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Good Corporate Governance
Corporate Governance
Importance of corporate governance
Guidelines to good corporate governance
Summary of related laws and regulations
Promotion of corporate governance excellence
Assessment of corporate governance of the Thai capital market
Corporate Governance
Corporate Governance is a managerial principle for a company to balance the interests of stakeholders, and enhance efficiency, transparency and accountability of the company.   
In case of a publicly-listed company, corporate governance is all the more important as it can be a tool internationally recognized for enhancing the company’s efficiency and credibility. Good governance, for example, allows every shareholder who normally cannot participate in the company’s operation in person to do so by appointing the board of directors to monitor and supervise the company’s management on their behalf. 
To establish a circle of trust between the stakeholders and the company, a corporate governance policy must be executed. In essence, the board of directors has the duty to protect the interest of both the company and the shareholders, not take an unfair advantage by abuse of their positions, oversees the executives’ and the management’s performance to optimize corporate efficiency and investors’ returns. Meanwhile, shareholders have the rights to access the company’s information, make material investment decisions and review the performance of directors and executives. 


Importance of corporate governance


As good corporate governance is a key criterion for approving issuance and offering for sale of securities, performing well in this area is an advantage for issuing companies and the capital market as a whole. In essence, the benefits are:    

• Lower financing costs and higher business competitiveness for issuers and listed companies;   
• Market confidence and attractiveness conducive to higher liquidity and market price for corporate finance






Guidelines to good corporate governance


Thailand has adopted the international standards on corporate governance from the OECD Principles of Corporate Governance, which comprise five core areas, as follows: 

• The rights of shareholders
   The area covers the equitable treatment of shareholders, the roles of stakeholders, disclosure and transparency, and the responsibilities of the board of directors.
CG principles are specified in related Thai laws and regulations. In addition, the SEC has prepared CG guidelines based on the OECD principles while other related agencies have produced CG manuals for their respective stakeholders.  





Summary of related laws and regulations ​

Law / regulations


 1. Law

1.1 Public Limited Company Act B.E. 2535 (1992)

• Prescribing basic rights of shareholders, i.e., rights to vote, rights to give a proxy, measures for accommodating shareholders in exercising rights, for example, specifying detailed information in letters to shareholders’ meetings, providing a proxy letter that allows proxy holder to vote for shareholders in a significant matter that might affect the company’s operation such as capital increase and acquiring or transferring an entire or part of business.


• Specifying that the board of directors perform duties with prudence and integrity.

1.2 Securities and Exchange Act B.E. 2535 (1992)

• Prescribing additional roles of shareholders and measures for investor protection, .e.g., rights to propose agenda prior to the shareholders’ meetings.


• Prescribing additional qualifications of the board of directors and executives and their performance of duties with prudence and integrity.

 2. Rules

2.1 Notification of the Capital Market Supervisory Board No. TorChor. 28/2551 Re: Approval for Issuance and Offering for Sale of Shares

Qualifications concerning corporate governance for approval of issuance and offering for sale of shares are as follows:

The rights of shareholders – The shareholding structure shall be clear and fair. The board of directors, executives and major shareholders shall not have conflicts of interest. The management shall protect investors’ rights and treat shareholders equally. 
The responsibilities of the board – The board of directors and executives shall not have prohibited qualifications and shall understand their responsibilities toward shareholders. The board structure shall incorporate a check and balance system, for example, one-third or at least three members of the board shall be independent directors and at least three members forms the Audit Committee, one of whom should have audit expertise. 
Disclosure and transparency – Information disclosed in support of investment decision-making shall be sufficient and not misleading. The company’s financial statements shall be prepared in accordance with the generally accepted accounting standards and audited by an SEC-approved auditor. A reliable internal control system shall be implemented on a continuing basis in compliance with the governing regulations. 
Integrity of stakeholders – Stakeholders shall not be involved with illegal business.

2.2 Notification of the Capital Market Supervisory Board No. TorChor. 44/2556 Re: Rules, Conditions and Procedures for Disclosure regarding Financial and Non-financial Information of Securities Issuers

• The issuing company shall disclose accurate and complete information and shall not conceal or fabricate information that should be disclosed.


• The issuing company shall disclose financial and non-financial information within the specified periods.


• The annual report shall contain information on corporate governance of business. In case of failure to comply with any requirement, the company shall clarify the reasons for such failure. 

2.3 Notification of the Capital Market Supervisory Board No. Torchor. 21/2551Re: Transactions of Related Parties

• Transactions made between directors, executives or persons related to the company or subsidiaries shall be in compliance with the regulations and disclosed accordingly. 

2.4 Notification of the Capital Market Supervisory Board No. TorChor. 20/2551 Re: Acquisition and Disposition of Assets

• Acquisition and disposition of assets, transfer or disclamation of rights to either assets or interest of a company or subsidiary shall comply with the governing regulations and disclosed accordingly.

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In addition to the SEC, the Stock Exchange of Thailand and the Thai Institute of Directors provide corporate governance manuals and guidelines for listed companies. 




Promotion of corporate governance excellence


The SEC cooperates with industry organizations in award presentation and related activities to recognize good corporate governance performers and encourage other listed companies to adopt similar principles into their business operation. This includes: 
• The Stock Exchange of Thailand: SET Awards
• The Thai Institute of Directors: CG Report of Thai Listed Companies 
• The Board of the Year Award
• The National Conference on Anti-Corruption Coalition
• The Annual General Shareholders’ Meeting (AGM) Assessment


Assessment of corporate governance of the Thai capital market

International and regional organizations conduct corporate governance survey on a regular basis, the results of which reflect where the Thai capital market stands in the global arena, thus useful for regulators in laying out corporate governance guidelines for listed companies and industry practitioners. Leading corporate governance assessment projects are:


• The World Bank     
o Corporate Governance - Report on the Observance of Standards and Codes: CG-ROSC (2013)
o Corporate Governance - Report on the Observance of Standards and Codes: CG-ROSC (2005)
o Doing Business
• The Asian Corporate Governance Association (ACGA) in collaboration with Credit Lyonnais Securities Asia (CLSA): CG Watch
• Asean CG Scorecard
Last updated on 05 October 2015
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