Paris, 19/01/2004 (Agence Europe) - The Organisation for Economic Cooperation and Development (OECD) has published a draft revision of its corporate governance principles adopted in 1999 by its member countries. It calls for comments from the public on the changes contemplated. Revision of the principles follows a request from OECD governments for reinforcement of the Principles in response to recent corporate scandals.
Since they were adopted in 1999, the OECD Principles have been a reference for corporate governance initiatives around the world. The Financial Stability Forum named them as one of the Twelve Key Standards for Sound Financial Systems, and they underpin the corporate governance component of the World Bank/IMF Reports on Standards and Codes (ROSC). Although they are non-binding, the Principles provide a reference for national legislation and regulation, as well as guidance for stock exchanges, investors, corporations and other parties. According to OECD Secretary General Donald Johnston: "Recent events have highlighted a number of areas in which the Principles can appropriately be strengthened. Once a new text is agreed, it will be up to governments, companies, investor groups and others to implement the recommendations and the OECD will follow this process closely".
The draft text now made public for comment (http: //http://www.oecd.org/dataoecd/19/29/23888981.pdf ) is the fruit of consultations over the past year with governments and representatives of business, professional groups, labour and civil society in both OECD and non-OECD countries. Issued under the responsibility of the OECD Secrtetariat, the draft represents work in progress.
The current principles already cover a large range of issues that have been at the centre of recent corporate scandals. They include recommendations on high quality standards of accounting and audit, the independence of board members and the need for boards to act in the interest of the company and the shareholders. The new draft text sets more demanding standards in an number of areas. It specifies that investors should have both the right to nominate company directors and a more forceful role in electing them. It states that shareholders should be able to express their views about compensation policy for board members and executives and submit question to auditors. It calls on institutional investors to disclose their overall voting policies and how they manage material conflicts of interest that may affect the way they excise key ownership functions such as voting. The text also identifies the need for effective protection of creditor rights and an efficient system for dealing with corporate insolvency. It calls on rating agencies, brokers and other providers of information that could influence investor decisions to disclose conflicts of interest and how they are being managed.
A final revised version of the Principles will be submitted to OECD governments for approval at the annual meeting of the OECD Council at Ministerial Level on 13-14 May 2004.