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 equitytrading totals about USD one million, as compared to USD onebillion in fixed income trading. The corporate sector islargely owned and controlled by family groups andconglomerates. The challenge is to create an environmentwhere medium-sized companies can raise capital in the marketand help them make the transition from tightly-controlledfamily firms to public companies. While pension fundsrepresent a large and rapidly growing source of funds, theyare reluctant to invest in equities. It has beendemonstrated 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 reportrecommends (i) the adoption of a securities bill as proposedby the securities regulator supevalores; (ii) the adoptionof International Accounting Standards (IAS) andInternational Standards on Auditing (ISA) and the creationof an independent audit oversight board; (iii) improvedenforcement; (iii) enhanced monitoring of compliance withthe code of good governance, for example by introducing acomply-or-explain requirement; and (iv) the creation of adirector training organization.
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