Overview of

ASEAN CG Scorecard
GOVERNANCE (CG) DISCLOSURE POLICY
AND PRACTICE
BASED ON ASEAN CG SCORECARD
 Module Content
 Background and the need for ASEAN CG
Scorecard
 Overview of OECD CG Principles
 Structure of the ASEAN CG Scorecard
 Scoring methodology the ASEAN CG Scorecard
 Overall evidences of CG Practices based on
the ASEAN CG Scorecard
 Implementing ASEAN CG Scorecard
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 Module Objectives
• By this module’s end, participants will be able to:
– Describe the background and the need for ASEAN CG
Scorecard,
– Explain OECD CG Principles,
– Explain the structure of the ASEAN CG Scorecard
– Understand the scoring methodology of the ASEAN CG
Scorecard,
– Understand the overall evidences of CG practices of PT
Matahari and large Indonesian PLCs based on the
Scorecard,
– Explain the strategy and steps to strengthen the
implemention of ASEAN CG Scorecard.
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ASEAN Corporate Governance ranking - Background
• Raise CG standards and practices of ASEAN
• Showcase and enhance visibility and investability of well-governed ASEAN PLCs
Objectives • Complement other ACMF initiatives and promote ASEAN as an asset class

• ACMF: Create a universal CG Scorecard containing key elements of good CG

• Devise a scoring methodology
Approach • Validate and publish ASEAN CG Scorecard
• Assess ASEAN PLCs identifying top 50 PLCs in each jurisdiction and top 50 PLCs
regionally

• ASEAN CG Scorecard released to public in March 2012

Progress • Assessment of 100 PLCs in 6 ASEAN Countries: 2012 , 2013, 2014, 2015
• Release of domestic top 50 PLCs in Feb 2013, March 2014, Dec 2014, Nov 2015

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OECD Principles of Corporate Governance
Ensuring the basis of corporate governance framework

Protecting shareholders’ rights.

The equitable treatment of shareholders, including minority shareholders.

Recognizing the rights of stakeholders and encouraging active co-operation

between corporations and stakeholders.

Ensuring timely and accurate disclosure is made on all material matter

regarding the corporation.

Effective monitoring of management by the board, and the board’s

accountability to the company and the shareholders.

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 What can good corporate governance
bring to a corporation?
• Creation and enhancement of a corporation’s competitive
advantage
• Enabling a corporation to perform efficiently and preventing fraud
and malpractice
• Providing protection to shareholders’ interest
• Increasing the valuation of an enterprise
• Ensuring compliance with laws and regulations
• Alleviating poverty by enhancing social responsibilities
Raising CG Practices with ASEAN CG Scorecard

ASEAN CG
Scorecard

Improving Encouraging
Enhancing CG
Compliance with Voluntary Adoption
Rules/Standards
Rules/Standards of CG Practices

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 ASEAN CG Scorecard
Regionally Public
Globally Based
Developed Information
• OECD CG • Six • English
Principles participating • Easily
• Other countries Accessible
International • Move beyond
and Regional local
Standards rules/standards

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 STRUCTURE OF THE ASEAN CG SCORECARD, 2015
There are two levels to the ASEAN CG Scorecard

Level 1
Has five major sections that corresponds
to the OECD Principles Level 2
Two additional Sections
Bonus & Penalty
Part A: Right of Shareholders (25)
Part B: Equitable Treatment (18) (11) Bonus items for companies
Part C: Role of Stakeholders (21) that go beyond minimum standards (26)
Part D: Disclosure & Transparency (41) (22) Penalty items for companies with
Part E: Responsibilities of the Board (74) poor practices (-59)

Total no. of items /descriptors (179) Total bonus and penalty items (33)
Total no of items/ descriptors (185) Total bonus and penalty items (34)TToo

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 Weightage: The ASEAN CG Scorecard
Weights per Section
Sections of Scorecard
of Scorecard

Rights of shareholders (Part A) 10%

Equitable treatment of shareholders (Part B) 15%

Role of stakeholders (Part C) 10%

Disclosure and transparency (Part D) 25%
Responsibilities of the board (Part E) 40%

Total 100%

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IICD’s Interpretation of the Findings
CG Score
Category Interpretation
(In Point)
Poor, below minimum
<60.00 Inappropriate
requirements
Meet minimum requirements as
60.00 – 69.99 Level 1
stated by laws and regulations
Fair, aware of international
70.00 – 79.99 Level 2
standards, but no adoption
Good, partly adopt international
80.00 – 89.99 Level 3
standards
Very Good, fully adopt
90.00 – 99.00 Level 4
international standards
Leadership in corporate
> = 100 Level 5
governance
 Sources of Information
 Annual Report
 Website
 Press Release/Corporate announcements
 Notice of Meeting of Shareholders
 Resolutions of Meeting of Shareholders
 Minutes of Meeting of Shareholders
 Board manual/charter
 Code of conduct/ethics
 Sustainability/CSR Report
 Media coverage
 Any other easily accessible public information
 Language: English

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 Scoring Methodology
Assessment relies primarily on publicly available and easily accessible information – annual report,
company websites, company announcements, circulars, articles of association, minutes of shareholders
meetings, CG policies, codes of conduct and sustainability reports.

