comply or explain’)


The second model follows the core elements of the „comply or explain‟
principle explained above: voluntary rules on practices combined with mandatory


disclosure. In this situation, all companies, whether they fully comply with the code or


not, are obliged to disclose information about their compliance.


Model 3: Voluntary mechanisms + voluntary disclosure (‘voluntary
comply or explain’)


The third model (figure II.1) involves voluntary rules on mechanisms


combined with voluntary disclosure. Some markets use a „comply or explain‟ rule that
is not applied to every company automatically, rather companies must voluntarily


adopt this rule, thus a disclosure obligation is triggered only if and when a listed


company decides to adopt the code or some part of the code. The selective nature of


this opt-in process makes this type of regulatory regime a voluntary one. The


combination of this type of voluntary opt-in process with „comply or explain‟ leads to
a situation of „voluntary comply or explain‟. Within this model not all companies are
subject to the same disclosure obligations, and what disclosure obligations do exist for


companies are a product of a voluntary choice by those companies. An example of this


model can be found in the following excerpt from one country‟s corporate governance
code:


Article 1…


For companies whose securities are admitted to some of the markets of the


Stock Exchange, the obligation of the Code implementation is generated in the


case they voluntarily in written (sic) inform the Stock Exchange that they


accept its application.




Chapter II: Main Challenges and Policy Recommendations 23


Article 2.The implementation of the Code implies the following obligations for


the companies:


• […]


• To report at least once a year on the corporate governance including
information on implementation of the Code recommendations or provide


explanations for noncompliance (the rule „comply or explain‟)


In this example, Article 1 indicates that the obligation of implementation is


generated only by voluntary adoption. Article 2 provides for disclosure using the


„comply or explain‟ principle. Thus Article 2 would only apply to companies that
voluntarily adopt the code and decide to assume these disclosure requirements.


Regulators should be careful to avoid this model of „voluntary comply or
explain‟. In practice such a disclosure regime translates into „comply or explain or do
nothing‟. Effective „comply or explain‟ regimes are of the type described in model 2
above: voluntary codes coupled with mandatory disclosure practices.


C. Disclosure chain: does the information get to


the public?


Regardless of the exact model of disclosure regulation used, an important


consideration for regulators working in this area is the question of whether or not


corporate governance disclosure reaches the public. UNCTAD‟s work on corporate
reporting focuses on disclosure that is public and available to all current and potential


future shareholders, as well as other stakeholders. Some forms of regulation


complicate or obstruct the transmission of information to the public. This section


highlights four issues to consider in promoting improved access to information.


1. Path: direct vs. indirect


Among the regulations reviewed in this report, the path of disclosing CG


information to the public is either direct or indirect. Following the direct path,


information reported by listed companies is communicated directly to the public (e.g.


via a company website or other documents widely accessible to the public).


Regulations typically contain text such as “The listed companies shall publish … (CG
information) on their website”. This type of rule is common among the markets around
the world.


The indirect path is less common but has the same effect of reaching the


public. Some markets‟ regulations stipulate the listed company shall report the CG
information to the regulator or stock exchange and subsequently the regulator or stock


exchange is obliged to disclose to the public (e.g. via the website of the regulator or


stock exchange).


A problem can arise, however, in the regulations of some countries wherein


companies are only required to report CG information to the regulator or stock


exchange, and the regulator or stock exchange does not subsequently pass on this


information to the public. This situation, while keeping regulators duly informed, does




24 Corporate Governance Disclosure in Emerging Markets


not allow for informing current and potential investors and other stakeholders.


Regulators can remedy this situation by making all company reports available on a


website.17 For their part, companies may wish to improve disclosure by including in


their direct communication to shareholders the corporate governance information that


has already been prepared for regulatory filings.


2. Recipient


UNCTAD‟s work on corporate governance disclosure focuses on disclosure to
the general public, which includes all current and potential future investors. However,


it is not common for regulations among the markets analyzed to clearly state the goal


that companies “publish” or “disclose to the public” corporate governance
information. Many regulations state instead that companies should “report to
shareholders”.


For the purpose of this report, regulations that require disclosure to


“shareholders” generally, were interpreted as being current as well as potential future
shareholders, in essence the general public. However some rules were even more


specific using text such as “current shareholders” which would preclude all potential
future shareholders and other stakeholders.


Regulators therefore should consider clarifying their rules by using language


such as “disclosure to public” rather than “disclosure to shareholder”. If one key
purpose of corporate reporting is to provide information to potential future investors,


i.e. to attract investment, then information must practically be made readily available


to everyone.


3. Accessibility of information: passive versus active


disclosure


Disclosure requirements can specify the way in which companies disclose


information, with implications for the accessibility of that information to the general


public and international investors. Regulations can require a more active approach to


disclosure meaning that the company takes steps to make the information easily


accessible by the public, e.g. via a company website.


Regulations can also permit a more passive approach, allowing the company to


make CG information available via less accessible means. For example, the company


may be permitted (or required) to keep CG information in its office, at the office of the


regulator or another registered office; the information is then made available upon


request to visitors of the office where it is stored. In some cases, people seeking access


to this information are required to pay a fee. This situation limits the accessibility of


information to stakeholders in general and can create a practically insurmountable


barrier to accessing such information for international investors. Regulators can


improve the accessibility of information by requiring it to be published on company


websites, or on the regulator‟s website.




17 It is noted that there are some unique reporting requirements that relate to special circumstances that should remain


confidential with a regulator. The discussion here refers to common corporate governance information of the


type in the UNCTAD ISAR benchmark that should be subject to disclosure at regular intervals.




Chapter II: Main Challenges and Policy Recommendations 25


With regards to international investors, the language of disclosure is also an


important factor for improving accessibility. As recommended in UNCTAD‟s
Guidance on Good Practices in Corporate Governance Disclosure: company


information should be made available in the national language (or one of the official


languages) of the enterprise as well as a common internationally used language.


4. Intermediary


Regulations can contain a variety of intermediaries for corporate governance


disclosure, including: mass media; local newspapers in wide circulation; a regulator‟s
official bulletin; public gazette; websites; etc. Each of these intermediaries has


implications for accessibility. While specific issues may require specific mediums of


communication, in general, regulators should consider the prioritization of the use of


websites as the most cost effective means of making information accessible to a wide


range of stakeholders, including international investors. A well-organized online


repository of public company documents can be of great value to investors, regulators


and other stakeholders. One of the best of examples of this is the United States SEC‟s
EDGAR database.


D. Other challenges


1. Implicit disclosure rules


Another issue related to corporate governance disclosure rules is the existence


of explicit and implicit disclosure obligations. Explicit disclosure rules are typically


simple, clear and direct. While implicit disclosure rules often require the combination


of one or more provisions within a code, or the combination of a code with a separate


company law that applies mandatory disclosure rules to the code. The vast majority of


disclosure rules in most countries (both developing and developed) are explicit.


