The nature of the environment in which contemporary businesses function is systemic which is described in corporate governance practices or codes.

Corporate governance can enable firms to maintain vitality, growth and stability. In the light of different views on Corporate Governance and Company Acts, which are among interests of many organizations, after financial crisis 2007-2009, this paper mainly concentrates on analysis of Code of Best Practices for Corporate Governance in selected northern Asian countries and separates it from the analysis of relevant Company Act and Accounting regulations, which can be used as reference for further scopes. Despite of trying to select an easy-reading writing style, there is still some academic words need to be explained in further.

This paper is organized as following. First (1st) session is Research literature review, which gives us a summary of what has been done in this field. Next, second (2nd) session provides some theories in corporate governance and manipulation. The third (3rd) session handles with empirical research findings and performing a comparative analysis among different Codes.

And final (4th) session turns to the conclusion and policy suggestion. Last but not least, a reference and web resources are introduced for further research and analysis. At last, there are exhibit session which covers some summary of this paper’s analysis and comparison. And a glossary notes is provided with information for reference.

Many researches so far are done in the corporate governance area in Europe. Hopt, Klaus J., and Leyens, Patrick C., (2004) pointed recent development trend in Europe Corporate Governance is specialized rules for listed companies and indicate growing convergence in internal control mechanisms independent of board structure. EU (2002) also issues the Code of Best practices and the 2006 Directive requires that each listed company should publish an annual corporate governance statement to what extent the company can comply with that code. Among its key principles is the separation of roles between the CEO and the Chairman as it stated “The Chairman and CEO roles should be separate and the CEO should not immediately become Chairman of either a unitary or a supervisory board”. Noia, Carmine Di., (2009) at ECIIA Conference shows after the crisis 2009 in Europe, there is no definition of shareholder due to national jealousy of company law; no harmonization of record date; and no shareholder identification. And OECD (2009) confirmed that the financial crisis can be an attribute to failures and weaknesses in corporate governance system, including risk management system and executives’ salaries. After crisis 2007-2008, Erkens, David., Hung, Mingyi., and Matos, Pedro., (2010), found out that during crisis, firms with more independent boards raised more equity capital, which partially caused them to experience worse stock returns. Last but not least, AFG 2010 Corporate Governance (CG) Code, France, stated the European code should be completed so that basic CG guidelines were defined to encourage best CG practices in every field for all listed companies in European Economic Area. Then, Lakshan and Wijekoon (2012) figured out that while CEO duality is positively related with the likelihood of corporate failure. Board size, auditor's opinion and outside ownership do not appear to be significant determinants.

And Aytekin et all (2013) concluded that researchers and practitioners should give special attention to board development and its functioning in order to develop corporate governance in Turkey, and also in Canada, because this factor is found to be weak compared to other factors. Dibra (2016) implied that corporate governance involves the function of direction rather than control.

Finally, Gopal (2017) mentioned with more emphasis on performance, a closely related issue that has emerged now is the balance in governance roles and responsibilities between shareholders and boards.

But what are the comparative guidelines of northern Asian corporate governance standards?

Theory of Corporate Governance, Scandal and Market Manipulation

Theory of manipulation

Different ownership structure affects manipulation. In dispered ownership regime, manager may have incentives to do some stock market manipulation. Baik, Bok., Billing, Bruce K., and Morton, Richard M., (2005) expressed SEC’ concerns that managers can manipulate non-GAAP measures to mislead investors. Moreover, it can be viewed from accounting manipulation side, which covers accounting techniques (such as one-time charges…) to manipulate expenses and profits of the company. The US Exchange Act 1934 or Australian Corporation Act 2001 have a section describing market manipulation as transactions which create an artificial price for a tradable security.

Theory of corporate governance and financial crisis

The 2012 CG Code in Pakistan mentioned good CG instills investor confidence. The UK Financial Reporting Council (2010) stated corporate governance is about what the board of a company does and how it sets the values of the company, and is to be distinguished from the day to day operational management of the company by full-time executives. We can see, therefore, different approaches on corporate governance.

Research methodology:

First of all, we perform a comparative analysis of Northern Asian corporate governance principles in each of two (2) different groups including 1) Relatively good Corporate governance group including Pakistan and Singapore;

We also use international standards of corporate governance for reference such as: ADB and OECD’s corporate governance principles as reference.

After that, we make a suggestion on what so-called common corporate governance principles for Northern Asian which is aiming to create a basic background for relevant corporations interesting in corporate governance subject. Additionally, it can be considered as the recommendation to relevant countries’ government and other relevant organizations for public policy and necessary evaluation. For a summary of our standards, see Exhibit sessions and the below table 4.

