OECD Committee

8/8/2019 OECD Committee

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OECD Committee

Recommendation

Presented by:

Sanjeev kumar jha


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OECD

(Organization for Economic Co-operation and Development)

The OECD originated in 1948 as the Organization for European

Economic Co-operation (OEEC), led by Robert Marjolin of

France, to help administer the Marshall Plan for the

reconstruction of Europe after World War II. Later, its

membership was extended to non-European states.

In 1961, it was reformed into the Organization for Economic Co-

operation and Development by the Convention on the

Organization for Economic Co-operation and Development. Most

OECD members are high-income economies with a high HumanDevelopment Index (HDI) and are regarded as developed

countries.


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OECD Principles

The OECD is an international economic organization of 33countries founded in 1961 to stimulate economic progress and

world trade.

It was one of the earliest non-governmental organizations to

work on and spell out principles and practices that should govern

corporate in their goal to attain long-term shareholder value. In

summary, they include the following aspects of corporate

governance:

1. The rights of shareholders

2. Equitable treatment of shareholders

3. The role of stakeholders in corporate governance

4. Disclosure and transparency

5. The responsibilities of the board


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I.Rights of Shareholders

Protection of shareholders rights and the

capability of shareholders to influence behaviour

of the corporation are pillars of good corporate

governance


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I.Rights of Shareholders

Secure ownership and registration,

Participation in decisions on sale,

Full disclosure of information,

Voting rights

Modification of corporate assets, mergers and

new share issues.


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II. Equitable Treatment of

Shareholders

The OECD is concerned with protecting minority

shareholders rights by setting up systems that keepinsiders, including managers and directors, from

taking advantage of their roles. For example,

Insider trading is explicitly prohibited and

directors should disclose any material interestregarding transactions.


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The Role of Stakeholders

cont. Where stakeholders participate in the corporate governance

process, they should have access to relevant, sufficient and

reliable information on a timely and regular basis.

Stakeholders, including individual employees and their

representative bodies, should be able to freely communicatetheir concerns about illegal or unethical practices to the board

and their rights should not be compromised for doing this.

The corporate governance framework would be complemented

by an effective, efficient insolvency framework and byeffective enforcement of creditor rights.


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IV. Disclosure and

Transparency A strong financial and non financial disclosure regime is the heart of

corporate governance

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.

Financial and operating results

Company objectives

Ownership and control structure

Board and executive information and recommendation

Foreseeable risk factors

Stakeholder information

Governance information


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V. The Responsibilities of the Board

T

he corporate governance framework shouldensure the strategic guidance of the company,

the effective monitoring of management by the

board, and the boards accountability to the

company and the shareholders.

The OECD guidelines provide a great deal of

details the functions of the board in protecting

the company and its shareholders. Theseinclude concerns about corporate strategy, risk,

executive compensation and performance as

well as accounting and reporting systems.


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Board members should act on a fully informed basis, in

good faith, with due diligence and care, and in the best

interest of the company and the shareholders.

Where board decisions may affect different shareholder

groups differently, the board should treat all shareholders

fairly.

The board should apply high ethical standards. It shouldtake into account the interests of stakeholders.

The board should be able to exercise objective independent

judgment on corporate affairs.

In order to fulfill their responsibilities, board membersshould have access to accurate, relevant and timely

information.


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OECD Guidelines Countries should be required to establish independent share registries. All too

often, newly privatized or partially privatized firms dilute stock or simply fail toregister shares purchased through foreign direct investment

Standards for transparency and reporting of the sales of underlying assets need to

be spelled out along with enforcement mechanisms and procedures by which

investors can seek to recover damages

The discussion of stakeholder participation in the OECD guidelines needs to bebalanced by discussion of conflict of interest and insider trading issues.

Property rights and their protection

Internationally accepted accounting standards should be explicitly required and

national standards should be brought into alignment with international standards

Internal company audit functions and the inclusion of outside directors on auditcommittees need to be made explicit. The best practice would be to require that

only outside, independent directors be allowed to serve on audit committees


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THANKU

Documents

OECD Committee