Regarding the role of institutional investors, CalPERS is the only institutional investor which has significantly affected Thai corporate governance.  When CalPERS announced in February 2002 that it would divest investments in Thailand following its review of corporate governance, transparency and market factors, the Thai government immediately responded by setting up a national level committee on corporate governance headed by the Prime Minister, and declared 2002, the “Year of Good Corporate Governance”.  Many measures concerning the corporate governance improvement have been initiated since then.  CalPERS is one of the largest international investors compared to Thai institutional investors which are much smaller and has not yet considered corporate governance as part of its investment criteria.  Likewise, employees and the market for corporate control have not contributed to any improvement in Thai corporate governance.

Thailand has also made much progress in improving its accounting and auditing standards.  Thai accounting and auditing standards have been revised to be consistent with the international accounting standards and the international standards on auditing.  The new law, Accounting Profession Act, which became effective in the fourth quarter of 2004, introduces a new regulatory framework under which all accounting professionals are supervised.  The law established Federation of Accounting Profession, which is responsible for licensing, registration, and drafting of conduct principles, and the Accounting Profession Oversight Board which supervises the Federation’s business and endorses Thai accounting standards.  The SEC has also taken a number of measures to improve the quality of financial reports such as requiring all listed companies to register the names of their accounting officers, examining auditors’ working papers in some suspicious cases, requiring audit partner rotation every five years, mandating more disclosure in annual reports and Form 56-1 annual filing, and closely reviewing financial statements of firms with weak governance.  To motivate companies to voluntarily improve their corporate governance, the SEC and the SET also utilized positive reinforcement and rewards including granting 50% discount on offering and annual fees to listed companies that have high rating on corporate governance. 

Regardless of the good progress in Thai corporate governance, further improvement is needed.  First, the protection of minority shareholders should be enhanced, and more financial and corporate governance information of listed firms should be made publicly available to investors.  Second, Thai regulators should place more emphasis on the top management than on the BOD, the audit committee and the external auditor for maintaining good governance and reliable financial reports.  Third, the BOT should strengthen its independence requirements of the board of directors of Thai financial institutions to be consistent with the SET requirements, and require financial institutions to use corporate governance as one of the lending criteria.  Fourth, to enhance the rights of creditors, the new Bankruptcy Law should be amended in four aspects, and the law on liquidation and foreclosure should be revised to speed up the process of collecting payments for creditors.  Fifth, Thailand needs a whistle-blower law to provide protection and retribution to employees who expose a company’s questionable conduct to the public.  Sixth, the valuation of long-life fixed assets should be based upon historical cost instead of allowing both historical cost and fair market value to prevent a company from creatively revaluing these assets upward.  Seventh, in terms of self-restraint, Thai companies should strictly adhere to two of the Buddhism’s five precepts, no stealing and no false statements, in order to prevent any misappropriation of companies’ assets and  fraudulent financial reporting.  Eighth, the Thai government needs to improve its own governance in light of crony capitalism, the increasing authoritarianism of the Prime Minister, Thaksin Shinawatra, the lack of transparency of his “populist” policies, and his policy of suppressing the press freedom.  The findings and the suggestions of this study should be useful for other emerging economies in their attempt to improve corporate governance.

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