However, implicit rules do persist to a greater or lesser extent in almost all countries,


and they can be a source of confusion for enterprises and other stakeholders.


A disclosure requirement can be regarded as implicit when it needs to be


considered together with other regulation or general principles to determine whether or


not a particular issue is subject to mandatory disclosure. There are two main types of


implicit disclosure found among regulations around the world:


i. Implicit Disclosure I: the disclosure requirement could be determined from
the consideration of two separate provisions within the same regulation or


from different regulations. For example, one provision may state that the


annual report shall be published, but without specifying the specific corporate


governance subjects to be included in the report. Meanwhile, another provision


may list the detailed items that shall be embodied in the annual report. Thus,


the disclosure requirements can be identified by considering these two articles


together. Another common example of this kind of implicit disclosure is when


a provision sets forth “Information regarding … [preceding or following
provisions] shall be reported to the public”. In this case, the disclosure
obligation becomes applicable to all the subjects covered in those provisions.




26 Corporate Governance Disclosure in Emerging Markets


ii. Implicit Disclosure II: the disclosure requirement could be determined from
the consideration of a provision and a general principle. The disclosure


obligation incurred from the „mandatory comply or explain‟ principle, implies
that a listed company shall disclose information related to the practices


described in the corporate governance code. For example, a provision from a


code adopting the „mandatory comply or explain‟ principle states “The
company should set up an internal control system that guarantees effective


reporting and disclosure of information”. The implied disclosure obligation of
this provision is that listed companies must disclose whether they have set up


internal control systems and whether the systems fulfil the requirement.


From a legal perspective, the disclosure obligation may be the same for both


explicit and implicit requirements. However, implicit requirements, or having


requirements embedded throughout many elements of law, may allow room for


interpretation and introduce a degree of uncertainty with respect to the requirements.


In the worst case, unintentional conflicts can emerge between requirements. Any


confusion about disclosure rules can add an extra burden on enterprises trying to meet


regulatory requirements and can hamper efforts to promote corporate transparency.


Regulators can benefit from using the following guiding principle: the clearer the


rules, the better.


Going forward it is anticipated that disclosure requirements will become


increasingly more explicit for a number of reasons including the implementation of


IFRS (International Financial Reporting Standards) for listed companies which


includes direct and explicit disclosure requirements, as well as the increasing use of


the „comply or explain‟ approach coupled with explicit mandatory disclosure rules.
For investors, analysts and regulators wishing to better understand the disclosure


requirements of markets, legal transparency and more explicit disclosure requirements


would appear advantageous.


2. General disclosure statements versus specific itemized


disclosure


Another issue is the use of „general disclosure statements‟ or general
statements of compliance with an entire code.18 Such statements can be as simple as:


“Company X complied with the code of corporate governance.” The problem with
such statements is that they do not contain any detailed, useable information about


company specific practices. (As such they are not considered a form of disclosure in


UNCTAD‟s research).


In contrast to general disclosure statements, some codes require specific


itemized disclosure of individual corporate governance subjects. When implementing


a „comply or explain‟ regime, regulators should avoid the use of general statements of
compliance, and should instead require itemized statements of compliance.




18 See in particular paragraph 58 of UNCTAD (2007) Review of the implementation status of corporate governance


disclosures: case study Pakistan (TD/B/C.II/ISAR/CRP.5).




Chapter II: Main Challenges and Policy Recommendations 27


3. Regulation requiring vague or undefined information


Similar to the issue of general disclosure statements is the situation wherein a


regulation requires vague or undefined information. For example, some regulations


require that listed companies publish a "corporate governance report" or disclose


"material information" on corporate governance without setting forth the content of


such reports in any detail, or providing any criteria as to the materiality of information.


As a result, disclosure regulations that contain a high-level of generality, or non-


precise language, without specific reference to other relevant authoritative sources of


reference, in most cases do not, in practice, require any specific information to be


disclosed.


E. Conclusion


Complexities in rules and requirements can undermine the ability of companies


to apply them. Difficulties accessing company disclosures relating to corporate


governance can impinge investor decision making. Therefore establishing clear


regulations and disclosure requirements and communicating these effectively is the


first step to ensuring CG regulations and requirements are adhered to. The second step


is corporate compliance and the third step is facilitating easy access to corporate


disclosures for the general public, i.e. potential future investors.


To improve the usefulness of CG disclosures, regulators could avoid requiring


vague or overly-generalized information, and work towards clarifying exactly what


type of disclosures are required. For example, regulators can integrate within a CG


code an annual questionnaire that specifically asks companies about their compliance


with elements of the code. Similarly, regulators can issue a comprehensive listing of


disclosure requirements to assist enterprises in preparing their reports, and help


investors in understanding what information can be expected from companies. Both


methods provide enterprises with detailed guidance on specific corporate governance


disclosure requirements and would remove any confusion among companies about


what they are expected to report, as well as providing an easy reference point for


investors and other stakeholders. Regulators could also consider implementing such


things as annual disclosure questionnaires or forms via the internet, and presenting the


results of such disclosures in an orderly way via a searchable internet database. Such


measures can increase the visibility and a further facilitate investor access to corporate


governance data.














ANNEXES




30 Corporate Governance Disclosure in Emerging Markets


Annex I. Methodological notes for chapter I


A. Prior studies


Corporate governance has been a major area of work for the Intergovernmental


Working Group of Experts on International Standards of Accounting and Reporting


(ISAR) since 1989.19 Since the 21st session of ISAR in 2004, the Group of Experts


has requested an annual review of the status of corporate governance disclosure. This


report is a consolidation of these multi-year studies and includes all or parts of the data


and analysis found in the following annual reviews:


 2007 Review of the Implementation Status of Corporate Governance


Disclosures: An Inventory of Disclosure Requirements in 25 Emerging


Markets (TD/B/COM.2/ISAR/CRP.6)


 2008 Review of the implementation status of corporate governance


disclosures: an examination of reporting practices among large


enterprises in 10 emerging markets (TD/B/C.II/ ISAR/CRP.1)


 2009 Review of the implementation status of corporate governance


disclosures: an examination of reporting practices among large


enterprises in 12 emerging markets (TD/B/C.II/ ISAR/CRP.6)


 2009 Review of the implementation status of corporate governance


disclosures: an inventory of disclosure requirements in 24 emerging


markets (TD/B/C.II/ISAR/CRP.8)


 2010 Review of the Implementation Status of Corporate Governance


Disclosures: An Inventory of Disclosure Requirements in 21 Frontier


Markets (TD/B/C.II/ISAR/CRP.9)


Each of these annual reviews uses UNCTAD‟s Guidance on Good Practices in
Corporate Governance Disclosure20 (referred to throughout as the UNCTAD ISAR


benchmark) as the benchmark against which to measure practice.


