C. Status of implementation of good practices on corporate governance
2. Main outcomes of the survey: overview of all disclosure items
Since not all disclosure items in the survey can be considered to be of equal importance to all users of corporate reports, table V.1 displays the results of the survey within each of the five broad categories discussed in section 1 above. This allows the readers of the report to draw their own conclusions based on the relative importance they assign to a particular category or subject area, and within that category, a particular disclosure item.
Table V.1. Main findings of survey on corporate governance disclosure (Number of enterprises in parentheses)
Type of listing Country income Special Focus
Disclosure items by category
All (105)
Inter- national
listing (70)
Only local listing
(30)
OECD
& other high income
(42)
Low &
middle income (63)
SOE (27) Financial transparency and information disclosure
(Per cent)
Financial and operating results 100 100 100 100 100 100
Critical accounting estimates 91 93 93 95 89 89
Type of listing Country income Special Focus
Disclosure items by category
All (105)
Inter- national
listing (70)
Only local listing
(30)
OECD
& other high income
(42)
Low &
middle income (63)
SOE (27) Nature, type and elements of related-party
transactions 86 93 77 90 83 85
Company objectives 79 89 63 88 73 74
Disclosure practices on related party
transactions where control exists* 76 84 67 81 73 78
Rules and procedure governing extraordinary
transactions* 70 81 47 83 60 70
The decision making process for approving
transactions with related parties* 63 76 43 71 57 59
CEO/CFO certification of financial statements* 51 66 27 69 40 44
Impact of alternative accounting decisions 50 56 43 69 37 26
Ownership structure and exercise of control rights (Per cent)
Process for holding annual general meetings 82 90 73 88 78 74
Ownership structure 78 91 57 90 70 70
Changes in shareholdings 76 80 70 81 73 67
Availability and accessibility of meeting agenda 75 83 67 88 67 67
Control structure 74 86 57 81 70 67
Control rights 70 84 47 81 62 48
Rules and procedures governing the acquisition
of corporate control in capital markets* 60 74 37 71 52 48
Control and corresponding equity stake 57 73 27 74 46 41
Anti-takeover measures* 22 27 13 31 16 15
Board and management structure and process (Per cent)
Composition of board of directors (executives
and non-executives) 82 93 67 98 71 74
Role and functions of the board of directors 81 91 67 98 70 70
Governance structures, such as committees and
other mechanisms to prevent conflict of interest 79 91 63 95 68 63
Duties of the directors 78 87 67 95 67 70
Qualifications and biographical information on
board members 77 86 67 88 70 74
Type of listing Country income Special Focus
Disclosure items by category
All (105)
Inter- national
listing (70)
Only local listing
(30)
OECD
& other high income
(42)
Low &
middle income (63)
SOE (27) Composition and function of governance
committee structures 76 89 60 90 67 59
Risk management objectives, system and
activities 75 84 60 93 63 63
Material interests of members of the board and
management 69 77 57 79 62 59
Performance evaluation process 68 79 53 88 54 56
Duration of director's contracts 64 80 37 81 52 41
Maintenance of independence of the board of
directors 64 79 40 83 51 52
Compensation payable clauses in directors`
contracts 63 80 33 79 52 41
Determination and composition of directors`
remuneration 59 71 40 76 48 56
Professional development and training activities 57 63 50 79 43 48
Number of directorships held by the directors 56 67 37 71 46 41
“Checks and balances” mechanisms 53 64 37 71 41 30
Availability and use of advisorship facility
during reporting period 53 64 33 71 41 48
Existence of procedure(s) for addressing
conflicts of interest among board members 50 66 20 57 46 44
Plan of succession 35 46 17 50 25 19
Corporate Responsibility and Compliance (Per cent)
Policy and performance in connection with
environmental and social responsibility 77 79 73 88 70 67
A Code of Ethics for all company employees* 68 84 40 83 57 41
A Code of Ethics for the Board and waivers to
the ethics code* 65 80 40 81 54 41
Mechanisms protecting the rights of
stakeholders in business 65 76 50 71 60 59
Impact of environmental and social responsibility policies on the firm's sustainability
63 66 57 74 56 41
Policy on "whistleblower" protection for all
employees* 41 51 23 57 30 22
Type of listing Country income Special Focus
Disclosure items by category
All (105)
Inter- national
listing (70)
Only local listing
(30)
OECD
& other high income
(42)
Low &
middle income (63)
SOE (27) Auditing
(Per cent)
Internal control systems and their effectiveness 66 80 43 88 51 52
Process for interaction with external auditors 65 79 43 88 49 48
Process for interaction with internal auditors 63 73 50 83 49 44
Process for appointment of external auditors 61 79 30 86 44 44
Board confidence in independence and integrity
of auditors 57 69 40 79 43 33
Process for appointment of internal auditors 53 71 20 79 37 33
Identification of the "financial expert" in the
audit committee* 50 67 20 67 40 33
* New disclosure items included in the 2005 survey.
