Having recently run a Corporate Governance seminar in Yangon what struck me was the level of disconnect between what is understood as corporate governance with that of it importance to an emerging economy such as found in Myanmar. The prevailing belief, hence the title of this piece, is that Corporate Governance really only applies to public listed Companies and all others is merely subject to prevailing Corporations Law. Not only does this show a lack of understanding of the cornerstone of good management, it is a dangerous notion that can so easily derail further economic development as well as participation by the citizens of the country.
Furthermore, the topic takes on a whole new focus and significance when you consider last week’s meeting between Daw Aung San Suu Kyi and President Barack Obama. This meeting dealt with the lifting of sanctions against the Myanmar, and agreement was reached. It is material to note that “The Burma Strategy Act of 2016,” drafted by Senators Cardin (D-MD) and McCain (R-AZ), set the context within which sanctions are to be lifted. This context and includes the requirement that US investment “ in Myanmar that upholds the highest business standards, including international labor standards and transparency as well as environmental, anti-corruption, human rights protections;……and strengthen anti-corruption and transparency initiatives;…”
So why do I say that it is dangerous for Myanmar business to hold the view that Corporate Governance only applies to Public Listed Companies? The reasons are many, however I will restrict it to a few observations.
Corporations Law in Myanmar is disjointed and in need of comprehensive review and rewrite. The law currently draws off a number of legal frameworks e.g. parts of English law, European Law, Dutch and so on. The framework was constructed within a country that was isolated and as such took bits and pieces from differing legal frameworks without regard to developing a comprehensive and integrated set of regulations that had consistency. As discussed at the recent workshop, it does not have an integrated system of rules, practices and processes by which a company is directed and controlled. One might say, the law is still emerging.
Importantly, unlike Corporations Law, the context given for USA investment in Myanmar is very clear in that it recognizes that there needs to be a balancing of the interests of a Company and that of its many stakeholders. In essence it sets a new paradigm in a Country in which secret trade deals and management arrangements could be made by Companies largely owned and operated by State instruments or their proxies. The call is for Companies to have: Reliability, Integrity and fulfill its obligations to its stakeholders.
The definition of stakeholder within Myanmar business has been called on to change. Not only are the interests of the owners important, but it now requires that the following is also taken into account through management practice and process:
- Creditors / Financial Institutions
- Regulatory Agencies.
No longer is it acceptable to view a Company (Privately or Publically-owned) as beholden to the owners / shareholders alone. It is part of the wider community and as I have often argued, a Company cannot exist without the recognition of the community within which it operates. What is needed is a system that allows for:
- Abiding to the Rule of Law
- Equitable / Inclusive and Participatory
- Efficient and Capable.
To demonstrate why all companies need corporate governance, one needs only consider theelements that make up the governance constitutional framework. These include the following:
- Board of Directors and Committees
- Legal and Regulatory Framework
- Organisational Hierarchy
- Monitoring and Internal Control Systems
- Transparency and Accountability measures
- Policies and Procedures
The starting point in answering the question raised with regards to corporate governance is to recognize that it applies to all Companies, irrespective of whether they privately or publically owned. Failure to recognize this may well lead to investment going elsewhere with the consequence that the Country’s economic development stagnates.
Andre Wheeler is CEO of Wheeler Management Consulting Pty Ltd and ASIA PACIFIC CONNEX