The basic tenets of corporate governance are accountability, responsibility, equitable
treatment, transparency, vision, and ethics. As the 1997 financial crisis broke and washed
over Thailand, it became apparent that weak corporate governance practices could have
intensified the severity of the problems. A close examination of corporate governance
practices at many Thai firms would have revealed that local governance practices did not
match international standards and expectations.
Like other Asian countries affected by the 1997 financial crisis, Thailand faced corporate
governance problems at two levels. Firstly, poor governance practices at firms created
many difficulties including overinvestment and over-borrowing to name but a few troubles.
Much of the excess borrowing went into projects of dubious benefit as well as unneeded and
ill-advised diversification efforts. At the time of the crisis, Thai public companies were largely
family-owned, with family and related-party shareholders as the controlling shareholders.
Much of the overinvestment and diversification efforts came at the expense of minority
shareholders, with many companies in effect expropriating wealth from minority
shareholders. As one consequence of poor governance practices, many firms faced
financial distress, to be resolved through bankruptcy proceedings or aggressive financial
restructuring.