1. Good Ethics Is GoodBusinessPresentation byMr. Graham SettleSenior GovernanceSpecialist Asian Development Bank Corporate Governance Conference28 January 2005, Mandarin Oriental Hotel, Makati City

2. Why is ADB ConcernedWith Corporate Ethics? Corporate ethics: key to private sectordevelopment Private sector: key to broad-basedgrowth Broad-based growth: key to povertyalleviation 3. Good Corporate Ethics:Who and What? State role: Clear rules and rights"Every kind of peaceful cooperation among men is primarilybased on mutual trust and only secondarily on institutionssuch as courts of justice and police." -- Albert Einstein (18791955) Private role: Keep promises to stakeholders 4. What is Most Important Source of Funds? EarningsRevenuesCustomers Trust 5. Ethics are EspeciallyImportant in Capital Markets Time horizons beyond the real economy The product is intangible 6. Benefits of CorporateShareholding Hedge against individual failure Corporation as legal person Rewards w/o having to be there Shares allow liquidity anddiversification 7. Costs of Corporate Shareholding Ownership is not control Principal-Agent conflict 8. History ofCorporate EvolutionThe Good, Bad, and Ugly 9. Lessons From History Regulator of first resort iscompetition Artificial confidence is harmful Artificial cures can cause harm Organic growth based on trust 10. A SELECT HISTORY OF CORPORATEREGIONAL INFLUENCEASIA EUROPEEVOLUTION AMERICAASIA 1602 1720 1987BLACK MONDAYom OCT. 19, 1987 t.c 1932 Do1920MILESTONES The DutchSouth Sea East IndiaBubbleBlackThe Match KingMonday CompanyGreatest Fraud The Ponzi1720AmericanScheme in History 1997 Model 19291980sFirst Special Purpose Vehicle1637Bill ofExchange MississippiSavings & AsianScheme RobberThe Great Loan Crises Currency TulipmaniaBarrons CrashCrisis 5000-3000 BC 9th Century10th-15th Century 1494 160216371720 1721 1820 1862-19131920 19291932 1934 1980s1990s 2000sTIME18902002193414941721 FederalSarbanesAntitrustSEC Act OxleyThe Wheel Invention ofBubbleChronometerAct 1913 Federal1934Double Entry Reserve Discovery ofAccounting1989Federalthe Number Late Deposit ZeroLate1700s Insurance1800s World Wide Web Modern SteamKeyStateEngineElectricity Innovations RegulationFutureCEO asShips Captain Monarch MonopolyState Monopoly Professional ManagerBureaucrat Corporate Raiders & Regulators Super RichCelebrity?10th-17th Century1600s-1820s 1820s-1920s 1930s-1970s1980s 1990s 11. 21 Century stReputation for Trust is a Private BrandThere is virtually no evidence of successfulcapital market reforms where the foundations oftrust are the exception rather than the rule.-- Alan Greenspan