One of the most influential guidelines has been the OECD Principles of Corporate Governance— published in 1999 and revised in 2004. The OECD guidelines are often referenced by countries developing local codes or guidelines. Building on the work of the OECD, other international organizations, private sector associations and more than 20 national corporate governance codes formed the United Nations Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) to produce their Guidance on Good Practices in Corporate Governance Disclosure. This internationally agreed benchmark consists of more than fifty distinct disclosure items across five broad categories
The OECD Principles of Corporate Governance were originally developed in response to a call by the OECD Council Meeting at Ministerial level in 1998, to develop, in conjunction with national governments, other relevant international organisations and the private sector, a set of corporate governance standards and guidelines. Since the Principles were agreed in 1999, they have formed the basis for corporate governance initiatives in both OECD and non-OECD countries alike. Moreover, they have been adopted as one of the Twelve Key Standards for Sound Financial Systems by the Financial Stability Forum. Accordingly, they form the basis of the corporate governance component of the World Bank/IMF Reports on the Observance of Standards and Codes (ROSC).
The OECD Council Meeting at Ministerial Level in 2002 agreed to survey developments in OECD countries and to assess the Principles in light of developments in corporate governance. This task was entrusted to the OECD Steering Group on Corporate Governance, which comprises representatives from OECD countries. In addition, the World Bank, the Bank for International Settlements (BIS) and the International Monetary Fund (IMF) were observers to the Group. For the assessment, the Steering Group also invited the Financial Stability Forum, the Basel Committee, and the International Organization of Securities Commissions (IOSCO) as ad hoc observers. In its review of the Principles, the Steering Group has undertaken comprehensive consultations and has prepared with the assistance of members the Survey of Developments in OECD Countries. The consultations have included experts from a large number of countries which have participated in the Regional Corporate Governance Roundtables that the OECD organises in Russia, Asia, South East Europe, Latin America and Eurasia with the support of the Global Corporate Governance Forum and others, and in co-operation with the World Bank and other non-OECD countries as well. Moreover, the Steering Group has consulted a wide range of interested parties such as the business sector, investors, and professional groups at national and international levels, trade unions, civil society organisations and international standard setting bodies.
A draft version of the Principles was put on the OECD website for public comment and resulted in a large number of responses. These have been made public on the OECD web site. On the basis of the discussions in the Steering Group, the Survey and the comments received during the wide ranging consultations, it was concluded that the 1999 Principles should be revised to take into account new developments and concerns. It was agreed that the revision should be pursued with a view to maintaining a non-binding principles-based approach, which recognises the need to adapt implementation to varying legal economic and cultural circumstances. The revised Principles contained in this document thus build upon a wide range of experience not only in the OECD area but also in non-OECD countries.
- Principle 1: Ensuring the Basis for an Effective Corporate Governance Framework – The corporate governance framework should promote transparent and efficient markets, be consistent with the rule of law and clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement authorities.
- Principle 2: The Rights of Shareholders and Key Ownership Functions – The corporate governance framework should protect and facilitate the exercise of shareholders’ rights.
- Principle 3: The Equitable Treatment of Shareholders – The corporate governance framework should ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for violation of their rights.
- Principle 4: The Role of Stakeholders in Corporate Governance – The corporate governance framework should recognise the rights of stakeholders established by law or through mutual agreements and encourage active co-operation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises.
- Principle 5: Disclosure and Transparency – The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company.
- Principle 6: The Responsibilities of the Board – The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the board’s accountability to the company and the shareholders.
