Asian institutional investors are starting to exercise their power as shareholders to improve corporate governance practices in the region, according to Jamie Allen, secretary general of the Asian Corporate Governance Association (ACGA). The practice, however, is still not as common as in North America or Europe.

"In terms of the investment industry as a whole, it's still very much a minority of institutions that are taking it seriously," said Allen in Hong Kong Thursday during the press event accompanying the release of ACGA's 2014 report on corporate governance and sustainability in Asia. A few recent initiatives throughout the region are hoping to change this.

Japan launched Asia's first Stewardship Code for institutional investors in the early 2014 and since then, similar efforts took place in Thailand and Malaysia. Thailand has now a collaborative set of proxy voting guidelines issued in March 2014 by a group of leading financial institutions. The Malaysian Code for Institutional Investors was published in June 2014. "There are high hopes that [it] will encourage more active stewardship in the coming years," noted Allen in the report.

Japan's Government Pension Investment Fund (GPIF) has started showing interest in issues of corporate governance, according to Allen. "They're very interested to understand how other members, particularly in the UK, implement their stewardship codes."

Institutional investors and portfolio managers can affect a company's governance directly, by voting against management's proposals during shareholders' meetings. This has been happening increasingly often in Japan where shareholders "are fed up that boards don't have more independent directors."

Portfolio managers in the region have also started paying more attention to governance issues in their investment process. "Three, four years ago most of them really weren't that interested in governance," he observed but nowadays, it's common to integrate corporate governance as a risk factor in the investment process.

ACGA publishes its corporate governance report every two years in collaboration with CLSA. This year's report saw Hong Kong catch up with Singapore at the top of the ranking, while Japan moved up to take the third spot.

While the authors of the report hailed Hong Kong for, among others, stronger legal regime governing insider trading, Singapore's advantages included better in speed of reporting and nomination of independent directors.