STATE-OWNED enterprises (SOEs) in Asia were found to comply with looser disclosure rules when compared to listed companies, prompting the need for the issuance of tighter regulations and stricter implementation of existing guidelines in each country.
This was one of the key points during the 12th Meeting of the Asia Network on Corporate Governance of State-owned Enterprises sponsored by the Organization for Economic Co-operation and Development (OECD) and the Governance Commission for Government-Owned and Controlled Corporations (GOCCs).
“We found that SOEs in Asia are often subject to weaker disclosure rules compared to listed companies, and it often reflects SOEs’ limited degree of corporatization,” OECD Corporate Finance and Corporate Governance Division Policy Analyst Chung-a Park said in a panel discussion during the forum in Makati yesterday.
Ms. Park mentioned that South Korea, the Philippines, and Vietnam are some of the countries in Asia that have specific reporting and disclosure requirements, while Cambodia and Malaysia have none.
At the same time, the OECD also found that SOEs are not always subjected to the same accounting and auditing requirements as private incorporated companies.
“(This) makes it difficult to identify irregular financial transactions. So these are often due to weak internal audit and control functions and guidance on corporate disclosure due to weaker degree of corporatization,” Ms. Park explained.
Weaker disclosure rules and auditing requirements could make SOEs vulnerable to money laundering and corruption.
In the Philippines, Securities and Exchange Commission (SEC) Chairperson Emilio B. Aquino said that the Revised Corporation Code passed into law earlier this year has given them the power to promote corporate governance. This allows the commission to issue guidelines that would protect GOCCs.
For instance, Mr. Aquino noted in a panel that they have issued Memorandum Circular No. 15 Series of 2019, which requires companies to disclose their beneficial owners.
“Any company must disclose the ultimate natural person that owns them…so that potential launderer will not utilize the layer of companies, launderers will not be behind state-owned enterprises or GOCCs,” Mr. Aquino said.
“It’s still a work in progress, we’re trying to plug some loopholes. There is some resistance, we put the responsibility on the corporate secretary to disclose this,” he added.
Aside from establishing guidelines that would strengthen disclosures, Institute for Democracy and Economic Affairs Chief Executive Officer Ali Salman said that regulators must focus on preventing corruption.
“They should promote awareness and competencies in preventing corrupt practices, including strengthening internal control,” Mr. Salman said in a panel.
For India’s Institute of Public Enterprise Director Ram Kumar Mishra, stopping corruption in SOEs starts at the top of management.
“If the president is corrupt, then all will be because of the culture…you have to look into yourself, practice not preach. We need such people like that,” Mr. Mishra said in a panel. — Arra B. Francia