This week marks the launch of an important market institution – the Myanmar Institute of Directors (MIoD), the first independent, private sector-led organization promoting best corporate governance standards and practices in the country. This is a significant step in Myanmar’s ongoing market reforms and sends a strong signal to the global business community the country’s commitment to good governance and responsible business.
Why is this so crucial for Myanmar’s growth? Globally, good governance has been shown to help companies improve performance and boost investor confidence, leading to increased access to capital. Three out of four investors cited better operational efficiency and revenue performance – as a result of good governance and sustainable business practices – as strong reasons to invest in the companies, according to a 2015 global investor survey by MIT Sloan Management Review and The Boston Consulting Group.
A preliminary review of the portfolio companies that the International Finance Corporation (IFC) has invested in globally also shows that those with better corporate governance scores (such as well-functioning boards and good risk management practices) enjoy nearly three times higher return on equity and lower credit risk than those with lower governance scores.
Recognizing the benefits, some of Myanmar’s leading businesses – such as Yoma Bank, City Mart Holding Co., and Shwe Taung Group – have made and continue to make important corporate governance reforms. Such changes are expected to help them attract more financing and international business partners.
At the heart of a sound corporate governance framework is a well-structured board comprising professional and responsible directors who can steward a company’s growth in the best interest of its shareholders. Investors looking to invest in Myanmar companies will scrutinize individual directors serving on a company’s board and demand necessary changes to be made before jumping on board. Therefore, having a sufficient pool of well-qualified directors is tantamount to spurring investment and supporting Myanmar’s growth.
In Thailand, for example, the Thai Institute of Directors Association has trained more than 25,000 directors since its inception in 1999. These directors have moved on to improve the performance of their respective companies, enhancing value for shareholders and contributing to the sustainable growth of the Thai economy.
With the new Myanmar Companies Law taking effect in August, local companies are compelled to modernize their boards and make other governance reforms. Now is thus a critical time to establish an organization like the Myanmar Institute of Directors to fulfill the soon-to-increase demand for high-quality directors, advance board professionalism, and promote business ethics and transparency.
As an independent, non-profit entity, MIoD is governed by a board of directors comprising business leaders from the private sector and senior officials from the Directorate of Investment and Company Administration, the Securities and Exchange Commission of Myanmar, and the Central Bank of Myanmar.
MIoD will begin delivering workshops and seminars on important governance topics to the market through its planned Learning Series program. This will help prepare a robust supply of professional directors to serve on the boards of Myanmar companies and give them the knowledge and tools to make necessary corporate governance changes.
The new institute will also benefit the whole Myanmar market by helping the country become part of an active network of over 120 similar institutes globally. All of them are important standard bearers of governance and responsible business for their markets, and MIoD will be no exception.
Within the Association of Southeast Asian Nations (ASEAN) community, director institutes collaborate frequently and help harmonize governance standards and practices across ASEAN economies, including through the ASEAN Corporate Governance Scorecard initiative. By joining them, Myanmar will send an important signal to global investors that it too aspires to the same international standards of governance.
As Myanmar expands its capital market and encourages more companies to list on its stock exchange, the country will need to implement more new laws, codes, and rules to create a sound and practical regulatory environment for the market. MIoD can be a constructive sounding board for such changes to further raise corporate governance standards.
The Institute’s motto – Governance for Growth – sums up why all companies and individuals are encouraged to become MIoD members. Companies will not only learn how good governance can support their own growth but will also enjoy the opportunity to network and share ideas with other leaders from Myanmar’s dynamic, rapidly changing business community.
MIoD was formed with support from IFC, a sister organization of the World Bank and a member of the World Bank Group, and the governments of Australia and the United Kingdom. To learn more, go to: www.myanmariod.com