Annual Meeting

Corporate Governance in a Post-Enron Environment

James McRitchie

What is the direction of shareholder activism in the United States (US) and how could this trend impact Asian markets? Globalization of capital is on the rise. Because investors want to minimize risk, those seeking to attract funds will face inevitable pressure toward convergence. Long-term investors will seek markets where their legal rights are known and protected, and where those using their money can be held accountable. Since the demise of Enron, US investors are even more sensitive to issues such as fraudulent financial reporting, conflict of interest, and lack of auditor and director independence. Countries with political stability, transparent accounting practices, shareholder rights, and employee protections will attract long-term investors who are willing to pay a premium for shares in well-governed companies. The corporate governance scores of countries and companies will be an important new tool for investors, as will the standards imposed by stock exchanges and their history of enforcement. Cutting-edge developments in the area of corporate governance may hint to future directions.