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Business

Thai business tries to clean up its act

A spate of scandals has given fresh urgency for rules to fight malfeasance

Bandid Nijathaworn, president and chief executive of the Thai Institute of Directors Association

BANGKOK Tackling corrupt practices, such as bribery and insider trading, has moved up the agenda at many companies in Thailand in recent years.

More than 830 Thai companies have signed on to a campaign to clean up business called the Collective Action Coalition Against Corruption. The initiative was set up in 2010 by private-sector organizations, including the Thai Chamber of Commerce. Of those taking part, 391 are listed companies that make up 80% of the market capitalization of the Stock Exchange of Thailand.

And more than 230 companies in the group have been certified as having sufficient internal anti-corruption policies.

A regionwide ranking of corporate governance in six Southeast Asian countries has shown signs of progress. The average score for Thai companies rose from 67.65 in 2012 to 87.53 out of a possible 100 in 2015, with 23 Thai businesses among the top 50, the most by far of any country in the survey.

"Companies are no longer seeing corporate governance as an extra cost," said Bandid Nijathaworn, president and chief executive of the Thai Institute of Directors Association and a former deputy governor of the Bank of Thailand. "It is seen more like a competitive factor to their business, especially as they compete for investment and funding."

NO MORE BLIND EYE Recent scandals have shown that corporate governance is beginning to matter a lot to domestic investors.

Insider trading at CP All, a company controlled by billionaire Dhanin Chearavanont that operates the 7-Eleven convenience store chain in Thailand, prompted institutional investors to shun its shares and vote against the reappointment of its independent directors. It was a show of disappointment as the company's chairman and two other executives that had faced criminal charges refused to step down.

A few months after the shareholders meeting, the company announced that the executives involved in the scandal will give up their salary for a year.

"In the old days, investors were focusing more on profits, without paying much attention [to] how it would affect [others] beyond the company, such as the community, its employees and the government," said Bandid. "But now they are becoming more aware of business sustainability."

Thailand's Securities and Exchange Commission is also cracking down on listed companies that are engaged in illegal practices. After charges were filed against CP All executives in December 2015, the watchdog fined Chai Sophonpanich, chairman of major nonlife insurer Bangkok Insurance, for illegally disclosing dividend payments to potential investors.

WATCHDOGS NEEDED "Once you become a listed company, family businesses have to understand that the business no longer belongs just to the family," IOD's Bandid said. He suggested companies that are heavily influenced by the founding family should have more independent directors than the legal requirement of one-third of the board.

"A lot of the corporate governance problems in Thailand arise because the board appointments are not good enough," Bandid said. State-owned companies, too, must deal with vested interests and should have a significant number of outside directors, he said.

Education is also essential. Most of the executives caught up in recent scandals have pleaded ignorance of the rules. The Securities Law was amended last year to clarify and specify offenses for market misconduct. IOD has been holding corporate governance seminars and more corporate directors are attending, Bandid said.

Outside the securities market, corruption is also a pressing issue. Earlier this year, U.S. and U.K. authorities alleged that state-owned oil and gas giant PTT and flag carrier Thai Airways International took bribes from the U.K.'s Rolls-Royce in return for the purchase of equipment and aircraft engines.

According to the annual Corruption Perceptions Index published by Transparency International, Thailand fell to 101st out of 176 countries in 2016, versus 76th the previous year.

Bandid sees signs of improvement, however. A new anti-corruption act was instituted in 2015 extending penalties to private citizens who pay bribes. Previously, sanctions were imposed only on government officials who took them. "This has made companies more aware ... that they can be [held] liable for bribery, even if the boards of directors were not directly involved in paying the bribe," Bandid said. "The challenge is on the enforcement of the law and improving the practices and mindset of both the public and private sector."

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