Corporate governance and political impediments to regional harmonization: cases from East Asia

Abstract: Is the harmonization of financial regulatory regimes possible in East Asia? Focusing on corporate governance, which many see as a critical part of the 1997 Asian financial crisis, and which is also seen as unresponsive to calls for change, this paper argues that such harmonization is possible, but that it will not be according to the standards advocated by the International Monetary Fund, World Bank, Organisation for Economic Co-operation and Development, and other international organizations. At present, actors generally feign compliance with these international rules and standards. The pattern of noncompliance is reflective of two types of regulatory models at work in East Asia, which correspond to democratic and nondemocratic regimes. The manner by which these political institutions mediate the influence of key actors determines corporate governance outcomes. Three cases illustrate the key dynamics: Singapore (nondemocracy), South Korea (democracy), and pre- and post-World War II Japan (change from nondemocracy to democracy). By identifying the key actors that determine regulatory outcomes, this paper points to a more realistic regulatory framework. This alternative framework is a compromise between the standards advocated by international organizations and the domestic political realities of East Asia.