Strong corporate governance is essential for companies to succeed on the Yangon Stock Exchange when it launches – and local companies have a lot to do to be up for the challenge.
The market is slated to launch in the third quarter 2015, and whether it survives depends on corporate governance, or the processes businesses use to direct activity, according to speakers at the Corporate Governance Forum Myanmar on February 17.
Speakers at the forum – which was put on by the Association of Chartered Certified Accountants; audit, tax and advisory firm KMPG; the Myanmar Institute of Certified Public Accountants and the UK-Myanmar Financial Services Taskforce – stressed the need for strong mechanisms and procedures to run companies.
“Good corporate governance … can lock in growth, make it stronger and more sustainable, and it’s one of the most important factors behind the development of a healthy economy,” said Alan Yarrow, alderman and Lord Mayor of London.
“Stock exchanges, for example, live and die on the strength of corporate governance.”
Malaysia member of parliament Datuk Nur Jazlan Mohamed said that well-implemented corporate governance builds trust in capital markets, confidence which will aid these markets to grow even more. Whether the Yangon Stock Exchange sinks or swims comes down to how companies run, he added.
“The development of a market economy in Myanmar depends on the development of the Yangon Stock Exchange,” he said. “The development of the Yangon Stock Exchange depends on the accountability of its companies.”
Nur Jazlan Mohamed also quoted the president’s economic adviser U Aung Tun Thet in saying that only about five of 200 domestic public companies currently meet required listing standards set by ASEAN and the Organisation for Economic Co-operation and Development (OECD) – making only 2.5 percent of the country’s public companies currently eligible to list on its exchange.
Investment and investor confidence is also tied to corporate governance.
Good corporate governance hinges on principles like accountability, transparency and predictability. It can also mean doing business in accordance with ethics rather than technicalities – or loopholes – of the law.
Myanmar Centre for Responsible Business director Vicky Bowman said good corporate governance is related to behaviours that define two things: whether you’re going to get your social licence to operate – or society’s approval for your operations – and whether you’re going to attract local business partners.
“Both of those are fundamental to your bottom line,” she added, pointing to the Letpadaung copper as an example of corporate governance gone wrong. Ms Bowman said the firm should have done more to engage with stakeholders, disclose information and establish risk management structures.
Some officials from leading local companies say they are aware of the changing business landscape.
“Corporate governance for our bank is not something that is nice to have anymore,” said Kanbawza Bank managing director Daw Kim Chawsu on a panel at the event. “It’s a must have.” The bank educates its employees on topics such as conflicts of interest and anti-corruption.
“I don’t think corporate governance is a to-do list,” she said. “I think it’s a journey that everybody needs to go on.”