The OECD Principles &
The OECD Guidelines on
Corporate Governance of StateOwned Enterprises
Eurasian Corporate Governance Roundtable
Task Force on Corporate Governance of Banks in Eurasia
Janet Holmes, Senior Legal Adviser
Corporate Affairs Division, OECD
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Overview of Presentation
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The OECD Principles of Corporate Governance
– Core elements of the OECD Principles
– Introduction to new Assessment Methodology
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The OECD Guidelines on Corporate Governance of StateOwned Enterprises
– Priorities in the SOE Guidelines
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What is corporate governance?
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A set of relationships between a company’s management, its
board, its shareholders and other stakeholders
A structure through which the company’s objectives are set
A means for determining how to achieve those objectives and
monitor performance
Should provide incentives for the board and management to
pursue objectives that are in the interests of the company
Should facilitate monitoring (e.g. by shareholders, stakeholders
and regulators)
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The OECD’s Corporate Governance
Principles
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First issued in 1999
Revised Principles issued in 2004
OECD Methodology for Assessing Implementation of
the OECD Principles released in December 2006
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Core Elements of the OECD Principles
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Chapter I: 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
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Chapter II: Basic rights of shareholders and key ownership
functions
– The corporate governance framework should protect and facilitate the
exercise of shareholders’ rights
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Chapter III: 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.
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The OECD Principles (continued)
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Chapter IV: 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.
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Chapter V: 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.
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Chapter VI: Board responsibilities
– 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.
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Assessment Methodology
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Methodology developed by OECD Steering Group on Corporate
Governance to support implementation of the Principles
– Experimental study of corporate governance in Turkey (the “Pilot Study”) carried
out to test the draft Methodology
• Pilot Study published in November 2006
– Final Methodology published in December 2006
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What is in the Methodology?
– General advice on how to use Methodology
• Qualitative assessment scheme: not a “check the box” approach
– For each of the 60+ Principles/sub-Principles:
• Description of “likely practices” to be examined
• One or more essential criteria to be assessed
– Advice on how to bring Principle-by-Principle assessments should be pulled
together into a final assessment
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What is special about the OECD
Principles and Methodology?
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Emphasise “functional equivalence” - the means used to
achieve the desired outcomes might vary, depending on:
– Legal and institutional frameworks
– Economic conditions & market structures
– Political and socio-cultural environment
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Therefore, the Principles can be applied in any jurisdiction
Effect on overall economic performance, market integrity and
incentives for market participants to be considered
Assessments require an evaluation of:
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Scope and content of laws, regulations & voluntary codes
Company practices – how widespread is adherence to Principles?
Accessibility and effectiveness of remedies
Efficiency & effectiveness of regulatory supervision & enforcement
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The SOE Guidelines
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Rationale for developing the SOE Guidelines
Main characteristics of the SOE Guidelines
Priorities
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Rationale for the SOE Guidelines
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Scale and scope of the state sector in many countries
Impact of SOEs on economic performance
Pressure for reform deriving from globalisation and
liberalisation
Expected benefits from improving SOE governance
Strong demand from non-OECD economies
Unique governance challenges
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Main characteristics of SOE Guidelines
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Complementary to the OECD Principles
Non-binding
Do not preclude or alter privatisation policies
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Priorities in the SOE Guidelines
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Ensure a level playing field between SOEs and private
companies
The state should act as an informed and active owner
– Establish a clear ownership policy
– State should not be involved in day-to-day management
– Transparency and accountability
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Provide for equitable treatment of minority shareholders
State ownership policy should fully recognise SOEs’
responsibilities to stakeholders
Improve transparency of SOEs’ objectives and performance
Strengthen and empower SOE boards
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For more information …
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Go to www.oecd.org/daf/corporate-affairs for
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Revised OECD Principles
New Methodology
SOE Guidelines
Comparative surveys
Roundtable proceedings
Pilot Study of Corporate Governance in Turkey
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