Latin American Capital Markets

CORPORATE GOVERNANCE AND CAPITAL MARKET DEVELOPMENT 445Short-term anecdotal information presents a mixed picture. Clearly, the supportersof reform have succeeded in focusing the attention of companies, managersand directors, institutional investors, and the general public on the importance of corporategovernance to the health of the capital markets (and by extension the pensionsavings regimes). Although it is hard to judge just how much the legal reforms encouragedthe development of private contractual arrangements, recent experiencesupports the conclusion that legal reforms can have the effect of accelerating thedevelopment and adoption of complementary or supplementary private contractualmechanisms.The reforms have not been a panacea.There has been no immediate rise inequity prices that might have reflected a reduction in the governance discount as aresult of passage of the reforms. Controversial delistings and changes of control acceleratedduring 2001 and continue today. It may be that controllers have tried to "getwhile the getting is good" before the legal reforms were in place (and during the graceperiod before Chile's mandatory tender offer regime goes into effect). Nor does theimpetus created by the legal reforms for voluntary private contracting appear to beuniform. All public companies in Chile have duly constituted the conflicts committeesrequired by the legislation, and growth companies, firms with American DepositoryReceipt programs (ADRs), and those with large pension fund stake holdings havebegun to improve their overall practices. However; Santiago's tightly knit communityof senior managers and directors has not experienced an epiphany. There has notbeen a general blossoming of interest in restructuring corporate boards to makethem more effective watchdogs of shareholder interests. Private efforts (some withsupport from the government) to publish an accepted best practices code for Chileancompanies have yet to demonstrate significant momentum. And the organization ofan institute of corporate directors is still nascentStock Exchange Listing Rules: Brazil's Novo MercadoThe New York Stock Exchange requirements for independent directors and auditcommittees are often cited as an example of the positive role that self-regulatoryorganizations in the securities markets can play in improving corporate governancestandards. 6 However; before the mid-1990s, many stock markets in both OECD andemerging markets resisted calls to impose higher standards on shareholder rights or6 The New York Stock Exchange's requirements for corporate governance of listed companies will be dramaticallytightened when new rules recommended by the NYSE Corporate Accountability and Listing Standards Committee(submitted to the U.S. Securities and Exchange Commission on August 15,2002) go into force.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub