But Charles Dallara, the head of Washington’s Institute of International Finance, insists it’s the right moment to unveil his group’s new code of corporate governance. “People normally yawn when you talk about improving accounting and auditing standards,” he says. “The Enron case may be a good lesson for us not to be arrogant, but its real impact is in focusing attention on these issues.”
The IIF, a lobbying group for more than 320 financial institutions in emerging markets , including Alliance Capital, Templeton Asset Management, TIAA-CREF and UBS Asset Management , believes that equity investment in poor countries would grow if local companies, lawmakers and regulators adopted the code. “Investors have been burned way too many times” and are reluctant to return to markets in Africa, Asia, Eastern Europe and Latin America, says Dallara, a former assistant Treasury secretary who helped craft the Brady bond rescue plan.
The IIF code recommends instituting “one share, one vote” at publicly quoted companies, subjecting takeovers to shareholder approval and ensuring the independence and adequate compensation of regulators and judges.
Dallara admits that “the real danger is that rules and regulations will be created and then not applied.” Still, he hopes the lure of foreign funding will win out. “We believe money managers will increasingly direct investment to countries that responsibly step up to the plate on corporate governance.”
