*{Facing the Challenge of Governance: Acquiring the Software of Globalization [http://www.weforum.org/site/knowledgenavigator.nsf/Content/Facing%20the%20Challenge%20of%20Governance%3A%20Acquiring%20the%20Software%20of%20Globalization?open&topic_id=300250000&theme_id=300]

            19.10.1999

            East Asia Economic Summit 1999}

            *partie=titre Good governance is the key goal *partie=nil

            The essential component of the "software of globalization" is good governance in both the public and private sectors according to the panellists. Companies must embrace international standards of transparency, integrity and accountability, while governments must provide the necessary regulatory and legal framework. Those who fail to upgrade their systems and operations risk losing out to competitors. "Investors will look at corporate governance more than in the past," said Donald Johnston, Secretary-General of the Paris-based Organization for Economic Cooperation and Development (OECD). "The penalty for a lack of corporate governance is the lack of investment flows." Philippine Vice-President Gloria Macapagal-Arroyo concluded: "Good governance is a need for all time."

            In his presentation, Johnston outlined a range of initiatives of the OECD, including the adoption and promotion of a covenant on bribery and corruption, guidelines on the conduct of multinational enterprises and internationally accepted principles of corporate governance. Governments, he said, must be more efficient and capable in guiding economic policy and they must be more flexible in their ties with civil society. Corruption is a global problem that must be dealt with. The OECD treaty making bribery in international transactions a crime is an important step, with more Asian countries wanting to subscribe to it. Johnston also noted that more and more companies are developing codes of conduct. With regard to the OECD's principles of corporate governance, he said that they "do not apply a full Anglo-Saxon model" but represent collective views. Donald Tsang, Financial Secretary of Hong Kong, stressed the importance of the rule of law. Corporate self-discipline is ineffective, he said. "Protection can only come from a legal system coupled with enforcement." 

            Macapagal-Arroyo outlined three tasks for governments in the drive to improve corporate management standards:
            to set up strong and competent internal institutions and structures;
            to uphold the rule of law, fairness and social justice;
            to promote accountability in the corporate sector by enhancing transparency.

            Open decision-making is essential, she said. "Democratic governance is good governance." The Vice-President explained how technology has improved governance in her country, citing the introduction of electronic customs clearance. In this instance, IT has cut down on corrupt practices. 

            Tanri Abeng, Indonesia's Minister for State Owned Enterprises, focused on how Indonesian firms, particularly state companies, are reorganizing their boardrooms and senior management with the aim of improving corporate governance to increase shareholder value. In many cases, the government is separating the regulatory function from corporate operations, empowering management and introducing performance-based reward systems. In the selection of company directions, he called for higher standards based on technical and professional qualifications, integrity, social sensitivity and business savvy. "This is our true challenge," the minister said. Finally, Vietnamese Deputy Prime Minister Nguyen Tan Dung told participants that, in response to the regional economic crisis, Vietnam was pushing ahead with reforms and restructuring, while at the same time concentrating on poverty reduction and the preservation of social and political stability.

            During the Q&A period, Professor Jean-Pierre Lehmann of the International Institute for Management Development in Switzerland suggested that many businesspeople might publicly embrace good governance and honest management, but then simply carry on with old corrupt ways. The post-crisis drive towards better corporate governance may be something of an over-reaction, he said. In reply, Johnston noted that the OECD had been working on the issue long before the economic crisis broke.                 

                  *{Contributors:       Johnston Donald J.
                  Macapagal Arroyo Gloria
                  Smadja Claude
                  Tsang Donald}