The financial crisis that overran much of Asia in the late 1990s prompted most of the affected countries—joined later by India—to make improved corporate governance a priority. Nearly all of them now require listed companies to have independent directors and audit committees (Exhibit 1). Agreement is growing, at least in principle, on what good governance entails, and most countries in the region have adopted explicit governance codes (see "Why codes of governance work"). Securities laws and the listing requirements of stock exchanges have been strengthened, regulatory authorities have enhanced powers, and the media are more inquisitive and probing.

Yet progress is uneven. Across Asia, too many companies remain unconvinced of the value of good governance, and change faces real-world impediments and disincentives. Moreover, the institutions needed to ensure good governance—judicial systems, capital markets, long-term institutional investors that can push for better governance—continue to be underdeveloped in most of these countries. Laws and regulations aren’t enforced rigorously; well-trained accountants and other professionals are scarce.

The starting point for reform in Asia is therefore very different from the starting point in Europe or North America. Asian governments, corporate leaders, investors, and regulators realize that corporate-governance practices won’t change overnight,...