In business life, corporate governance is a framework that will guide businesses in managing interconnections of multiple and diversified elements in their internal and external environments. This framework uses sustainable development as a concept that could successfully be adapted into strategic management theory and practice. Errors in using CG framework might create manipulation and lead to the scandals and bankruptcies of many companies.

A-Findings on Corporate governance issues after financial crisis, corporate scandals and market manipulation

There are several popular issues including: there still lacks of the appraisal of the role of the legal division in the company which contributes to the bad results on the corporate performance and scandals.

We can point it out another CG issue. It is, the errors of financial and accounting procedures that lead to manipulation in both balance sheet and income statement.

B-Findings on Ways of Manipulation during Corporate Scandals

Several Manipulation Techniques found out during corporate scandals involve, but not limited to:

B.1– The manipulation techniques in the income statement:

Here, the company’s revenues are recorded when the company is not completing all services committed. Or managers join in cooking the firm books and manipulating the company earnings. For example, in the 2006 Healthsouth scandal, the company earnings was boosted ($1.4 billion from 1996 to 2003) with fictious transactions.

B.2. - The manipulation techniques in both the income statement and balance sheet:

In case of Lehman Brothers (2008), it is accused of using another company, Hudson Castle, for its accounting manipulation which means transferring its asset and risks. Or in 2002 Adelphia scandal, one of the larges cable firm in the US, revenues from its subsidiaries and other businesses flowed into one account which used to pay bills. Then, the management used company’s line of credit for personal purchases.

B.3 - The manipulation techniques relevant to international accounting practice code:

We can see two (2) below different popular accounting rules on treatment “impairment” term which may mislead the company.

In IFRs: Impairment is recorded when an asset's carrying amount exceeds the higher of the asset's value-in-use (discounted present value of the asset's expected future cash flows) and fair value less costs to sell.

And in GAAPs: Impairment is recorded when an asset's carrying amount exceeds the expected future cash flows to be derived from the asset on an undiscounted basis.

B.4- Other manipulation techniques net belong to above classifications:

Manipulation can happen when the individual or company sells share when the price is high and buy back when low price to maximize the return. Moreover, manipulation happen if fund managers can use invested money for their own purposes and steal funds from investors. For example, in 2008 Madoff investment scandal, people and investors entrusted fund management but the money was used for management personal gain and investors lost $50 billion.

C-Actions on Preventing or Controlling negative manipulation

Necessary actions to prevent or control negative market manipulation are, but not limited to, periodically re-evaluation of Code of Best Practices, enhancing board independence, and internal procedures to avoid corruption.

D-Findings on Construction of a Limited Common Northern Asian Corporate Governance standards

These findings will be shown in a detailed analysis of a model indicated in the later sessions.

<D.1> -Group 2 – Relatively Good Corporate governance group analysis

Singapore 2012 Code of Corporate Governance analysis:

Good recommendations involved in the 2012 Code include, but not limited to, creating sustainable and financially sound firm through a constructive relationship b.t shareholders and Board.

Besides, it is more directly than other Codes that the Code states roles of the chairman in helping directors.

In addition to, it encourages shareholders communicate with BD reasons on disagreeing with proposals at GM.

For a summary on corporate governance factors, please refer to the Exhibit 2.

In summary, the description on AC is among good sides in the Code 2012 while it does not analyze well supervisory for managers.

Table 1

Subjects or parties	Main quality factors	Sub quality factors	Responsibilities	Objectives	Note
Audit committee	Independent; 2 members (1 chair) with accounting/financial MGT expertise;	At least 3 directors (1 AC chair); reasonable resources;	Cooperation with MGT; review policy on financial reporting;	Not mentioned clearly from the Code
Nomination committee	Recommend to BD on BD appointment;	name of NC disclosed in annual report;	Views on director independent in character & judgement;	Not mentioned clearly from the Code
Compensation or Remuneration committee	NEDs all; fair; avoid rewarding poor performance;	At least 3 directors; seek experts in or outside co. on remuneration;	Recommend to BD package for each director;	Not mentioned clearly from the Code
CEO	Not mentioned clearly from the Code	CEO and Chairman should be separate persons;	Not mentioned clearly from the Code	Not mentioned clearly from the Code
The Chair	Promote a BD culture of openness and debate;	Lead the board; set agenda;	If chairman is part of MGT team, half of board is independent directors;	Not mentioned clearly from the Code
CEO and The Chair relationship	appropriate balance power;	Clear division b.t leadership of BD and managing business;	If the same, half of board is independent directors;	Not mentioned clearly from the Code
Corporate Secretary	Under chairman direction; ensure good information flow in BD, committees, b.t NEDs and MGT;	Ensure BD procedures followed; attend all BD meetings; advise BD on governance matters;	BD have separate and independent access to secretary; removed and approved by BD;	Not mentioned clearly from the Code
Compliance officer	Not mentioned clearly from the Code	Not mentioned clearly from the Code	Not mentioned clearly from the Code	Not mentioned clearly from the Code
Board of Directors	Meet regularly; progressive refreshing;	Ensure financial & HR for objectives; not so large;	Strategic objectives;	Long term success of the co.;
Executive/Representative director	Not mentioned clearly from the Code	Not mentioned clearly from the Code	Have long term incentive schemes;	Not mentioned clearly from the Code
Non-executive director	Not mentioned clearly from the Code	Meet regularly w/o MGT presence;	Develop proposals on strategy; review MGT performance in meeting agreed goals;	Not mentioned clearly from the Code

