Latin American Capital Markets

CORPORATE GOVERNANCE AND CAPITAL MARKET DEVELOPMENT 453forced in the courts (or through administrative action) or as an informal arrangementenforceable strictly as a reputation matter? Or should it be regarded as a mix, withex ante characteristics of legislation, but with enforcement left mostly to privatemeans? The ultimate answer in any particular case probably depends largely on theapproaches the regulator takes to enforcement and the courts take to interpretation.Regulators that push-start the code-drafting process but do not monopolize its content(as in Mexico) may accelerate the emergence of appropriate benchmarks forgood governance if the process is inclusive. However, if the regulator construes thecode as akin to a law or regulation, particularly in an environment where judicial oversightof executive action is weak, then the code may come to be regarded as law.Thismay have important implications for compliance. In such a case, as with most laws,companies may come to regard minimum formal compliance as the goal, with perhapsnegative consequences for development of more voluntary initiatives and evenfor the development of public discourse on the topic of corporate governance.Disclosure Regime in ColombiaCorporate Governance Activism in Colombia: A Combined ResponseDevelopments in Colombia are proving to be an interesting example of the interrelationbetween public policy efforts and voluntary initiatives with respect to sound corporategovernance practices. Before the end of 2000, both the public and private sectorsbegan to focus public attention on the shortcomings of the corporate governanceregime and practices in Colombian corporations. In preparing a proposed capital marketslaw for presentation to Congress, the Superintendency of Securities insisted thatthe new legislation had to address perceived problems with the enforceability ofshareholder rights, transparency, board practices, and director and controller liability. 20At about the same time, the Confederation of Chambers of Commerce launched acorporate governance project to increase awareness by Colombian companies ofmarket expectations, an effort joined by the Stock Exchange of Colombia, which wasinterested in preparing unlisted companies for the public markets, and the PensionFunds Association, representing the country's principal institutional investors. 21 Consequently,a benchmark national code project is now in its early stages, with participationfrom all major private sector associations.20 Interestingly, in anticipation of further private sector initiatives, the draft law included specific legal authorization forcorporate governance rating agencies.21 Confederation of Chambers of Commerce, Corporate Governance Project (www.confecamaras.org.co).Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub