Checks and balances: Applying international corporate governance standards means confronting traditional values


As Myanmar is liberalising its economy, an increasingly wide range of traditional business practices and structures are being challenged. These range from how to raise finance to how to attract and keep talented employees, with changes in corporate governance now seen as a vital step to ensure sustainable future growth.

Transitioning to new ways of doing business is not always an easy task, but “this paradigm shift is crucial for Myanmar companies”, Daw Cherry Trivedi, CEO of the Myanmar Institute of Directors, told OBG. “With local companies now open to international shareholders, there has to be a culture shift towards international standards and compliance.”

Governance Scorecard

A Corporate Governance Scorecard for Myanmar was published in 2019 by the International Financial Centre (IFC), the Securities and Exchange Commission of Myanmar, the Yangon Stock Exchange (YSX), and the Directorate of Investment and Company Administration. The survey looked at the corporate governance practices of 24 of the country’s largest companies, evaluating them according to five criteria: rights of shareholders; equitable treatment of shareholders; the role of stakeholders; disclosure and transparency; and the responsibilities of the board. The result was an aggregate score of 30% – some way below the 2015 ASEAN average of 69% – but with much variation. The top-performing firm scored 59% and the five YSX-listed companies averaged 43%. Public sector companies, meanwhile, scored 25% on average, and private sector outfits averaged 35%.

Furthermore, in 2019 the Myanmar Centre for Responsible Business published its fifth edition of the “Transparency in Myanmar Enterprises” report. Taking a wider view, the report studied 248 of the largest Myanmar companies, finding an overall average score of 5% while the five YSX-listed firms scored an average of 32%.

Traditional Practices

Traditionally, companies in Myanmar have tended to be family owned and operated. With the economy being state socialist for many decades, no widespread application of modern corporate governance emerged, and businesses now have to catch up. For many Myanmar companies, succession runs from founder-owner to sons and daughters, while financing comes predominantly from family, friends and other informal sources, such as money lenders. With a heavy top-down structure, decision-making is often the responsibility of the founder alone, and transparency and accountability are limited.

With Myanmar now opening up to international best practices, such structures often find themselves at a competitive disadvantage, particularly when faced by foreign rivals. Indeed, old-style succession can lead to inexperienced or unqualified family members taking over, while a lack of proper scrutiny of decision-making makes repeating mistakes more likely.

International Standards

Myanmar’s 2017 Companies Law requires greater corporate disclosure by directors, board members, and company accounts and records, while the law also sets out rules for shareholder rights and directors’ responsibilities.

Going forward, these standards are likely to become stricter and more comprehensive, particularly if Myanmar companies are to attract foreign investment. If foreign entities are to offer participation or a joint venture, then a higher degree of transparency will be required, along with an examination of working practices and company control. Addressing this, the IFC and other bodies behind the scorecard have recommended the development of a specific Myanmar Code of Corporate Governance. They also highlighted the need to strengthen the monitoring and enforcement of the existing Companies Law, which already contains many of the foundations of good governance.

Along with consultancies and NGOs, such as the Myanmar Centre for Responsible Business, new bodies – including the Myanmar Institute of Directors – will assist with the transformation by promoting best corporate governance practices through advice and training.