Presentation on theme: "Eurasian Corporate Governance Roundtable"— Presentation transcript:
1 The OECD Principles & The OECD Guidelines on Corporate Governance of State-Owned Enterprises Eurasian Corporate Governance RoundtableTask Force on Corporate Governance of Banks in EurasiaJanet Holmes, Senior Legal AdviserCorporate Affairs Division, OECD
2 Overview of Presentation The OECD Principles of Corporate GovernanceCore elements of the OECD PrinciplesIntroduction to new Assessment MethodologyThe OECD Guidelines on Corporate Governance of State-Owned EnterprisesPriorities in the SOE Guidelines
3 What is corporate governance? A set of relationships between a company’s management, its board, its shareholders and other stakeholdersA structure through which the company’s objectives are setA means for determining how to achieve those objectives and monitor performanceShould provide incentives for the board and management to pursue objectives that are in the interests of the companyShould facilitate monitoring (e.g. by shareholders, stakeholders and regulators)
4 The OECD’s Corporate Governance Principles First issued in 1999Revised Principles issued in 2004OECD Methodology for Assessing Implementation of the OECD Principles released in December 2006
5 Core Elements of the OECD Principles Chapter I: Ensuring the basis for an effective corporate governance frameworkThe 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 authoritiesChapter II: Basic rights of shareholders and key ownership functionsThe corporate governance framework should protect and facilitate the exercise of shareholders’ rightsChapter III: Equitable treatment of shareholdersThe 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.
6 The OECD Principles (continued) Chapter IV: Role of stakeholders in corporate governanceThe 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.Chapter V: Disclosure and transparencyThe 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.Chapter VI: Board responsibilitiesThe 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.
7 Assessment Methodology Methodology developed by OECD Steering Group on Corporate Governance to support implementation of the PrinciplesExperimental study of corporate governance in Turkey (the “Pilot Study”) carried out to test the draft MethodologyPilot Study published in November 2006Final Methodology published in December 2006What is in the Methodology?General advice on how to use MethodologyQualitative assessment scheme: not a “check the box” approachFor each of the 60+ Principles/sub-Principles:Description of “likely practices” to be examinedOne or more essential criteria to be assessedAdvice on how to bring Principle-by-Principle assessments should be pulled together into a final assessment
8 What is special about the OECD Principles and Methodology? Emphasise “functional equivalence” - the means used to achieve the desired outcomes might vary, depending on:Legal and institutional frameworksEconomic conditions & market structuresPolitical and socio-cultural environmentTherefore, the Principles can be applied in any jurisdictionEffect on overall economic performance, market integrity and incentives for market participants to be consideredAssessments require an evaluation of:Scope and content of laws, regulations & voluntary codesCompany practices – how widespread is adherence to Principles?Accessibility and effectiveness of remediesEfficiency & effectiveness of regulatory supervision & enforcement
9 The SOE Guidelines Rationale for developing the SOE Guidelines Main characteristics of the SOE GuidelinesPriorities
10 Rationale for the SOE Guidelines Scale and scope of the state sector in many countriesImpact of SOEs on economic performancePressure for reform deriving from globalisation and liberalisationExpected benefits from improving SOE governanceStrong demand from non-OECD economiesUnique governance challenges
11 Main characteristics of SOE Guidelines Complementary to the OECD PrinciplesNon-bindingDo not preclude or alter privatisation policies
12 Priorities in the SOE Guidelines Ensure a level playing field between SOEs and private companiesThe state should act as an informed and active ownerEstablish a clear ownership policyState should not be involved in day-to-day managementTransparency and accountabilityProvide for equitable treatment of minority shareholdersState ownership policy should fully recognise SOEs’ responsibilities to stakeholdersImprove transparency of SOEs’ objectives and performanceStrengthen and empower SOE boards
13 For more information … Go to www.oecd.org/daf/corporate-affairs for Revised OECD PrinciplesNew MethodologySOE GuidelinesComparative surveysRoundtable proceedingsPilot Study of Corporate Governance in Turkey