In many transition countries, weak corporate governance has been blamed for the delay in restructuring after privatisation. In other words, while privatisation succeeded in transferring ownership of enterprises from public to private hands, ambiguous property rights and an inadequate regulatory and institutional framework resulted in unchecked control by corporate insiders and opaque ownership and control structures. In many cases the rights of minority shareholders were very poorly protected indeed. At the end of the day, this poor governance undermined confidence in the markets and held the whole financial system hostage. It is also worth noting that the challenge to improve governance is not limited to emerging market and transition economies.
All countries stand to gain from improving the way their enterprises operate.
Even the most advanced economies are discussing, questioning and working towards better practices. In the United States the separation of the chairman and chief executive preferred by many investors is unusual. European countries face mounting calls for better treatment of minority shareholders and greater transparency in mergers and acquisitions. In Japan, efforts to rekindle economic dynamism clearly require improvements in areas such as information disclosure and board practices. In their constant search for investment opportunities, investors will not hesitate to take their money around the globe.