This report assesses the corporategovernance policy framework, enforcement and compliancepractices in Colombia. The capital markets are smallrelative to the economy and trading volume is low. Thecorporate sector is largely owned and controlled by familygroups and conglomerates. The challenge is to create anenvironment where medium-sized companies can raise capitalin the market and help them make the transition fromtightly-controlled family firms to public companies. Whilepension funds represent a large and rapidly growing sourceof funds, they are reluctant to invest in equities. It hasbeen demonstrated across countries that capital marketdevelopment correlates positively with the degree ofshareholder protection and good corporate governance.Awareness of the importance of corporate governance issuesis growing. Success stories of privatizations linked withgood corporate governance highlight the importance of theissue. Colombia is an interesting example of the interplaybetween legal changes and voluntary initiatives based on theincentive to attract capital. It has put a minimum corporategovernance disclosure regime in place for companies thatwish to be eligible for pension fund investments. The reportmakes policy recommendations that may be grouped under threebroad headings: legislative reform, institutionalstrengthening and voluntary/private initiatives. The reportrecommends (1) adopting a securities bill as proposed by thesecurities regulator Supevalores; (2) adopting internationalstandards and creating an independent audit oversight board;(3) improving enforcement; (4) enhancing compliancemonitoring with the code of good governance; and (5)creating a director training organization.
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