General overview
As shown in table V.1, the strongest group of disclosure items is Financial Transparency, and the weakest group is Auditing. Generally, the disclosure of internationally listed enterprises is better than the disclosure of only locally listed enterprises, and the disclosure of enterprises from high income countries is better than that of lower income countries. The special focus on SOEs reveals a general weakness in disclosure compared to all the companies in the survey. These general observations are the subject of more detailed analysis in sections 3 to 6 below.
Table V.1 also shows that the average disclosure rate for all enterprises fell below 50 per cent for only three of the disclosure items. These three items (and their respective disclosure category) were: anti-takeover measures (in the ‘ownership structure’ category); policy on whistleblower protection (in the corporate responsibility and compliance category); and succession planning (in the board and management structure and process category). The disclosure item on anti-takeover measures — i.e. for all types of enterprises — was the least prevalent disclosure item in the entire survey. The disclosure item on whistleblower protection was the second least prevalent. Although the average rate of disclosure for this item rises to 57 per cent for both internationally listed enterprises and enterprises from high-income countries, it averages only 30 per cent for enterprises from low- and middle-income countries; this may suggest a practice that has become commonplace in more developed markets but which has not yet spread to all markets. The rate of disclosure for the item 'plan of succession' was also relatively low for all groups of enterprises surveyed, rising at its highest point to 50 per cent for high income countries. A short list of the most prevalent and least prevalent disclosure items is provided in table V.2.
Table V.2. Most prevalent and least prevalent disclosure items (Per cent)
Top 5 most prevalent
disclosure items among all 105 enterprises surveyed
Disclosure Rate
Bottom 5 least prevalent disclosure items among all 105 enterprises surveyed
Disclosure Rate Financial and operating results 100 Identification of the "financial
expert" in the audit committee 50 Critical accounting estimates 91 Impact of alternative accounting
decisions 50
Nature, type and elements of
related-party transactions 86 Policy on "whistleblower"
protection for all employees* 41 Composition of board of directors
(executives and non-executives) 82 Plan of succession 35
Process for holding annual general
meetings 82 Anti-takeover measures* 22
* New disclosure items included in the 2005 survey.
Of the ten new disclosure items added to the 2005 survey, eight are disclosed by more than 50 per cent of enterprises surveyed. Only two of the additional disclosure items (anti-takeover measures; and policy on 'whistleblower' protection) are among the least prevalent disclosure items discussed above. And one of these least prevalent items (whistleblower protection) is disclosed by more than 50 per cent of the internationally listed enterprises or enterprises from high income countries examined in this survey. This indicates that most of the new disclosure items added to the 2005 survey's benchmark, as well as to the updated guidance document ISAR/30, represent relatively widespread existing good practices in corporate governance disclosure.
Another new disclosure item under Financial Transparency, was CEO/CFO certification of financial statements. The results for this item (with over 65 per cent of both high income and internationally listed firms making disclosure on this subject) are interesting given the relative novelty of this disclosure item in corporate governance reporting. Indeed this disclosure item is largely a product of the Sarbanes Oxely Act in the United States, yet it has clearly managed to influence a range of enterprises from around the world.
3. Comparison of disclosure items between internationally listed companies and