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The OECD Principles already cover many of the 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 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 questions 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 exercise 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. It also calls on boards to be more rigorous in disclosing related party transactions and to protect so-called 'whistle blowers' by allowing them confidential access to a contact at board level.
The OECD Principles are the result of a consensus between participating governments on minimum requirements for best practice. Although they are non-binding, they provide a reference for national legislation and regulation, as well as guidance for stock exchanges, investors, corporations and other parties. The review of the principles is supported by a survey of corporate governance developments in OECD countries, which was carried out in 2002-2003. In addition, the OECD has released a synthesis of experiences gained from the Regional Corporate Governance Roundtables.
The deadline for responses is 5 February 2004 and should be addressed to corporate.affairs@oecd.org.
It is anticipated that 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
Draft revised text of the Principles of Corporate Governance.
Original Principles of Corporate Governance.
Survey
Synthesis of experiences