Note that these studies are cross-sectional studies, each of which captures a


portion of the broader picture of corporate governance disclosure in emerging markets;


they are not longitudinal studies and thus do measure trends over time.


B. Methodological notes for the analysis of mandatory


disclosure requirements


The sample


The sample of markets is included in the study is drawn from the MSCI


Emerging Markets Index produced by Morgan Stanley Capital International (MSCI


EM Index).
21


At the time this multi-year research programme was initiated in 2007, the


MSCI EM Index tracked approximately 850 publicly listed enterprises, which




19 E/C.10/AC.3/1989/6


20 UNCTAD/ITE/ TEB/2006/3


21 MSCI is a commercial provider of financial information including equity indices tracking publicly listed


enterprises around the world.




Annexes 31


accounted for roughly 85% of the market capitalization of 25 emerging markets.
22


It


remains today among the most widely followed indices among institutional investors


to gauge the performance of equity investments in emerging markets. Table AI.1


below provides a list of the 25 markets included in the study.


Table AI.1. The 25 markets included in the study


1. Argentina 14. Republic of Korea


2. Brazil 15. Malaysia


3. Chile 16. Mexico


4. China 17. Morocco


5. China, Taiwan Province of 18. Pakistan


6. Columbia 19. Peru


7. Czech Republic 20. Philippines


8. Egypt 21. Poland


9. Hungary 22. Russian Federation


10. India 23. South Africa


11. Indonesia 24. Thailand


12. Israel 25. Turkey


13. Jordan


Sources of information


The analysis contained in this section was performed primarily using publicly


available documents from the Internet but, in some cases, where publicly available


information needed to be supplemented or clarified, direct feedback was solicited from


regulators and/or stock exchange officials. All preliminary findings were submitted to


regulators or stock exchange authorities in the respective markets for comment. A


number of replies were received and comments and suggestions were duly


incorporated into the findings.






22 During the time period of the study, beginning in 2007 and ending in 2009, the MSCI EM Index underwent


revision resulting in the removal of Argentina, Jordan and Pakistan. Since data had already been collected for


the purposes of this study, those countries were included in the analysis presented in chapter I sections B and
C. For up to date information on the MSCI EM Index please see: www.mscibarra.com




32 Corporate Governance Disclosure in Emerging Markets


C. Methodological notes for the analysis of company


disclosure practices and compliance


The sample


188 companies from 22 emerging markets were examined. The enterprises


selected for this chapter were the 10 largest enterprises from each country (by MSCI


EM Index weighting). Where countries had less than 10 enterprises in the index


(Hungary, Peru, Argentina, Morocco, Czech Republic and Colombia), all of the


enterprises for that country were included in the study.


In five countries, the selected enterprises represented 100% of the MSCI Index


weighting. In an additional 10 countries the selected enterprises represented between


80% and 100% of the index weighting. In the remaining 10 countries, the companies


represented between 45% and 77% of the country‟s MSCI EM Index weighting. The
companies that form part of the study are thus highly representative of the MSCI Index


as a whole and of the population of the largest companies within the local market.


Additionally, they operate in a diversified range of industrial sectors and represent a


broad picture of the economy.


Figure AI.1. A diverse range of industries examined


The 188 emerging market enterprises by sector23


(Number of companies)


Financials (55)


Telecommunication
Services (27)


Materials (30)


Energy (23)


Industrials (17)


Utilities (10)


Consumer Staples
(11)


Consumer
Discretionary (8)


Health Care (2)
Information


Technology (5)






23 Based on Global Industry Classification Standard (GICS). Source: www.mscibarra.com




Annexes 33


The 188 emerging market enterprises described above form the core sample


and primary focus of this section‟s analysis. To provide some context and comparison
to developed market practices, a supplementary sample was created of the 10 leading


enterprises in Japan the United Kingdom and the United States, three of the largest


equity markets in the world. This supplementary sample is comprised of 10 of the


largest enterprises by market capitalization from the Nikkei 225 (for Japan), and the


top 10 enterprises by index weighting from the Standard & Poor‟s 500 index (for the
United States) and the FTSE 100 (for the United Kingdom).


24


A complete list of enterprises included in the study is found in annex IV. In


total, the company review considered over 10,000 individual data points.
25




Sources of information


The analysis in this section was conducted by examining a range of publicly


available corporate reports including: annual reports, corporate governance reports,


corporate responsibility reports, exchange filings, and other information available


from financial databases (e.g. Thompson, Reuters, and Bloomberg) and company


websites.
26






24 The 10 selected enterprises from the Nikkei 225 were chosen from among the top 11 enterprises in that ind ex to


avoid reviewing an enterprise that is a subsidiary of another member of the list.
25 Data points: 52 disclosures in the ISAR benchmark for each of the 218 enterprises in the primary and secondary


samples.


26 As this report is a review of publicly available information, contacting companies directly was not required.


However, when questions of interpretation arose, every effort was made to allow enterprises to clarify their


disclosures. In addition, all of the enterprises in the study were contacted to a llow them to review the


preliminary findings for their company and ensure the accuracy of those findings. Feedback was received
from a number of enterprises and their comments and suggestions were incorporated into the final results.




34 Corporate Governance Disclosure in Emerging Markets


Annex II. List of disclosure items in the UNCTAD


ISAR benchmark


No. Disclosure Item
27




Ownership Structure and Exercise of Control Rights


1 Ownership structure


2 Process for holding annual general meetings


3 Changes in shareholdings


4 Control structure


5 Control and corresponding equity stake


6 Availability and accessibility of meeting agenda


7 Control rights


8
Rules and procedures governing the acquisition of corporate control in capital


markets.


9 Anti-takeover measures


Financial Transparency


10 Financial and operating results


11 Critical accounting estimates


12 Nature, type and elements of related-party transactions


13 Company objectives


14 Impact of alternative accounting decisions


15 The decision-making process for approving transactions with related parties


16 Rules and procedures governing extraordinary transactions


17 Board‟s responsibilities regarding financial communications


Auditing


18 Process for interaction with internal auditors


19 Process for interaction with external auditors


20 Process for appointment of external auditors


21 Process for appointment of internal auditors/scope of work and responsibilities


22 Board confidence in independence and integrity of external auditors


23 Internal control systems




27 One benchmark item was removed from the 2008 and 2009 studies. Prior UNCTAD studies included 53 items. A


disclosure on “Practices on related party transactions where control exists” (previously Item 15) was removed
because of substantive overlap with another item “Nature, type and elements of related-party transactions”
(Item 12). The items in this report have been renumbered accordingly, giving a total of 52 items. The ISAR
benchmark is subject to periodic review and change.




