The concept of good corporate governance is gaining pace with mainland companies but still has some way to go before it reaches international standards. According to Patrick Rozario, principal of business risk services at Grant Thornton, during the past five years many mainland companies have made noteworthy improvements in their perception and adoption of good corporate governance but many others still lag. Mr Rozario said there were a combination of reasons for this including the way that many mainland companies were structured and managed. 'A high proportion of mainland companies operate with a management hierarchy that can make implementing the principles of good corporate governance very difficult,' he said. The principles of internationally recognised corporate governance included transparency, segregation of duties, accountability and balance of responsibilities, Mr Rozario said. Good corporate governance also included well-defined best practice targets, effective motivation schemes and internal and external checking mechanisms. 'High standards of corporate governance can only be maintained by building a framework to support education, training and strong regulatory compliance,' he said. The high profile collapse of giant corporations Enron and WorldCom served to highlight a lack of good corporate governance and the need for independent regulation. 'These were companies where very little transparency existed and they were dominated by senior managers who operated with very little accountability.' Many Hong Kong companies are also run with a ridged hierarchy. However, many years of exposure to international business practices had seen the introduction of corporate governance practices. 'We have listed companies in Hong Kong that operate with the best examples of corporate governance, but there are also others that show plenty of room for improvement,' Mr Rozario said. There are plenty of examples of Hong Kong companies delivering value and performance, but they may not have paid enough attention to the forms of corporate governance that are now demanded by global investors of world-class companies. He said the mainland had also had its share of corporate scandals including the misappropriation of funds at state-owned banks, collusion between banks and companies for loan credits and fraudulent financial reporting by large corporations. As mainland companies continued to seek overseas stock listings, Mr Rozario said they would be required to implement corporate governance polices. Partnerships with companies, including those from Hong Kong, and mergers and acquisitions with foreign companies could also act as a catalyst to improve corporate governance. 'There are no easy answers or simple solutions that will suddenly drive a rapid move by the majority of mainland companies towards good corporate governance. 'We are looking at something that will take time but could speed up due to increased engagement with the global business environment.' The mainland government had quickened the reform and opening-up process to meet the challenges for corporate governance, which is a key mechanism for running a modern enterprise. This includes the introduction of laws similar to the US Sarbanes-Oxley Act and revisions to the securities law and the company law which, together are known as the Two Laws. These lay the foundation of corporate governance for listed and other corporations, and detail the requirements and responsibilities of corporation and securities intermediates to their stakeholders. Mr Rozario said as the need for good corporate governance became more prevalent investors would pay more for companies they perceived as well governed, especially those in emerging markets.