The Thai corporate governance: from crisis to recovery

Abstract

Besides cronyism, corruption, and nepotism, "bad corporate governance" has been ascribed as one of the factors responsible for the fall of the East Asian economies. It is interesting to note that, when the good times rolled, such serious defects were never brought to light. But when money dries up, the search for answers exposes many serious underlying defects of our economy. As the Thai proverb goes: When the tide recedes, the stumps appear. Until the crisis, the issue of corporate governance is rather unfamiliar with most of us in Thailand. Even now, we cannot find a Thai word that can convey the idea of "governance" properly. There are at least three versions in use at the moment. So, to be able to deal with the issue of corporate governance, we feel that it is necessary to first define it. In a nutshell, corporate governance concerns the responsibility that directors and managers hold to other stakeholders of a company which include shareholders, creditors, the government, employee, the society, the environment and consumers. Managers are responsible for managing the business in such a way that maximizes value to owners or shareholders; directors are responsible for monitoring that managers do so. Both are jointly responsible for servicing debt, ensuring the well-being of employees, providing reliable services to customers, taking responsibility in environmental concerns, Indeed, balancing the responsibilities to diverse groups can be complicated. For the purpose of this paper, we shall focus only on the board's and management's responsibility to financial stakeholders: shareholders and creditors.