Annexes 35


No. Disclosure Item
27




24 Duration of current auditors


25 Rotation of audit partners


26 Auditors` involvement in non-audit work and the fees paid to the auditors


Corporate Responsibility and Compliance


27 Policy and performance in connection with environmental and social responsibility


28
Impact of environmental and social responsibility policies on the firm‟s
sustainability


29 A code of ethics for the board and waivers to the ethics code


30 A code of ethics for all company employees


31 Policy on “whistle blower” protection for all employees


32 Mechanisms protecting the rights of other stakeholders in business


33 The role of employees in corporate governance


Board and Management Structure and Process


34
Governance structures, such as committees and other mechanisms to prevent


conflict of interest


35 “Checks and balances” mechanisms


36 Composition of board of directors (executives and non-executives)


37 Composition and function of governance committee structures


38 Role and functions of the board of directors


39 Risk management objectives, system and activities


40 Qualifications and biographical information on board members


41 Types and duties of outside board and management positions


42 Material interests of members of the board and management


43 Existence of plan of succession


44 Duration of director‟s contracts


45
Compensation policy for senior executives departing the firm as a result of a merger


or acquisition


46 Determination and composition of directors` remuneration


47 Independence of the board of directors


48
Number of outside board and management position directorships held by the


directors


49 Existence of procedure(s) for addressing conflicts of interest among board members


50 Professional development and training activities


51 Availability and use of advisorship facility during reporting period


52 Performance evaluation process




36 Corporate Governance Disclosure in Emerging Markets


Annex III. List of information sources by market


Argentina


 Stock Exchange Rules ("Reglamento de Cotización");


 National Securities Rules (Normas de la Comisión Nacional de Valores);


 Decree nr. 677/01;


 Corporate Law Nro. 19.500 (Ley de Sociedades Comerciales).




Brazil


 LAW No. 10.303, OF OCTOBER 31, 2001 (Corporate Law);


 Law no. 6.404 of December 15, 1976;


 CMV Instruction No 308 of May 14, 1999;


 CVM Instruction No 358 of January 3, 2002;


 CVM Instruction No 457 of July 13, 2007;


 Corporate Governance Code.




Chile


 Characteristics of the Chilean Stock Market, Bolsa de Comercio de Santiago, 2003;


 Questionnaire of the Santiago Stock Exchange, Serie Institucional N° 3, Bolsa de
Comercio de Santiago, 1999;


 Law No. 18,045 (Securities Market Law);


 Law No. 18,046 (Corporations Law).




China


 Rules Governing the Listing of Stocks on Shanghai Stock Exchange (Revised in
2008);


 Provisional Code of Corporate Governance for Securities Companies;


 Securities Law of the People's Republic of China (Revised in 2005);


 Company Law of the People's Republic of China (Revised in 2005).




China, Taiwan Province of


 Corporate Governance Best-Practice Principles for TSEC/GTSM Listed Companies;


 Corporate Governance Best-Practice Principles for TSEC/GTSM Listed Companies;


 Taiwan Stock Exchange Corporation Rules Governing Information Reporting by
Listed Companies (amendment in Dec 2008);


 Business Mergers and Acquisitions Law;


 Co., Ltd. Self-Regulatory Rules on Disclosure of Merger and Acquisition
Information;


 Company Act.




Columbia


 Código de Comercio;


 Código de mejores prácticas corporativas: Código País.





Annexes 37


Czech Republic


 Section III of the Exchange Rules of the Prague Stock Exchange;


 Act on Undertaking on the Capital Market;


 Act on Auditors;


 Commercial Code No. 513/1991 (“Obchodní zákoník”).




Egypt


 Egyptian Code of Corporate Governance (2005);


 Listing Rules of the Cairo Alexandria Stock Exchange;


 Capital Market Law (second edition of 1998);


 Auditing Standards;


 Accounting Standards.




Hungary


 Directive 2004/109/EC of December 15, 2004;


 Regulations of the Budapest Stock Exchange for listing, continued trading and
disclosure;


 Corporate Governance Code;


 Act IV of 2006 on Business Associations.




India


 Listing Agreement for Equity, Bombay Stock Exchange;


 Report of the Kumar Mangalam Birla Committee on Corporate Governance;


 Securities and Exchange Board of India Notification.




Indonesia


 Regulation Number I-A Listing Requirements, Jakarta Stock Exchange;


 Regulation Number I-E Concerning the Obligation of Information Submission,
Jakarta Stock Exchange;


 Bapepam Rules Number VIII.G.11;


 Bapepam Rules Number VIII.G.2;


 Bapepam Rules Number IX.E.1;


 Bapepam Rules Number IX.E.2;


 Report on the Observance of Standards and Codes (ROSC).




Israel


 Company Law 5759-1999;


 The Securities Law;


 Identifying a principal shareholder in a reporting corporation;


 IFRS.





38 Corporate Governance Disclosure in Emerging Markets


Japan


 Security Listing Regulations, Tokyo Stock Exchange (TSE);


 Principles of Corporate Governance for Listed Companies, TSE;


 Criteria of Listing, TSE;


 Listing Guides for Foreign Companies, TSE;


 Companies Act;


 Rules on Timely Disclosure of Corporate Information by Issuer of Listed Security
and the Like, TSE;


 New Legislative Framework for Investor Protection, Financial Services Agency;


 Law Concerning the Promotion of Business Activities with Environmental
Consideration by Specified Corporations, Ministry of the Environment;


 The Whistle Blower Protection Act.




Jordan


 Directives for Listing Securities on the Amman Stock Exchange, 2004;


 The Securities Law, 2002;


 The Companies Law No. 22 of 1997;


 JSC Directives of Disclosure and Auditing and Accounting Standards of 2004.




Republic of Korea


 Stock Market Disclosure Regulation, 2007, KRX;


 Stock Market Operational Guidelines on Fair Disclosure, 2007, KRX;


 Stock Market Listing Regulation, 2008, KRX;


 Enforcement Rule of Stock Market Listing Regulation, 2008, KRX;


 Commercial Act, Republic of Korea.




Malaysia


 Listing Requirements for Main Board and Second Board, KLSE;


 Malaysian Code on Corporate Governance, Securities Commission Malaysia.




Mexico


 Ley General de Sociedades Mercantiles;


 Ley del Mercado de valores;


 Code of Best Corporate Practices, 2006, Bolsa Mexicana de Valores (BMV);


 Corporate Governance Code for Mexico, 2002, BMV;


 Code of Professional Ethics of the Mexican Stock Exchange Community, BMV.




Morocco


 General Rules of the Stock Exchange (Casablanca-Bourse);


 Loi N° 17-95 Relative aux Societes Anonymes.




Pakistan


 General Rules of the Karachi Stock Exchange;


 Listing Regulations of the Karachi Stock Exchange;


 Code of Corporate Governance, Securities and Exchange Commission of Pakistan.





