Due to such pattern of ownership, the families control and manage the affairs of the companies, according to a final draft report of the Asian Development Bank (ADB) which was prepared under an ongoing ADB technical assistance project.

The report pointed out that in many of these companies, substantial majority of the shares remain within hands of a family bloc.

"Consequently, family members not only comprise the principal management officials but also serve on the board of the directors," it said.

The report said there is little distinction between the board and management, and that management's accountability to the board for its performance and conduct is absent.

It said many important decisions regarding companies are taken at family meetings and such decisions are adopted in board meetings to merely ensure that all legal obligations under the Companies Act are fulfilled.

This intertwining between management and the policymaking board reduces the chances of the boards to prevent insider dealings and preferential treatments.

Such a situation also diminishes the ability of the board of directors to monitor and measure how well managers are succeeding in enhancing corporate wealth for all shareholders, the ADB final draft report said.

The report identified conglomerates' involvement in cross owner directorship to be a key reason for insider abuse to outside shareholders. "These conglomerates involve cross-ownership relationships with a number of private companies through which the majority shareholder group exercises common control, either directly or by way of nominees."

"As a result, there is ample opportunities to obscure transfer of funds and assets and engage in so-called related party transactions that improperly favour the inside shareholders or otherwise detrimental to the interests of the public company."

The report said though there are independent directors, who sit on the boards of companies, but they fail to give independent judgement as the nominees tend to have business or social connections with the controlling shareholder group.

"On the other hand, individuals with the qualifications and stature to act independently as directors appear to be concerned about exposure to criminal and civil liabilities for the acts of the company since the standards are vague and are believed unsuitable for outside directors," the report said.