Corporate governance standards may cover a plethora of issues. The most widely used benchmark for good corporate governance – the OECD Principles of Corporate Governance – cover five main areas: I) rights of shareholders; II) equitable treatment of shareholders; III) role of shareholders in corporate governance; IV) disclosure and transparency; and V) responsibility of the board. One of the most important initiatives in this area is the World Bank and OECD Global Corporate Governance Forum. This forum brings together leading bodies engaged in worldwide governance reform: multilateral banks active in developing countries and transition economies, international organizations, and country groupings engaged in governance reform, alongside professional standards setting bodies, and the private sector. The Global Corporate Governance Forum seeks to broaden the dialogue on corporate governance, to exchange experience and good practices, and to coordinate activities and identify and fill gaps in provision of technical assistance.<sup>18</sup> The investors in our sample singled out corporate governance practices which ensure transparency and good alignment of interests between management and (minority) shareholders as the most crucial for the primary investability decision. Investors in our sample use external datasuppliers as well as direct meetings with the companies to provide input into the assessment of the overall quality of a market’s corporate governance practices. Specialized consultant companies and investment banks as well as international financial institutions all provide assessments of the overall quality of the corporate governance environment in emerging as well as developed markets.<sup>19</sup> Rating the quality of corporate governance is, however, notoriously difficult without going to the firm level. While rules and regulations may require having, for example, independent directors on the board, the directors may be so friendly with the major shareholder that the intended independent check is only nominal. Many bottom-up equity investors, therefore, spend a good deal of time and effort assessing the quality of corporate governance in individual companies and, in some cases, countries.

Investors in our sample may leave out otherwise attractive companies from their investable universe due to lack of adherence to corporate governance standards (as in the case of investment managers employed by CalPERS cf. Box 1: above), but they will often continue to monitor these companies, and if the potential to create additional value is present, will use influence to exert pressure and change the corporate governance situation. Pressure is exerted either by individual institutional investors or through associations, etc. Corporate governance is one of the few areas where institutional investors especially have found enough common interest to overcome the diversity in investment strategy which otherwise keeps strong all-encompassing alliances from _for companies to afford investors a higher level of accountability through good corporate governance practices and greater transparency, and, as a consequence, reduce funding costs“,_ cf. www.bovespa.com.br.

> 18 For more about the work of the Global Corporate Governance Forum see http://www.gcgf.org.

> 19 See for example the work done by KLD Research & Analytics, Credit Lyonnais Securities Asia (CLSA), and the summary assessments of the observance of selected standards and codes conducted by the World Bank and IMF, which, in some countries, include the OECD corporate governance principles, see http://www.worldbank.org/ifa/rosc.html.

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