Truly global

The revision of the OECD’s corporate governance principles provides a good example of how a more open and dialogue-oriented approach can ensure the global relevance of such instruments. The review involved not only consultation with civil society, labour and business in OECD countries, but was based on five years of policy dialogue in regions around the world, as well as putting the Principles to the test.

Corporate governance roundtables involving 38 countries in Asia, Latin America, southeast Europe, Eurasia and Russia have been discussing and introducing their own corporate governance reforms, using the OECD Principles of Corporate Governance as a benchmark.

While this shows that the Principles apply well beyond the OECD area, the process has been two-way, as lessons from the 25 roundtable meetings and several public consultations were taken into account in making the new revisions.

A range of issues were taken on board. One significant example was enforcement, a severe challenge even when the legal framework is adequate. In many cases implementation of rules and regulations is deficient, with some cases of inconsistencies, since the design bears little relation to the institutional and human resources available. These concerns are reflected in a new chapter that provides more guidance on creating a sound regulatory system, such as by clearly delineating the competencies of different regulatory agencies to support the corporate governance framework.

Concentrated and opaque ownership structures are a feature in a number of non-OECD countries, as is weak minority shareholder protection. In such situations those in control can structure commercial transactions with their own private companies, family, etc., to benefit themselves at the expense of the company or its smaller shareholders. The Principles now include added guidance on disclosure of transactions between related parties so as to prevent abuse.

Moreover, there is strong support for disclosing conflicts of interest by board members and major investors, as well as for improving transparency. And the fiduciary duties of board members have been clarified in a bid to deal with opaque and concentrated ownership structures. For instance, their duty is not to the group as a whole, but to the company where they are a board member, and they are required to treat all shareholders equally.

©OECD Observer No 243, May 2004

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