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There is a growing consensus among policymakers, business leaders, and the public that corporate governance is an essential tool for improving corporate performance and advancing the overall development of market-oriented democracies. This paper argues that the potential benefits from governance reforms in emerging markets are enormous. Establishing trusted markets with sound institutional foundations and introducing governance principles to all types of businesses will stimulate commerce, investment, and entrepreneurship. Corporate governance functions as a complete system, requiring rule of law, market institutions, and property rights, sound practices within firms, and external elements such as market pressures and appropriate regulatory supervision.  These governance reforms are essential to strategies for improving the quality of business and democracy.

This tool-kit  looks at:

• benefits of and key concepts in corporate governance
• a framework for applying corporate governance principles to emerging markets situations
• internal and external aspects of firm governance
• a four-step strategy for corporate governance reform
• five examples of actual reform programs

The paper suggests that certain institutional prerequisites of a market economy are necessary in order to maintain a healthy, competitive governance environment in emerging markets. It proposes the need for certain institutional reforms including:

• a strong system of private property rights and laws that guarantee the sanctity of contracts
• a strong, independent, and transparent judicial system, and enforcement of the rule of law
• freedom of entry - markets that are competitive and open to new entrants
• reformed government agencies and regulatory structures
• freedom of information – transparent governments that do not restrict the flow of economic information

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