Annexes 39


Peru


 Reglamento de inscripción y exclusión de valores mobiliarios en la Bolsa de Valores
de Lima (Regulation of Inscription and exclusion of values in the Stock Exchange of


Lima);


 Ley General de las Sociedades (General Societies Law);


 Reglamento de Hechos de Importancia, Información Reservada y Otras
Comunicaciones (Regulation of Important Facts, Reserved Information and Other


Communications) o Reglamento de Propiedad Indirecta, Vinculación y Grupos


Económicos;


 Reglamento de Propiedad Indirecta, Vinculación y Grupos Económicos (Regulation
of Indirect Property, Linkages and Economic Groups);


 Reglamento de Oferta Pública de Adquisión y de Compra de Valores por Exclusión
(Regulation of Public Supply of Acquisition and Purchase of Values by Exclusion);


 Reglamento de Información Financiera y Manual para la Preparación de Información
Financiera (Regulation of Financial Information and Manual for the Preparation of


Financial Information);


 Manual para la Preparación de Memorias Anuales y Normas Comunes para la
determinación del contenido de Documentos Informativos (Manual for the


Preparation of Annual Reports and Common Norms for the determination of the


Intelligence document content).




Philippines


 The Corporation Code of the Philippines;


 Financial Disclosure Checklist (Philippines Securities and Exchange Commission);


 The Securities Regulation Code;


 Philippines Code of Corporate Governance.




Poland


 Commission Recommendation of February 15, 2005;


 Best Practices for Warsaw Stock Exchange Listed Companies, 2007;


 WSE Listing Regulations;


 Act of July 29, 2005 on Public Offerings.




Russian Federation


 Corporate Governance Code;


 Law on Securities Markets;


 Russian Civil Code.




South Africa


 Stock exchange listing rules for the Johannesburg Stock Exchange;


 The King Report III.




Thailand


 Disclosure Manual, 2007, Stock Exchange of Thailand (SET);


 Principles of Good Corporate Governance for Listed Companies, 2006, SET;


 Listed Companies Handbook, 2009;


 Listing of Ordinary Shares or Preferred Shares as Listed Securities, 2001 (Amended
in 2009).





40 Corporate Governance Disclosure in Emerging Markets


Turkey


 Commercial Code;


 Communiqué on Principles Regarding Public Disclosure of Material Events (Capital
Markets Board of Turkey);


 Communique amending the communique regarding independent auditing in capital
markets;


 The Capital Markets Law, 2007.




United Kingdom


 Disclosure Rules and Transparency Rules, Finance Service Association (FSA);


 FSA Handbook;


 The City Code on Takeovers and Mergers, The Panel on Takeovers and Mergers;


 Alternative Investment Management;


 The Combined Code on Corporate Governance, 2008.




United States


 Security Act, 1933;


 Listed Companies Manual, NYSE;


 Sarbanes-Oxley Act;


 Standards relating to listed company audit committees;


 Regulation S-K, SEC.




Annexes 41


Annex IV. List of enterprises included in the


study by market




Argentina


 Banco Macro B


 Petrobras Energia Part B


 Siderar A


 Telecom Argentina B




Brazil


 Ambev PN


 Banco Bradesco PN


 Banco Itau Hldg Fin. PN


 Companhia Siderurgica Nacional


 Gerdau PN


 Petrobras PN


 Tele Norte Leste Part. PN


 Unibanco


 Usiminas PNA


 Vale do Rio Doce PNA


Chile


 Banco Santander Chile


 Cencosud


 CMPC (Empresas)


 Colbun


 Empresas Copec


 Endesa (Chile)


 Enersis


 Entel


 LAN Airlines


 Soquimich B


China


 China Communications CONST-H


 China Construction BK H


 China Life Insurance H


 China Mobile


 China Petro & Chem H


 China Shenhua Energy H


 CNOOC


 ICBC H


 Petrochina Co. H


 Ping An Insurance H




Colombia


 Bancolombia


 Cementos Argos


 Ecopetrol


 Interconexion Electrica


 Suramericana de Inversiones




Czech Republic


 Central European Media


 Ceske energeticke. Zavody (CEZ)


 Komercni banka


 Telefonica o2 Czech Republic


 Unipetrol




Egypt


 Commercial International Bank


 EFG-Hermes Holding


 Egypt Kuwait Holding


 Egyptian Mobile Services


 El Ezz Steel Rebars


 El Sewedy Cables Holding Co.


 Orascom construction Industries


 Orascom Telecom Holding


 Sidi Kerir Petrochemicals


 Telecom Egypt




Hungary


 Magyar Telekom


 MOL Magyar Olaj-es Gazipari Nyrt.


 OTP bank


 Richter Gedeon


India


 Bharat Heavy Electricals


 HDFC Bank


 Housing Dev Finance Corp


 ICICI Bank


 Infosys Technologies


 ITC


 Larsen & Toubro


 Oil & Natural Gas Corp


 Reliance Communication


 Reliance Industries




42 Corporate Governance Disclosure in Emerging Markets


Indonesia


 Astra International


 Bank Central Asia


 Bank Mandiri


 Bank Rakyat Indonesia


 Bumi Resources


 Indosat


 Int‟l nickel Indonesia


 Perusahaan Gas Negara


 Telekomunikasi Indonesia


 United Tractors


Israel


 Bank Hapoalim


 Bank Leumi le-Israel


 Bezeq Israel Telecom


 Check Point Software


 Israel Chemicals


 Israel Corp


 Makhteshim Agan Industries


 Nice Systems


 Partner Communications


 Teva Pharmaceutical Industries


Japan


 Canon Inc.


 Honda Motor Co., Ltd.


 Mitsubishi Corporation


 Mitsubishi UFJ Financial Group


 Nippon Telegraph & Telephone


 Panasonic Corporation


 Sumitomo Mitsui Financial Group
Inc.


 Takeda Pharmaceutical Company
Limited


 The Tokyo Electric Power Co Inc


 Toyota Motor Corporation




Republic of Korea


 Hyundai Heavy Industries


 Hyundai Motor Co


 Kepco Korea Electric Power Corp.


 Kookmin Bank


 KT&G Corp (Korea Tobacco)


