Improving the Corporate Governance Legal Framework and Practice of Mongolia

Corporate Governance

GBRW was contracted by the EBRD to assess the Corporate Governance framework and related law, regulation, and practice in Mongolia.

This required the development of a questionnaire and visits to a range of financial institutions and companies to ascertain the status of Corporate Governance and whether it actually happened or they were just ticking the boxes. As with other questionnaires this required asking indirect questions in order to obtain a reasonably accurate response to what would have been the direct question. The Assessment Report generated a series of proposals and recommendations to the government.

Mongolia had only relatively recently allowed the private sector to flourish and it was suffering similar growing pains to Russia. Privatisation of state-owned companies had only been a partial success, there was a growing number of oligarchs and the concepts of corporate governance were not fully understood. The law itself had been written with the assistance of foreign consultants some years previously and was in itself reasonable. Following the completion of the questionnaire it needed a few adjustments are recommendations were made to the government.

The principle recommendations were in regard to effecting cultural change and a methodology for building an appreciation of the benefits in the medium and longer term of a robust and effective corporate governance methodology within companies in Mongolia. In a post-communist society this can be difficult as “the greatest difficulty in the world is not for people to accept new ideas but to make them forget the old ideas” John Maynard Keynes.

Deliverables included:

- Review of current Corporate Governance legislation, regulation, and practice;

- Development of a questionnaire agreed by the government on Corporate Governance practices in companies;

- Creation of a list of indirect questions to companies to obtain a clearer response to the direct questions on Corporate Governance;

- Interviews with senior officers of around 50 companies ranging from large former state-owned companies to SMEs to obtain a picture of the implementation of existing legislation and regulation;

- Discussion with the government on conclusions and recommendations; and

- Final report proposing some minor changes to the legislation and regulation but concentrating on encouraging private sector companies to build and implement their own system of governance conforming as far as possible to best international practice.