Corporate Governance

The Importance of Corporate Governance

 An important element to boost the success of development and regional economic integration relates to defining the standards, mechanisms, policies and implementation directions that are correct, clear and comprehensive. For Lao’s PDR, developing an efficient, strength and transparency stock market requires to have the good corporate governance to build and increase the confidence of market participants and to generate returns and increase long-term value for investors.
 The Lao Securities Commission Office (LSCO) and Lao Securities Exchange (LSX) see the importance of corporate governance to the long-term development of listed companies. Therefore, LSCO and LSX have collaborated with the International Finance Corporation (IFC) to research and adopt the regional and international corporate governance principles as basis for formulating “Guideline on Corporate Governance for Listed Companies” aiming to enhance the quality of corporate governance practice of listed companies to be gradually in line with the regional and international standards issued by the organization for Economic Co-operation and Development (G20/OECD) and the Association of Southeast Asian Nations (ASEAN).
 Good corporate governance improves a company’s performance, create a favorable investment climate, and contributes to the sustainable development of the capital market. In addition, implementation of the good corporate governance will help the company to operate efficiently, transparently and fairly. At the same time, a company with good corporate governance system will build confidence for investors and attract more domestic and foreign investments.

Purposes of the Corporate Governance Assessment

The main purposes of corporate governance assessment for listed companies are as follows:

  • To evaluate the quality of listed companies’ corporate governance especially the performance of listed companies on disclosure, holding of shareholder meetings including fulfilment of the responsibilities and duties of the board of director and directors;
  • To analyze the good points, shortcomings and things to be improved for listed companies, bring the results of the assessment to enhance and strengthen their corporate governance;
  • The market regulator can use the corporate governance assessment result for policies making in order to develop the listed company's corporate governance practice;
  • To prepare for the ASEAN CG Scorecard assessment in the future.
Assessment Mechanism

The assessment mechanism utilizes the Lao CG Scorecard Form, comprising 100 questions for a total of 100 points. The questions are divided into four main sections:

  • Shareholder Rights and Equal Treatment of Shareholders 10 points,
  • Management of Relationship with Stakeholders 10 points,
  • Disclosure and Transparency 40 points,
  • Roles and Responsibilities of the Board 40 points.
Classification

Status

Classification

Score Range

Very Good

From 80 points and above

Good

From 70 to 79,99 points

Moderate

From 50 to 69,99 points

Weak

Below 50 points

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