Promoting a More Efficient Corporate Governance Model in Emerging Markets Through Corporate Law

If we group together corporate governance models in countries with emerging markets, it is worthwhile to consider if reform suggestions could be offered to these countries collectively to address their shared weak points from a legal perspective. This article attempts to find common characteristics in corporate governance models from countries with emerging markets, who suffer from similar problems and challenges. The article traces many dimensions through which corporate governance functions in emerging markets can be characterized, with an emphasis on the legal foundations and responses to problems especially within corporate law, in order to promote the soundness of corporate governance systems measured according to criteria such as accountability, transparency, responsibility, and fairness. Focusing on corporate governance problems arising from state ownership, state control, board independence, and poor stakeholder and minority shareholder protection, several proposals are made at different levels.

Hybrid regulatory sources from government legislation and soft law are suggested as appropriate for emerging markets. A series of elements are suggested, although some may have already been enforced individually in certain jurisdictions, including independent directors, employee representatives, more clearly defined directors’ duties, especially their duties toward stakeholders, mandatory information disclosure of corporate social responsibility (“CSR”) issues, legitimacy of cross-listing, effective auditing, and the appointment of independent external auditors in order to promote corporate governance and respond to inefficiencies in emerging markets.