【正文】 n be adopted by panies and credibly audited. However, such codes, mon in the London and New York stock exchanges, for example, have seen a much poorer uptake in Asia. It may well be, therefore, that in this region, there needs to be measures introduced that are backed up by strong legal protection. (This is further examined in the second part of this article).There are a number of issues connected with controlling shareholders that have to be addressed through such measures. In Asia, in particular, the most mon controlling shareholder is the family. This raises big issues when it es to succession planning and the management and control of panies. When the family founder decides to step aside for example, we may see another family member take over the leadership role even when the skills and talents of that family member would normally dictate otherwise. In this case a poor governance structure means that the pany might be managed by less than fully petent personnel. In addition, however, a pany with poor governance might actually find it difficult to recruit professional management to run the business group.Companies have considerable discretion about what dividends will be paid to shareholders. Shareholder buy the shares of panies looking for financial benefit in terms of both the dividend ine and capital gains associated with the share price. They need assurance that fair dividends will be paid (since this also impacts on share price). Moreover, they need to know that their interests as shareholders will not be discriminated against in favour of other shareholders. In particular, it is important that controlling shareholders are not allowed to get money out of the pany in other ways that suits their own interests.One way in which this often occurs in emerging market economies is through the practice monly known and ‘tunneling’. This is the situation where pany ‘insiders’ take the assets for themselves. Tunneling es at the expense of shareholders and other stakeholders and in the process reduces investor confidence, retards capital market development, reduces access to equity finance and ultimately slower growing and less stable economies. Like corruption, more generally, it destroys confidence in a whole economy, stifles inward investment and makes the poorest parts of society even poorer. Tunneling can be easily done by controlling shareholders who can often transfer money and other assets out of a pany, benefiting themselves and harming minority shareholders, employees and local munities. These activities can severely damage a pany and even lead to bankruptcy. There have been cases where controlling shareholders have intentionally “hollowed out” the pany, leaving debts unpaid and workers without jobs.There are a number of forms of tunneling that exist. The first relates to acting on privileged information for personal gain. Additional purchases of shares by a controlling shareholder or members of the family or associated businesses can be done prior to an announcement of a deal that will send the share price higher. Such insider dealing is illegal in many Asian countries but many see it as prevalent and largely unchallenged Asset transfers on overly favourable terms to other panies owned by controlling shareholders is another tunneling tactic. Granting of specific contracts to particular panies on favourable terms and the transfer of liabilities can all benefit controlling shareholders over minority ones. Transfer pricing tactics between panies owned by the same controlling shareholder can exploit both minority shareholders and creditors. One way in which controlling shareholders can tunnel a pany relates to capital increases. It is not unmon for new shares in a pany to be issued and sold either directly or through a related party to the controlling shareholder on favourable terms. This not only provides a built in premium for the dominant party, but also decreases the holding of minority shareholders. We return to this issue below.In kind contributions to controlling shareholders can also extract resources from a pany even before they reach the bottom line, reducing profitability and dividends to be paid. Cars, houses, yachts, luxury ‘business travel’ and other perks may be given to controlling shareholders but not others. In addition, the controlling shareholder, along with friends and relatives may also have management positions for which they are overpensated. Investment decisions may reflect the personal interests of the controlling shareholders and low profit subsidiaries of the pany created in order to satisfy the whims of children of the founder.The greatest opportunity for minority shareholders to e together and have their voices heard is the general meeting of the pany where (in theory) shareholders can use their fundamental rights as owners of the pany to participate in decisionmaking. Unfortunately, such meetings often do not live up to that promise. There have been cases in some Asian countries of shareholders actually being kept away from meetings, meetings being held unannounced, locations changed at the last minute and not municated and security checks being so tight as to not allow members past doors into the meeting.But the ultimate question is whether the shareholder general meeting even matters if there exists a controlling shareholder. By definition the controlling shareholder can muster enough votes to control the outes of the meeting. But there are ways of overing this builtin bias. One is to use supermajority requirements for certain major transaction of important strategic pany decisions. A threshold of achieving at least twothirds or even 75% of the vote might be introduced in such circumstances.Major transactions, in particular, require special treatment when it es to developing corporate governance guidelines because these can have a huge impact on the pany, its employees and shareholders. In addition, so called relatedparty trans