Improving Board Performance in Emerging Markets
McKinsey Quarterly, No. 1, 2006
9 Pages Posted: 8 May 2006
The need for well-functioning boards is especially urgent in emerging markets because institutions that wish to promote good corporate behavior are often weak there. But since directors and shareholders in these regions face unique challenges, the wholesale adoption of Western corporate governance practices isn't necessarily the right answer.
Six features of emerging markets significantly influence the effectiveness of boards there: a high concentration of ownership, weak recruitment processes and a shortage of experienced directors, poor focus, an inadequate supply of information, complex cultural traditions, and underdeveloped legal regimes. Overcoming these problems and creating a vibrant and constructive board environment will probably pay off in better performance and a lower cost of capital.
Keywords: corporate governance, board of directors, emerging markets
JEL Classification: G34, G39
Suggested Citation: Suggested Citation