Step 1: Level 1 Scoring

 each descriptor/ item in Level 1 attracts 1 point
 add all scores in each Part, divide by the number of questions,
multiply weightage and then add to sum of other Parts
 conducted by the individual CG experts designated to assess that
country
 peer review conducted on a sample for quality control
 If items are mandated, by default get 1 point (except for part D)

Step 2: Level 2 Scoring

 bonus scores varies (from +1 to +2)
 penalty scores (from - 1 to -10)
Step 3: Total Scores
add up sum of level 1 and 2 to arrive at final score 13
 Assessment Process
• Capital market regulators assign Domestic
Ranking Bodies to conduct the assessment:
– Indonesia: Indonesia Institute for Corporate Directorship
(IICD)
– Malaysia: Minority Shareholders Watchdog Group
– Philippines: Institute of Corporate Directors Philippines
– Singapore: Singapore Institute of Directors
– Thailand: Thai Institute of Directors
– Vietnam: Individual, Vietnam National University
• Results of the assessment are reviewed by
assessors from other countries.
 Assessment Process
Information/Data Second Round of
Collection External Review

Assessment
Second Round of
Justification
Domestic Review

Expert Section Review

External Review or Reconciliation

Justification Final Score

 2017 ACGS Structure
Number
2015 Default New OJK
Level 1 and Level 2 of Items
ACGS Answer Regulation
(2017)
Rights of Shareholders 20 25 8 7
Equitable Treatment of
15 18 7 2
Shareholders
Role of Stakeholders 13 21 - 11
Disclosure & Transparency 32 41 - 23

Responsibility of the Boards 65 74 7 30

Total Level 1 145 179 22 73

Bonus Points 13 11 - -
Penalty Points 25 22 - -
Total Level 1 + Level 2 183 212 22 73
 CG Score Biggest100 By Part
(2014 – 2017)
2014 2015 2016 2017
72.37
67.91
62.68
57.27

25.91
19.04 23.77
18.17
9.66 7.98 17.5 20.99
7.7 7.77 16.28 20.2
9.53
7.24 9.16 6.96
6.8 7.73 6.82
4.59

PART A PART B PART C PART D PART E OVERALL

 CG Score MidCap100 By Part
(2016 – 2017)
2016 2017
63.14
59.91

22.93
16.93 21.01
16.24
9.09 9.01 7.03
6.54 6.45 6.55

PART A PART B PART C PART D PART E OVERALL

Financial Vs. Non-Financial: Mean Score
BIGGEST100 MIDCAP100
84.27

66.84 68.48
62.19

FINANCIAL NON-FINANCIAL
 Top-50 ASEAN PLCs:
A Challenge for Indonesia
Number of Companies
23

11
8
6
2
0
Indonesia Malaysia Philippines Singapore Thailand Vietnam
 OJK Regulatory Reform
ACMF Initiatives

World Bank
ACGS ACGA/CLSA
ROSC

Indonesia CG Road Map

OJK New Regulations CG Code for PLCs

 OJK’s Responses
• Launched Corporate Governance Roadmap
• Issued new rules/Revised existing rules:
– Audit Committee (December 2012)
– Annual Report (December 2012)
– General Meeting of Shareholders (December 2014)
– Board of Commissioners and Directors (December 2014)
– Nominatiion and Remuneration Committee (December 2014)
– Corporate Secreatry (December 2014)
– Website for public companies (June 2015)
– CG Code for Listed Companies (October 2015)
• Impose ‘Comply or Explain Rule’ to CG Code for listed
companies, starting in year 2017
 What was Happening: Weak Board Culture in
Governance Processes
• Quantity and quality of indpendence commissioners
• Poor independence judgment since most president
commissioners, RNC chairmans are non-independent
commissioners
• Poor selection processes for independent
commissioners
• Inappropriate performance appraisal both for BOD and
BOC (especially independent commissioners)
– Criteria and processes
• Poor remuneration practices
• Lack of review of material control and risk
management by BOC
 Weak Board Culture….cont’d
• Inappropriate review internal control and risk
management by BOC
• Inappropriate review of material RPTs by BOC
• Poor review of company’s mission and
strategy
• Inappropriate continuos professional director
development programs
• Poor quality of board meetings
A Need To Establish An Effective CG System

Law, Rules
and
Regulations

CG
Articles of Board Codes of Policies CG
Association Charter Ethics and Implementation
Procedures

International
CG Codes

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Governance Processes, Risk and Compliance

CG Policies and
Procedures
Implementation The Role of
Internal
Evaluation Audit, Risk
Manageme
nt and
Disclosure Compliance

Performance