 LG Electronics


 Posco


 Samsung Electronics Co


 Shinhan Financial Group


 Shinsegae Co




Malaysia


 Bumiputra-Commerce Holdings


 Genting


 IOI Corp


 Kuala Lumpur Kepong


 Malayan Banking


 MISC Fgn


 Public Bank Fgn


 Sime Darby


 Telekom Malaysia


 Tenaga Nasional




Mexico


 America Movil L


 Cemex CPO


 Empresas ICA


 Femsa


 Grupo Financiero Banorte O


 Grupo Mexico B


 Grupo Televisa CPO


 Industrias Penoles


 Telefonos de Mexico


 Wal-mart de Mexico


Morocco


 Attijariwafa Bank


 BMCE Bank


 CGI


 Douja Promotion Groupe Addoha


 Maroc Telecom


 (ONA) Omnium Nord Africain




Peru


 Compania de Minas Buenaventura


 Compania Minera Milpo


 Credicorp


 Southern Copper C




Philippines


 Ayala Corporation


 Ayala Land


 Bank Of Philippine Islands


 The Energy Development Corporation


 Globe Telecom


 Jollibee Foods Corporation


 Manila Electric Company


 Phil Long Distance Telephone


 SM Investments


 SM Prime Holdings




Annexes 43


Poland


 Asseco Poland


 Bank Pekao


 Bank Zachodni WBK


 Globe Trade Centre


 KGHM Polska Miedz


 PBG


 PKO Bank Polski


 Polish Oil & Gas


 Polski Koncern Naf Orlen


 TP SA Telekom Polska


Russian Federation


 Gazprom


 Lukoil Holding


 Mobile Telesys


 Norilsk Nickel


 Novatek GDR


 Sberbank Russia


 Surgutneftegaz


 Tatneft


 Unified Energy


 VimpelCom




South Africa


 Anglo Platinum


 Anglogold Ashanti


 FirstRand


 Gold Fields


 Impala Platinum Holdings


 MTN Group


 Naspers


 Remgro


 Sasol


 Standard Bank Group


Thailand


 Advanced Info Service


 Bangkok Bank Fgn


 Bank of Ayudhya


 Banpu


 CP ALL PCL


 Kasikornbank Fgn


 PTT


 PTT Exploration & Production


 Siam Cement


 Siam Commercial Bank


Turkey


 Akbank


 Anadolu Efes Biracilik


 Enka Insaat ve Sanayi


 Eregli Demir ve Celik Fabrikalari


 Tupras Turkiye Petrol


 Turk Telekomunikasyon


 Turkcell Iletisim Hizmet


 Turkiye Garanti Bankasi


 Turkiye Is Bankasi


 Yapi ve Kredi Bankasi


United Kingdom


 Anglo American


 Astra Zeneca


 Barclays


 BP


 GlaxoSmithKline


 HSBC


 Rio Tinto


 Royal Bank of Scotland Group


 Royal Dutch Shell


 Vodafone Group




United States


 AT&T Inc


 Bank of America Corporation


 Chevron Corporation


 Exxon Mobil Corporation


 General Electric


 International Business Machines (IBM)


 Johnson & Johnson


 JP Morgan Chase & Co


 Microsoft Corporation


 Procter & Gamble






Annex V. Number of enterprises that disclose by market


Notes: Each square shows: the number of enterprises disclosing each UNCTAD ISAR benchmark item / number of enterprises studied in the market.


Countries are ordered from left to right in order of total number of disclosure items required (maximum to minimum).


Shaded square indicate that the disclosure item is required for listed enterprises in that country.


Disclosure items from the UNCTAD ISAR benchmark are numbered 1 through 52. The name of individual disclosure items can be found in annex II.


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Ownership Structure and Exercise of Control Rights


1 10 / 10 10 / 10 4 / 4 10 / 10 9 / 10 10 / 10 10 / 10 8 / 10 10 / 10 8 / 10 9 / 10 8 / 10 6 / 10 7 / 10 4 / 4 4 /4 8 / 10 6 / 6 5 / 5 10 / 10 10 /10 5 / 5


2 3 / 10 7 / 10 4 / 4 9 / 10 6 / 10 10 / 10 6 / 10 10 / 10 10 / 10 6 / 10 6 / 10 8 / 10 5 / 10 8 / 10 4 / 4 4 /4 6 / 10 4 / 6 5 / 5 10 / 10 5 /10 5 / 5


3 7 / 10 7 / 10 3 / 4 7 / 10 7 / 10 3 / 10 8 / 10 6 / 10 8 / 10 5 / 10 9 / 10 7 / 10 1 / 10 7 / 10 2 / 4 3 / 4 5 / 10 2 / 6 3 / 5 8 / 10 9 /10 3 / 5


4 6 / 10 10 / 10 4 / 4 10 / 10 9 / 10 10 / 10 8 / 10 8 / 10 10 / 10 8 / 10 6 / 10 9 / 10 5 / 10 7 / 10 4 / 4 4 / 4 7 / 10 6 / 6 5 / 5 10 / 10 10 / 10 5 / 5


5 4 / 10 9 / 10 4 / 4 10 / 10 10 / 10 10 / 10 5 / 10 8 / 10 9 / 10 8 / 10 5 / 10 9 / 10 3 / 10 8 / 10 4 / 4 4 / 4 7 / 10 4 / 6 5 / 5 10 / 10 7 / 10 3 / 5


6 9 / 10 10 / 10 4 / 4 10 / 10 8 / 10 10 / 10 9 / 10 8 / 10 10 / 10 7 / 10 7 / 10 9 / 10 5 / 10 9 / 10 4 / 4 4 / 4 8 / 10 5 / 6 5 / 5 9 / 10 8 / 10 4 / 5


7 6 / 10 10 / 10 4 / 4 5 / 10 7 / 10 10 / 10 6 / 10 10 / 10 9 / 10 6 / 10 4 / 10 8 / 10 3 / 10 4 / 10 4 / 4 4 / 4 7 / 10 4 / 6 5 / 5 10 / 10 8 / 10 5 / 5


8 9 / 10 2 / 10 4 / 4 3 / 10 9 / 10 4 / 10 4 / 10 9 / 10 4 / 10 5 / 10 8 / 10 8 / 10 1 / 10 4 / 10 2 / 4 2 / 4 8 / 10 1 / 6 3 / 5 2 / 10 6 / 10 2 / 5


9 0 / 10 2 / 10 3 / 4 2 / 10 1 / 10 3 / 10 0 / 10 1 / 10 1 / 10 1 / 10 1 / 10 1 / 10 1 / 10 1 / 10 1 / 4 3 / 4 2 / 10 1 / 6 4 / 5 1 / 10 3 / 10 1 / 5




28 In 2009 Item 49 was listed as a required item by the Russian Federation but upon further revision this has been corrected.


