Improvement in Thai Corporate Governance After the Crisis
Since the crisis, Thai corporate ownership structure has been less family-oriented and more dominated by the government and foreign investors (Nikomborirak and Tangkitvanich, 1999).  Following the banking reform, Thai government has become the largest equity owner in the banking industry owning seven out of 14 commercial banks.  Consequently, the government has both the political and economic power to influence Thai corporate governance.  In its efforts to improve corporate governance, the Thai government has adhered to the following three dimensions: regulation, market forces and self-restraint.  Among these three dimensions, regulation is the one which contributes the most to the improvement in Thai corporate governance.  Similar to other Asian developing countries, Thai market forces have not contributed much to improving corporate governance after the financial crisis because Thai capital markets are relatively small, and play only a secondary role to banks in providing any financing to companies.   To enhance the comparability with the previous section, which describes Thai corporate governance before the crisis, the discussion about Thai regulation and market forces after the crisis is also organized into the same four sub-sections: the rights and treatment of minority shareholders, the structure and responsibilities of the board of directors, the rights and roles of stakeholders, institutional investors and the market for corporate control, and the financial disclosure and transparency. 
The third dimension of corporate governance, self-restraint of a corporation, is synonymous to high ethical standards or a commitment to do the right things.  Self-restraint is very difficult to measure, and therefore, the Thai government emphasizes rewards and positive reinforcement for companies with good governance as an important means to improve self-restraint.  The fifth sub-section discusses these rewards and positive reinforcement.

Before discussing these corporate governance dimensions, it is important to be aware of two Thai regulators which play crucial role in improving corporate governance of listed companies.  They are the Stock Exchange of Thailand (SET) and the Securities Exchange Commission (SEC).  The SET history dates back to July 1962 when a private group established an organized stock exchange.  However, this stock exchange was inactive because of a lack of official government support and a limited investor understanding of the equity market.  In May 1974, long-awaited legislation establishing “The Securities Exchange of Thailand” was enacted, and on April 30, 1975, the Securities Exchange of Thailand officially started trading.  On January 1, 1991, its name was formally changed to “The Stock Exchange of Thailand” (SET).  The Securities Exchange Act of 1992 (SEA) established further regulatory framework for the SET, and required that the SET be overseen by the SEC.  The SEC, which was established in 1992 by the SEA, serves as the police of the Thai stock exchange.   The SEC impact on Thai corporate governance began only after the crisis with most of its work concentrated in and after 2002, the “Year of Good Corporate Governance” as declared by the Thai government.       

The Rights and Treatment of Minority Shareholders
To provide more protection for minority shareholders, both the SET and the SEC have amended their rules related to transactions that are “connected” to the major shareholders and the top executives.  Connected transactions can be detrimental to minority shareholders because the company’s funds or benefits may be siphoned out to the major shareholders or the top executives (Phuvanatnaranubala, 2005).  Three examples of such connected transactions are: (1) loans to major shareholders or executives which later became non-performing, (2) using a company’s funds to invest in major shareholders’ projects which later turned sour and required substantial write-downs, and (3) a company’s giving up its right to subscribe to the capital increase in a profitable subsidiary so that individuals connected to the major shareholders or the top executives could gain control in this subsidiary.   In particular, the new SET rules provide a clearer definition of connected transactions and require these transactions to be approved by shareholders.  Companies also have to provide written details about these transactions to both their shareholders and the SEC prior to the shareholder meeting date.   The new rule provides the SEC the power to intervene in case of inappropriate connected transactions by requiring explanations from the company or issuing an order for rectifications.  If the company insists in pursuing the inappropriate connected transactions, the SEC can issue a public statement to alarm the shareholders.  In 2004 the SEC was able to stop six inappropriate transactions worth 3,000 million baht ($70 million), and also issued the orders for rectification of three transactions worth 1,500 million baht (Chantanayingyong, 2005).  The Public Company Act has also been amended to prohibit loans to major shareholders, top executives and directors.

Phuvanatnaranubala (2005) stated that the SEC has recently proposed to the government four amendments to the Securities and Exchange Act of 1992: (1) enhancing the rights of small shareholders to request public companies to convene meetings, (2) specifying the procedures to follow for transactions connected with major shareholder or company’s executives, (3) setting the penalties both civil and criminal cases for failure to inform shareholders of important information, and (4) strengthening the enforcement power of the SEC so that the SEC shall, for the first time, be able to take civil action against unfair trading practices.  This proposal has been accepted by the government, and is currently in the drafting stage.  The SEC also proposed to the government the enactment of the law to allow for class action suits which would help small shareholders minimize their legal expenses by pulling together their resources (Phuvanatnaranubala, 2005).  To strengthen enforcement, the Prime Minister has also issued an order setting up a committee comprising of the SEC and/or the BOT, the police and the attorney general to coordinate cases for prosecution.  From 1999 to June 2005, the SEC filed criminal complaints against current and former executives of three listed companies alleging corporate fraud and/or misappropriation of the company’s fund (two of these companies were also alleged for violating financial reporting rules).  The first compliant filed in 1999 resulted in the sentence of five years’ imprisonment without probation against two former executives.  Since 2005 the Thai government has also set up a special unit to investigate financial fraud, and is considering an increase in penalties for both civil and criminal cases.  The establishment of this special unit could help speed up the prosecution process which currently takes 5-10 years.