Despite the efforts of national governments and international organizations to improve corporate governance in emerging markets, the response of the companies themselves has been underwhelming.1 Many companies ignore the initiatives—which primarily involve reform of boards of directors—or just pay lip service to them. Little attention is paid to the directors' qualifications, even when reforms are mandated, as they are in South Korea, where 25 to 50 percent of a company's directors (depending on its size and sector) must now come from the outside. Could the problem be that the would-be reformers are focusing on the wrong reforms?
The corporate-governance model usually prescribed is the one that prevails in the US and the UK
The corporate-governance model usually prescribed is the one that prevails in the United States and the United Kingdom. Its emphasis on shareholder value reflects the environment in those two countries, where a very large, dispersed class of investors, with no prior connection to the companies listed on the public exchanges, insists on boards that are similarly independent. These investors also demand a high level of financial and business disclosure.
Compare this with the situation in many emerging markets, where family-owned businesses predominate. Since the top...