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Financial Transparency


10 10 / 10 10 / 10 4 / 4 10 / 10 10 / 10 10 / 10 10 / 10 10 / 10 10 / 10 10 / 10 10 / 10 10 / 10 10 / 10 10 / 10 4 / 4 4 / 4 10 / 10 6 / 6 5 / 5 10 / 10 10 / 10 5 / 5


11 8 / 10 10 / 10 4 / 4 10 / 10 8 / 10 10 / 10 9 / 10 9 / 10 10 / 10 10 / 10 10 / 10 9 / 10 7 / 10 7 / 10 4 / 4 4 / 4 8 / 10 4 / 6 5 / 5 10 / 10 10 / 10 5 / 5


12 10 / 10 10 / 10 3 / 4 10 / 10 9 / 10 10 / 10 10 / 10 9 / 10 10 / 10 9 / 10 9 / 10 9 / 10 8 / 10 9 / 10 4 / 4 3 / 4 10 / 10 4 / 6 5 / 5 10 / 10 10 / 10 5 / 5


13 10 / 10 10 / 10 4 / 4 10 / 10 10 / 10 10 / 10 10 / 10 10 / 10 9 / 10 10 / 10 10 / 10 10 / 10 10 / 10 10 / 10 4 / 4 4 / 4 10 / 10 5 / 6 5 / 5 10 / 10 10 / 10 5 / 5


14 9 / 10 10 / 10 4 / 4 10 / 10 5 / 10 10 / 10 5 / 10 8 / 10 9 / 10 10 / 10 8 / 10 7 / 10 4 / 10 5 / 10 3 / 4 3 / 4 9 / 10 4 / 6 5 / 5 7 / 10 8 / 10 3 / 5


15 3 / 10 7 / 10 1 / 4 6 / 10 7 / 10 9 / 10 3 / 10 7 / 10 6 / 10 9 / 10 4 / 10 4 / 10 1 / 10 1 / 10 4 / 4 2 / 4 9 / 10 0 / 6 2 / 5 1 / 10 9 / 10 2 / 5


16 5 / 10 1 / 10 2 / 4 4 / 10 4 / 10 6 / 10 6 / 10 9 / 10 9 / 10 7 / 10 5 / 10 5 / 10 4 / 10 6 / 10 1 / 4 2 / 4 8 / 10 2 / 6 5 / 5 10 / 10 5 / 10 5 / 5


17 9 / 10 10 / 10 2 / 4 10 / 10 10 / 10 10 / 10 9 / 10 8 / 10 6 / 10 7 / 10 10 / 10 9 / 10 3 / 10 4 / 10 3 / 4 4 / 4 9 / 10 1 / 6 4 / 5 6 / 10 9 / 10 5 / 5


Auditing


18 10 / 10 9 / 10 4 / 4 10 / 10 9 / 10 10 / 10 10 / 10 8 / 10 6 / 10 7 / 10 8 / 10 7 / 10 7 / 10 1 / 10 4 / 4 3 / 4 6 / 10 4 / 6 5 / 5 10 / 10 6 / 10 5 / 5


19 9 / 10 9 / 10 4 / 4 10 / 10 7 / 10 10 / 10 9 / 10 8 / 10 5 / 10 3 / 10 9 / 10 7 / 10 6 / 10 3 / 10 4 / 4 3 / 4 8 / 10 3 / 6 5 / 5 8 / 10 6 / 10 3 / 5


20 7 / 10 10 / 10 4 / 4 9 / 10 8 / 10 10 / 10 10 / 10 9 / 10 10 / 10 6 / 10 7 / 10 8 / 10 5 / 10 6 / 10 4 / 4 3 / 4 6 / 10 4 / 6 5 / 5 9 / 10 9 / 10 4 / 5


21 6 / 10 8 / 10 3 / 4 4 / 10 4 / 10 10 / 10 6 / 10 6 / 10 6 / 10 7 / 10 2 / 10 2 / 10 6 / 10 2 / 10 4 / 4 4 / 4 1 / 10 2 / 6 5 / 5 8 / 10 5 / 10 5 / 5


22 10 / 10 4 / 10 1 / 4 8 / 10 8 / 10 7 / 10 2 / 10 6 / 10 8 / 10 5 / 10 7 / 10 3 / 10 1 / 10 3 / 10 0 / 4 1 / 4 5 / 10 0 / 6 0 / 5 4 / 10 0 / 10 0 / 5


23 7 / 10 10 / 10 4 / 4 10 / 10 10 / 10 10 / 10 9 / 10 8 / 10 7 / 10 6 / 10 10 / 10 10 / 10 6 / 10 7 / 10 4 / 4 4 / 4 9 / 10 4 / 6 5 / 5 10 / 10 7 / 10 5 / 5


24 1 / 10 10 / 10 4 / 4 9 / 10 3 / 10 10 / 10 9 / 10 3 / 10 7 / 10 1 / 10 8 / 10 5 / 10 4 / 10 4 / 10 4 / 4 3 / 4 2 / 10 4 / 6 3 / 5 7 / 10 4 / 10 4 / 5


25 2 / 10 7 / 10 1 / 4 0 / 10 2 / 10 3 / 10 0 / 10 0 / 10 2 / 10 1 / 10 1 / 10 0 / 10 2 / 10 1 / 10 3 / 4 1 / 4 3 / 10 0 / 6 2 / 5 0 / 10 2 / 10 3 / 5


26 4 / 10 8 / 10 4 / 4 9 / 10 3 / 10 7 / 10 9 / 10 4 / 10 6 / 10 5 / 10 4 / 10 7 / 10 0 / 10 4 / 10 4 / 4 3 / 4 6 / 10 2 / 6 5 / 5 2 / 10 5 / 10 2 / 5


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Corporate Responsibility and Compliance


27 9 / 10 10 / 10 4 / 4 9 / 10 10 / 10 10 / 10 7 / 10 10 / 10 9 / 10 7 / 10 8 / 10 8 / 10 9 / 10 9 / 10 4 / 4 4 / 4 9 / 10 5 / 6 5 / 5 10 / 10 10 / 10 5 / 5


28 6 / 10 5 / 10 4 / 4 8 / 10 7 / 10 7 / 10 7 / 10 5 / 10 7 / 10 4 / 10 8 / 10 5 / 10 3 / 10 8 / 10 3 / 4 2 / 4 5 / 10 2 / 6 4 / 5 6 / 10 5 / 10 4 / 5


29 2 / 10 6 / 10 2 / 4 4 / 10 4 / 10 10 / 10 10 / 10 2 / 10 2 / 10 4 / 10 7 / 10 2 / 10 2 / 10 6 / 10 4 / 4 4 / 4 8 / 10 1 / 6 2 / 5 3 / 10 5 / 10 3 / 5


30 10 / 10 6 / 10 3 / 4 7 / 10 9 / 10 10 / 10 7 / 10 5 / 10 4 / 10 6 / 10 8 / 10 4 / 10 3 / 10 9 / 10 4 / 4 3 / 4 9 / 10 1 / 6 4 / 5 7 / 10 6 / 10 5 / 5


31 6 / 10 2 / 10 2 / 4 2 / 10 6 / 10 6 / 10 8 / 10 1 / 10 2 / 10 4 / 10 5 / 10 2 / 10 3 / 10 4 / 10 4 / 4 3 / 4 7 / 10 0 / 6 2 / 5 2 / 10 4 / 10 2 / 5


32 9 / 10 8 / 10 3 / 4 9 / 10 10 / 10 10 / 10 9 / 10 7 / 10 4 / 10 4 / 10 10 / 10 5 / 10 6 / 10 10 / 10 4 / 4 4 / 4 8 / 10 2 / 6 4 / 5 9 / 10 8 / 10 5 / 5


