DOING BUSINESS 2009 - JOHN J. HADDAD, Ph.D.

(8 economies)2Note: A reform is counted as 1 reform per reforming economy per year.Source: Doing Business database.38 Doing Business 2009FIGURE 7.5Top reformers in 2005–08in protecting investorsAverage improvement (index 0–10)20082005+2.4Extent ofdisclosureindex+2.7Extent ofdirectorliability indexSource: Doing Business database.+1.4Ease ofshareholdersuits indexchoose to amend existing regulations orstart from scratch, depending on howup-to-date their current legislation is. In2007 Georgia amended its securities legislationby adding provisions regulatingdisclosure and approval of transactionsbetween interested parties. Belarus, Colombiaand Thailand did the same. Othercountries, such as Mozambique and Slovenia,started from scratch. Adopting anentirely new law offers an opportunityto reform other areas—such as businessregistration, directors’ duties, disclosurerules and issuance of shares.Reformers often find inspiration ineconomies with a similar legal originor in their main commercial partners.Mexico’s securities law reform took intoaccount aspects of a U.S. law—the PublicCompany Accounting Reform and InvestorProtection Act of 2002, commonlyknown as the Sarbanes-Oxley Act. Botswanaand Mozambique followed theSouth African model. As a reformerfrom Mozambique explains, “Our previouscode was inherited from Portugal.Today our main commercial partner isSouth Africa, and we are surrounded bycountries that have the same model. Weprefer to adopt legislation that would enableus to attract more investment fromSouth Africa and make life easier for ourmain investors.”Even the best regulations will makelittle difference if the court system isweak. Bangladesh and Montenegro havelaws setting out strong disclosure requirementsand extensive obligations fordirectors. But with the most basic commercialdisputes taking more than 1,000days to resolve in Bangladesh and morethan 500 in Montenegro, these laws maynot have the desired effect.NotesFIGURE 7.2Rankings on protecting investors1. are Doidge, based Karolyi on 3 subindicatorsand Stulz (2007).2. Requirements Dahya, Dimitrov and McConnell Liability (2008). of CEOon approval and disclosure and board of directors3. Sitta (2005).of related-partyin related-party4. transactions World Bank (2006c).transactions33.3% 33.3%Extent5. See Johns and Extent Lobet of (2007). of directordisclosure6. McKinsey & Company liability (2002, p. 8).index index7. Lobet (2008).33.3%Ease of shareholdersuits indexType of evidence that can be collectedbefore and during the trialNote: See Data notes for details.(c) The International Bank for Reconstruction and Development / The World Bank