Table 2

The concept presented in this research paper is founded on previous researches and latest governance practices which could provide guidelines of implementing the principles of sustainable corporate governance into businesses and encourage management practices. One of vital goals of this study is to present a set of relatively good corporate governance factors that help to prevent failures from corporate scandals, market manipulation during and after financial crisis.

Among several key corporate governance issues is the setting of a sound organization of committee.

While the Pakistan 2012 Code suggests a full-time employee, not CFO, as coordinator b.t BD and auditing firm in case the company outsource IA function. And the Singapore Code specifies the chair should promote a BD culture of openness and debate.

In consideration of corporate governance issues analyzed in the previous sessions, we proposed the main and sub quality factors in this paper a set of general corporate governance standards in a limited Northern Asian model with selected countries. To achieve a better leadership combined with sustainability for firms, this paper pointed out main quality and sub-quality factors for a good corporate governance system. It has some implications for further research and proper recommendations to relevant government and organizations. For instance, sub-quality factors (mentioned as N/A in the above comparative result table) can be explored in further researches.

[1.] Aytekin, I., Miles, M., and Esen, S., (2013), Corporate Governance: A Comparative Study of Practices in Turkey and Canada, IUP Journal of Corporate Governance, Vol.12,

No.2

[2.] Dibra, R., (2016), Corporate Governance Failure: The Case of Enron and Parmalat, European Scientific Journal, Vol.12, No.6

[3.] Enriques, Luca., and Volpin, Paolo F., (2007), Corporate Governance Reforms in Continental Europe, Journal of Economic Perspectives, Vol.21, No.1

[4.] Bauer, Rob., Guenster, Nadja., and Otten Roger, (2003), Empirical Evidence on Corporate Governance in Europe- The Effects on Stock Returns, Firm Value and Performance, EFMA Basel Meetings Paper

[5.] Kirchmaier, Tom., Owen, Jeoffrey., and Grant, Jeremy., (2005), Corporate Governance in the US and Europe- Where Are We Now, SSRN Working Paper Series

[6.] Lakshan, A.M.I., and Wijekoon, W.M.H.N., (2012), Corporate Governance and Corporate Failure, Procedia Economics and Finance, Vol.2, 191-198

[7.] Gopal, R., (2017), The Corporate Purpose and Governance Failures – A Tales of Two Corporates in India, SSRN Working Paper Series

[8.] Hopt, Klaus J., (2005), European Company Law and Corporate Governance: Where Does The Action Plan of The European Commission Lead ?, ECGI Law Working Paper , No.52/2005

[9.] Hopt, Klaus J., and Leyens, Patrick C., (2004), Board Models in Europe – Recent Developments of Internal Corporate Governance Structures in Germany, the United Kingdom, France and Italy, ECGI Law Working Paper , No. 18/2004

[10.] Carriere, Giovanni., Cowen, Andrew., Marco, Jose’ Antonio., Monson, Donald., Pievani, Federica., and Rasker, Tianko., (2002), European Corporate Governance: A Changing Landscape?, MIT Sloan 50th Anniversary Project

[11.] IFRs and US GAPP, Deloitte, 2007.

[12.] Erkens, David., Hung, Mingyi., and Matos, Pedro., (2010), Corporate Governance in the 2007-2008 Financial Crisis: Evidence from Financial Institutions Worldwide, SSRN Working paper series

[13.] Baik, Bok., Billing, Bruce K., and Morton, Richard M., (2005), Manipulation, Increased Transparency, and Value Relevance of Non- GAAP Disclosures for Real Estate Investment Trusts (REITs), FARS Meeting Paper

[14.] Tran Ngoc Huy, Dinh., (2010), A Set of Limited Asian Pacific Corporate Governance Standards After Financial Crisis, Corporate Scandals and Market Manipulation, SSRN Working Paper Series

[15.] OECD Corporate Governance Guidelines, OECD, 1999.