May 30, 2016 – According to a recent survey by the Thai Institute of Directors Association (IOD), most directors thought that the current penalty on directors and executives was too light for those culpable of unfair treatment to shareholders, including insider trading. They prefer to see the penalty include fine, imprisonment, and a ban from directorship, instead of just being fined as in most cases seen in Thailand. Absence of a strong ethical corporate culture is also seen by directors responding to the survey as the key factor behind the unethical conduct of directors.
The second annual Thai Director Survey reflects views of directors on issues of their immediate concern. Conducted between March 2016 and May 2016, it drew responses from 416 directors. Given the diversity of respondents' experiences, business types, and sizes, the survey is believed to fairly represent the overall views of directors in Thailand.
In the survey, 65% of directors think the current penalty is too light with respect to unfair treatment or taking advantage over other investors such as insider trading and stock manipulation. Most directors think the punishment for such wrongdoing should include fine, jail term, and disqualification of directorship.
Based on data available on the Securities and Exchange Commission website, the IOD has found that most directors or executives who were found guilty on unfair treatment charges just paid fine but were still able to keep their board seats. Some cases are repeated offenses. Penalties should therefore be raised to such levels as to discourage or deter such offences.
"The IOD felt that wrongdoings by directors related with asset malpractices are serious offences that cannot be ignored as they undermine both legal and ethical standards. Therefore, boards should thoroughly probe the persons being nominated for directorship to ensure that they have no prior record of conviction under the Securities and Exchange Act," said Dr. Bandid Nijathaworn, President and CEO of the IOD.
Respondents view that key factors causing directors to perform their duties unethically include lacking of ethical corporate culture (60%), boards weighing profit over ethic (47%), and inefficient internal control (36%). An improvement on this front should start at the board level by recognizing the importance and driving for the establishment of ethical corporate culture. The board should also set a prudent example and install a proper and ethical governance system.
Regarding board performance, 74% of respondents view board diversity, specifically inclusion of directors with various skills that align with business strategy, as the most crucial element in enhancing board efficiency. At board meetings this year, most directors think they will emphasize more on business strategy (61%) and risk management (54%).
On Thai economic outlook, 35% of directors expect stable growth, 33% foresee slightly worsening condition, 10% anticipate severe economic deterioration, and 22% project a mild improvement. They share a similar view on global economic outlook, with 39% of directors anticipating a steady growth, 33% foreseeing a slightly weaker prospect, 12% expecting a steep decline, and 16% projecting a small improvement. Among key obstacles to business operations are unclear economic direction (22%), political instability (21%), and corruption (20%).