1. It is a truism that it is easier to bring in new rules than to make them work. This is not just an issue of needing more enforcement. It is also about the way in which the rules are designed. Some governance best practices--primarily those relating to board independence. Unless the rules are well crafted, with a clear sense of how they will be robust and effective, the end result is likely to be disappointing. Examples: loose definitions of "independent director" in Hong Kong and Japan; injecting "independence" into both tiers of the two-tier board system in Indonesia or the dual systems in China and Taiwan.
2. Modern governance rules are being overlaid on entrenched political systems and traditional business cultures. This raises multiple issues:
Can governments expect companies to be transparent when they themselves are not? Can governance take root when the government is corrupt and no independent commission against corruption exists?
While good governance benefits certain types of companies, others may lose out from it.
Those which make money from opacity and corruption, for example, or those which aim to be transparent in a fundamentally opaque market (i.e., they are too far ahead of the curve; their own information is used against them by competitors, customers and corrupt tax officials).
3. Modern governance rules are also being overlaid undeveloped legal systems and often-outdated company and securities law. This also raises multiple issues:
Can regulators expect "the market" to help enforce the rules (i.e., "private enforcement") when the cards are so clearly stacked against investors? Examples: no class action; loser-pays legal systems; procedural and financial obstructions to bringing a law suit; company articles of association clearly designed to benefit the majority owner.