The introduction of new company laws and corporate governance standards in emerging markets requires a paradigm shift in the orientation of governments and the international donor community. As a requisite of new legislation, reformers and regulators should involve directors and their companies in legislative drafting and other standard setting processes and be aware of the limitations of “Western models.”
Impact assessments are necessary to understand the costs associated with implementation and enforcement. Legislative “shock therapies” do not always work in financial markets with poor enforcement and low acceptance of modern corporate governance standards.
The implementation of corporate governance systems in emerging markets undoubtedly requires regulatory reform. Although refinement of laws will continue to be necessary, the focus should be on the implementation and enforcement of modern standards. Formal training in business ethics, legislation, regulations and international standards are equally important to develop new generations of independent directors and business leaders.
Self-regulation, director accreditation, continuing education and peer-to-peer consultation networks can be useful instruments to provide directors incentives to develop their skills and working procedures. This not only requires a considerable investment in time and resources, but also recognition of the limitations of coercive reform strategies in emerging markets and the importance of demand-driven programs that will provide incentives to the private sector to make changes in business attitudes and practices.
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