2012年-世界发展银行全球_Corporate_Governance_Country_Assessment___El_Salvador_34页_1mb

Summary of the Report on the Observance of Standards and Codes (ROSC) for El Salvador

Core Content

The Report on the Observance of Standards and Codes (ROSC) for El Salvador, published in June 2012, evaluates the country's corporate governance policy framework and its alignment with the OECD Principles of Corporate Governance. The assessment highlights the importance of corporate governance in promoting economic development, enhancing investor confidence, and reducing financial vulnerabilities.

Corporate governance is defined as the structures and processes that guide the direction and control of companies, focusing on the relationships between management, the board of directors, shareholders, and other stakeholders. The report emphasizes that good corporate governance improves firm performance, increases access to capital, and reduces the risk of systemic financial failures.

Main Points and Key Findings

Importance of Corporate Governance

• Corporate governance supports sustainable economic development by improving company performance and access to cost-effective capital.
• Weak governance frameworks can discourage investment and reduce investor confidence.
• The international economic crisis highlighted the need for strong governance practices to protect retirement savings and ensure stability.

Current Corporate Governance Landscape in El Salvador

• The equity market in El Salvador is small and underdeveloped, with limited growth over the past five years.
• The market capitalization is around US$11 billion, equivalent to 48.9% of GDP as of May 2012.
• Financial institutions dominate the listed sector, with 38 listed companies and 4 new share issuances in 2012.
• Pension funds are the largest institutional investors, but they are heavily constrained in their investment policies, mainly due to government mandates and limited investable domestic securities.

Legal and Regulatory Framework

• El Salvador's legal framework is based on civil law and includes the Commercial Code (1970) and Securities Law (Decreto 809, 1994).
• The Financial System Supervision and Regulation Law (SSFL), enacted in August 2011, integrates the Superintendencia Financiera (SSF), Superintendencia de Obligaciones Mercantiles (SOM), and Bolsa de Valores de El Salvador (BVES) into a single regulatory authority.
• The Commercial Code and Securities Law are outdated and require significant revision to better protect minority shareholders and ensure transparency in related-party transactions and dividends.

Institutional and Enforcement Challenges

• SOM faces capacity constraints with only 10 staff members responsible for overseeing 30,000–50,000 entities, limiting its effectiveness.
• The BVES, as the only stock exchange, has governance concerns, including potential conflicts of interest due to the CEO owning a brokerage firm.
• Sanctions for non-compliance are limited in scope and severity, with only reprimands and fines (equivalent to 15–50 monthly minimum wages) available.

Shareholder Rights

• The Commercial Code provides basic shareholder rights, but these are often inadequate for listed companies and public interest entities.
• Cumulative voting, pre-emptive rights, and proportional representation are not widely implemented.
• Squeeze-out and withdrawal rights are not well defined, leaving minority shareholders vulnerable.

Regional Integration

• El Salvador is part of a regional initiative to develop an integrated Central American capital market with Panama and Costa Rica.
• The Ley de Mercado (art. 10) was updated to allow foreign issuances.
• The SSFL enables the SSF to share non-public information with countries with which MoUs have been signed.
• The AMERICA project allows remote access to securities markets across Central American countries.

Key Recommendations

• Draft a corporate governance code that strengthens the role of the board and improves transparency.
• Update the Commercial Code and Securities Law to reflect modern governance standards and better protect shareholders.
• Accelerate the adoption of IFRS and ISA to align with international accounting and auditing practices.
• Enhance non-financial disclosures to improve corporate accountability and transparency.
• Improve enforcement mechanisms and increase the deterrent effect of sanctions.
• Strengthen the capacity of SOM through better IT systems and human resources.
• Ensure effective coordination between SSF and BCR, especially in prudential supervision and capital market regulation.

Conclusion

El Salvador has made progress in corporate governance reform, particularly with the integration of financial sector regulators and the adoption of voluntary governance norms for financial institutions. However, the legal framework remains outdated, and enforcement is weak, limiting the effectiveness of corporate governance. Regional integration and international standards offer potential for growth, but implementation and awareness need to be strengthened. The report concludes that improving corporate governance is crucial for attracting long-term investment and supporting sustainable economic growth.