33 3 / 10 0 / 10 4 / 4 6 / 10 8 / 10 0 / 10 7 / 10 3 / 10 3 / 10 4 / 10 10 / 10 4 / 10 1 / 10 8 / 10 0 / 4 0 / 4 8 / 10 0 / 6 4 / 5 0 / 10 0 / 10 0 / 5


Board and Management Structure and Process


34 10 / 10 9 / 10 4 / 4 10 / 10 10 / 10 10 / 10 10 / 10 9 / 10 9 / 10 9 / 10 10 / 10 9 / 10 6 / 10 10 / 10 4 / 4 4 / 4 9 / 10 4 / 6 5 / 5 10 / 10 9 / 10 5 / 5


35 9 / 10 9 / 10 4 / 4 10 / 10 10 / 10 10 / 10 8 / 10 6 / 10 10 / 10 6 / 10 10 / 10 9 / 10 6 / 10 4 / 10 4 / 4 4 / 4 6 / 10 4 / 6 5 / 5 10 / 10 10 / 10 5 / 5


36 10 / 10 10 / 10 4 / 4 10 / 10 10 / 10 10 / 10 10 / 10 10 / 10 10 / 10 9 / 10 10 / 10 10 / 10 9 / 10 10 / 10 4 / 4 4 / 4 10 / 10 6 / 6 5 / 5 10 / 10 10 / 10 5 / 5


37 10 / 10 9 / 10 4 / 4 9 / 10 10 / 10 10 / 10 10 / 10 8 / 10 9 / 10 7 / 10 10 / 10 9 / 10 6 / 10 10 / 10 4 / 4 4 / 4 9 / 10 4 / 6 5 / 5 10 / 10 9 / 10 5 / 5


38 9 / 10 9 / 10 4 / 4 10 / 10 9 / 10 10 / 10 9 / 10 10 / 10 10 / 10 7 / 10 10 / 10 10 / 10 5 / 10 10 / 10 4 / 4 4 / 4 9 / 10 3 / 6 5 / 5 10 / 10 10 / 10 5 / 5


39 10 / 10 10 / 10 4 / 4 10 / 10 10 / 10 10 / 10 9 / 10 8 / 10 10 / 10 10 / 10 10 / 10 10 / 10 8 / 10 5 / 10 4 / 4 4 / 4 6 / 10 4 / 6 5 / 5 10 / 10 10 / 10 5 / 5


40 8 / 10 10 / 10 4 / 4 10 / 10 8 / 10 10 / 10 10 / 10 7 / 10 10 / 10 9 / 10 10 / 10 10 / 10 8 / 10 6 / 10 4 / 4 3 / 4 8 / 10 2 / 6 5 / 5 8 / 10 5 / 10 5 / 5


41 9 / 10 10 / 10 4 / 4 10 / 10 9 / 10 10 / 10 10 / 10 6 / 10 9 / 10 9 / 10 7 / 10 10 / 10 8 / 10 6 / 10 4 / 4 3 / 4 8 / 10 1 / 6 4 / 5 8 / 10 5 / 10 5 / 5


42 10 / 10 6 / 10 4 / 4 10 / 10 3 / 10 10 / 10 10 / 10 5 / 10 7 / 10 3 / 10 7 / 10 8 / 10 0 / 10 6 / 10 4 / 4 4 / 4 7 / 10 3 / 6 4 / 5 5 / 10 8 / 10 5 / 5


43 9 / 10 6 / 10 2 / 4 9 / 10 4 / 10 10 / 10 6 / 10 1 / 10 2 / 10 1 / 10 6 / 10 7 / 10 4 / 10 6 / 10 4 / 4 4 / 4 2 / 10 2 / 6 4 / 5 9 / 10 5 / 10 5 / 5


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b


lic o
f


K
o


re
a




P
er


u


A
rg


en
tin


a


M
ex


ico


M
o


ro
cc


o


C
ze


ch


R
ep


u
b


lic


T
u


rk
ey




C
h


ile


C
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lo
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ia




44 7 / 10 9 / 10 4 / 4 10 / 10 10 / 10 10 / 10 10 / 10 9 / 10 10 / 10 6 / 10 10 / 10 10 / 10 3 / 10 8 / 10 4 / 4 4 / 4 7 / 10 2 / 6 5 / 5 10 / 10 8 / 10 5 / 5


45 0 / 10 3 / 10 0 / 4 0 / 10 0 / 10 0 / 10 0 / 10 1 / 10 0 / 10 1 / 10 0 / 10 1 / 10 0 / 10 0 / 10 1 / 4 1 / 4 0 / 10 0 / 6 5 / 5 0 / 10 0 / 10 0 / 5


46 10 / 10 10 / 10 4 / 4 10 / 10 3 / 10 10 / 10 10 / 10 7 / 10 10 / 10 7 / 10 10 / 10 10 / 10 4 / 10 6 / 10 4 / 4 4 / 4 3 / 10 4 / 6 5 / 5 7 / 10 10 / 10 5 / 5


47 10 / 10 10 / 10 4 / 4 10 / 10 7 / 10 10 / 10 10 / 10 6 / 10 7 / 10 6 / 10 4 / 10 10 / 10 5 / 10 10 / 10 4 / 4 4 / 4 9 / 10 1 / 6 2 / 5 6 / 10 8 / 10 5 / 5


48 10 / 10 10 / 10 4 / 4 10 / 10 9 / 10 10 / 10 10 / 10 6 / 10 9 / 10 9 / 10 6 / 10 10 / 10 8 / 10 7 / 10 4 / 4 3 / 4 8 / 10 1 / 6 4 / 5 8 / 10 5 / 10 5 / 5


49 4 / 10 6 / 10 4 / 4 8 / 10 4 / 10 10 / 10 9 / 10 5 / 10 8 / 10 4 / 10 6 / 10 4 / 10 2 / 10 4 / 10 4 / 4 3 / 4 6 / 10 2 / 6 4 / 5 6 / 10 8 / 10 5 / 5


50 7 / 10 8 / 10 2 / 4 10 / 10 3 / 10 9 / 10 6 / 10 4 / 10 2 / 10 2 / 10 6 / 10 2 / 10 1 / 10 1 / 10 1 / 4 2 / 4 2 / 10 0 / 6 1 / 5 3 / 10 1 / 10 2 / 5


51 7 / 10 5 / 10 3 / 4 10 / 10 6 / 10 10 / 10 5 / 10 2 / 10 3 / 10 4 / 10 5 / 10 5 / 10 3 / 10 7 / 10 4 / 4 4 / 4 8 / 10 0 / 6 3 / 5 5 / 10 5 / 10 5 / 5


52 10 / 10 7 / 10 4 / 4 9 / 10 3 / 10 10 / 10 9 / 10 2 / 10 6 / 10 3 / 10 7 / 10 9 / 10 3 / 10 6 / 10 3 / 4 3 / 4 8 / 10 0 / 6 4 / 5 2 / 10 7 / 10 5 / 5





















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