Opening remarks by Ingrid van Wees, ADB Vice-President for Finance and Risk Management, at the Corporate Governance: Challenges And Opportunities in Asia on 21 November 2017.

Good morning honorable judges, distinguished guests, ladies and gentlemen, welcome to the second day of our conference.

In my opening remarks, I would like to do three things: first, to synthesize yesterday’s discussion and link it to today’s topics; second, to highlight the importance of corporate governance in the 21st century; and third, to call for action by all stakeholders.

Conference synthesis and link with today’s discussion

Yesterday, we first talked about the principles of corporate governance moderated by Chris Razook from the International Finance Corp. (IFC). After a keynote interview with Diwakar Gupta, ADB Vice-President for Private Sector and Co-Financing Operations, a panel discussion zeroed in on the perspective of the private sector, international financial institutions such as IFC and ADB, and government regulators such as the Philippine Securities and Exchange Commission. Mohd. Sani Ismail then introduced the participants to the ASEAN Corporate Governance Scorecard and its importance and impact on the private sector.

Our second technical session, moderated by Diana David from Financial Times, featured the role of corporate principals and the board of directors. Jane Fuller, also of Financial Times, then walked us through the trends in shareholders’ part in determining corporate strategies and decisions.

Day 1 ended with the reaffirmation of ADB’s push for the corporate governance agenda, both in the private and public sectors, particularly in state-owned enterprises. Through this knowledge and skills development program, ADB will continue to be an active partner of all stakeholders in the further development of corporate governance in Asia and the Pacific. We saw how the private and public sectors can, and must, work together to promote common corporate governance principles. We’ve also seen how effective management within the corporation can lead to better relationship with shareholders and reduce the risks brought about by activists. 

As I see from the agenda, today promises equally, if not more, exciting sessions on how we can hold corporations responsible for their actions. From reportorial requirements and periodic audits to actual litigation, corporations are now more exposed to the vigilant eyes of their investors and other stakeholders.

Mandating the composition of the board of directors is another way to influence corporate governance. Renée Adams will later present the rising trend of imposing boardroom diversity policies based on the “business case” argument that firms with more female board members perform better. Dan Puchniak will discuss the varieties of independent directors in Asia.

It is now up to us to use these broad measures to push for greater corporate accountability.

Importance of corporate governance in the 21st century

The theme of this 2-day workshop—Corporate Governance: Challenges and Opportunities in Asia—is very timely, wouldn’t you agree? More and more companies are facing stiff penalties not just from government regulators but also from activist investors and the concerned public.

Who has not heard about the corporate scandal involving Enron in the early 2000s? In a short span of a few months in 2001, what was one of America’s top 10 corporations with operations in more than 40 countries went bankrupt – all because the unethical accounting practices, earnings manipulation, and mismanagement by its executives came to light. Investors and partners withdrew, stocks were sold off, and numerous investigations followed. Its former CEOs, Kenneth Lay and Jeffrey Skilling, were convicted in 2006 for securities fraud, wire fraud, and making false and misleading statements. The accounting firm involved, Arthur Andersen, then one of the most leading in the world, also fell due to its dealings with Enron. Since then Enron has become a household name and a textbook case for corporate governance practices.

Jumping to 2017 — just a few months ago, the US Department of Justice raided Perrigo for alleged price-fixing in the pharmaceutical industry. The incident drove Perrigo stock prices 4.2% down1 and CEO John Hendrickson announced his retirement just 14 months after assuming position2.

Closer to home, Ezubao allegedly swindled over 900,000 investors of $7.6 billion3. A Beijing court sentenced Ding Ning, head of Ezubao’s parent company, Yucheng Holdings, and another top corporate officer, Ding Dian, with life imprisonment, handed prison sentences of 3 to 15 years to 24 other defendants, and imposed fines, including a $290 million penalty on Yucheng4.

Despite the increasing number of huge corporations being penalized for corporate misdeeds, many continue to commit fraud against their investors, consumers and government regulators. It would appear that the penalties being imposed on errant corporations do not serve as effective deterrents. In fact, this year alone, 59 Ponzi schemes with total losses reaching $2.4 billion were discovered in the US5.

At the same time, we are seeing an increasing number of activist investors that force changes in corporate strategies and actions, albeit with lower prevalence of shareholder activism in Asia than in US and Europe6. One positive consequence of shareholder activism is that more and more boards and executives engage their shareholders in making corporate decisions, thereby promoting management transparency7. Boards also need not fear activist investors because research shows that overcoming activist campaigns can significantly boost share prices8.

Call for action

Together We Deliver. ADB has started implementing projects across Asia and the Pacific that show significant development impacts, best practice, and innovation.

In 1995, ADB became the first multilateral development bank to adopt a Governance Policy. Its Anticorruption Policy followed in 1998. Both policies steer ADB’s governance and anticorruption work. Since then, ADB has supported several projects that aim to strengthen corporate governance. ADB has also assisted a few Securities and Exchange Commissions in developing and broadening the scope of corporate governance rules.

With such meetings, we, at ADB, are trying to do our bit in strengthening the capacity of our relevant stakeholders’ regulatory and governance skills. This conference is only the beginning. It is the first pilot offering of what we hope to be a regular program offering of our Knowledge and Skills Development Program on Corporate Governance. With your support, we also aspire to produce knowledge products, including case briefs, reports, blogs, and a corporate governance webpage as part of the ADB website.

We are also considering the possibility of institutionalizing this program should there be sufficient interest.

Let this conference be an eye opener on our powers as corporate stakeholders, consumers, and members of the public. I look forward to seeing your eyes brimming with determination to take action, when needed. Let us constantly engage ourselves in the processes that hold corporate citizens accountable for their decisions.

And let me end with a quote from Plato:

We can easily forgive a child who is afraid of the dark; the real tragedy of life is when men are afraid of the light.

1N. Bomey. 2017. Justice Department raids generics maker Perrigo in drug price-fixing probe. USA Today. 3 May.

2V. Monga. 2017. Perrigo CEO to Leave After 14 Months. Fox Business. 5 June.

3Asia One. 2017. China jails 26 over $10.2 billion Ponzi scheme.


5B. Love. 2017. Investors beware: the Ponzi scheme is thriving. Financial Times. 30 March.

6J. Adebiyi. 2016. Recent Shareholder Activism in Asia Could Signal Changing Attitudes. Skadden. January.

7D. Beatty. 2017. How activist investors are transforming the role of public-company boards. McKinsey & Company. January.

8R. Derousseau. 2017. Do Shareholders Win When Activists Win? Fortune. 14 October.