G20/OECD PRINCIPLES OF CORPORATE GOVERNANCE

CHRISTIAN CAMILO MUÑOZ MANQUILLO

PILOT UNIVERSITY OF COLOMBIA

To improve the integrity of companies and markets in the world a fundamental factor for the

vitality and stability of economies. It is a good corporate governance that is made up of the rules

and practices that govern the relationship between the administrators and the shareholders of

the corporations, also with interest groups such as employees, creditors, contributes to the

growth and financial stability by supporting the confidence of the G20 Principles and the OECD

Principles for Corporate Governance provide specific guidelines for policymakers, regulators

and market participants to improve the legal, institutional and regulatory framework that

sustains corporate governance. These principles provide also practical suggestions for stock

markets, investors, corporations and other parties that play some role in the process of

developing good corporate governance.

¿What are the G20 and OECD Principles of Corporate Governance and what do they

address?

The Principles cover six key areas of corporate governance: security for the foundations of

a framework, for effective corporate governance, the rights of shareholders, equitable treatment

for shareholders, the role of interest groups in corporate governance, disclosure and

transparency of corporate information, as well as the responsibilities of the board of directors.

There are explanatory notes for each area that also indicate the range of policy measures that

have proven to be successful in achieving their objectives. The key to its success is that the

Principles make bases and are not prescriptive in a way that maintains its relevance for different

legal, economic and social contexts.

I. Security for the foundations of a framework for effective corporate governance

The framework for corporate governance should promote efficient and transparent

markets, be consistent with the laws in force and clearly articulate the responsibilities

among the different authorities in charge of supervision, regulation and compliance with

laws.

II. The rights of the shareholders and the key functions of the owners

The framework for corporate governance should protect the rights of shareholders and

facilitate their exercise.

III. Equitable treatment for shareholders

The framework for corporate governance must ensure equitable treatment for all

shareholders, including minority and foreign shareholders. They should have the

opportunity to have effective justice done in their rights are violated.

IV. The role of interest groups in corporate governance

The framework for corporate governance should recognize the rights of interest

groups that have been established by law or through mutual agreements, should also

encourage active cooperation between companies and interest groups for the creation of

wealth, employment and sustainability of financially successful companies.

V. Disclosure and transparency of relevant corporate information

The framework for corporate governance must provide assurance that information

on all matters regarding the company is timely and accurately disclosed, including

information related to its financial situation, performance, owners and management.

must provide security so that the company is managed strategically, so that there is effective

control of the administration by the board of directors and for it to render accounts to the

company and the shareholders.

The Principles are the basic requirements of the institutional and legal regulatory framework

that are needed to obtain an effective corporate governance. The Principles are intended to

establish an effective system of restrictions and balances between the boards of directors and

the administration as such.

The board of directors is responsible to the shareholders who, in accordance with the

Principles, must be able to exercise their fundamental property rights, including the

appointment and removal of the members of the board of directors, and must receive fair

treatment from the parties. of the company. Finally, for the company to be successful it is also

necessary to consider the interest groups, such as employees and creditors who provide

resources to the company and who also need access to timely and efficient information.

¿How do the OECD Principles help to strengthen oversight of boards of directors?

The board of directors serves to balance the property rights enjoyed by the shareholders with

the discretion guaranteed to the administrators. Good corporate governance requires that the

board of directors, whatever its structure, focus on long-term issues, such as the evaluation of

the corporate strategy and the activities that may involve changes in the nature and direction of

the company, in instead of taking responsibilities in day-to-day operations. both in the collective

and the individual, the members of the board of directors must have clearly defined incentives

and duties to ensure that they fulfill their functions effectively.

establishing a corporate code of ethics, ensuring compliance with laws and regulations and

supervising the internal control systems related to financial reporting to obtain clear and

transparent information for shareholders

the Principles adopt a general conception of the independence and objectivity of the board

of directors, instead of referring simply to the independence of the administration. Boards of

directors should review transactions with related parties using independent board members and

provide confidential access to informants who may be in a position to identify unethical conduct

and abusive transactions. Although in recent years the practice of creating board committees

for tasks such as audit, remuneration and nomination of board members has spread, the

underlying concepts have not always been well understood and committees often play very

important roles. different depending on the company. To avoid confusion and to keep investors

informed, the Principles advise that the composition, mandate and dissolution of committees be

clearly defined and fully disclosed.

Activities of the G20 and OECD Principles to improve corporate governance

The OECD serves as the international nexus for policy discussions related to corporate

governance. The Principles are the centerpiece of the various activities that this body has

undertaken to improve corporate governance. In cooperation with the World Bank, the Regional

Roundtables have used these principles as a framework for policy dialogue to promote regional

reforms of corporate governance in Asia, Latin America, Eurasia, Southeast Europe and Russia.

As a result, the documents have been obtained as white papers in which common objectives for

policies are developed and recommendations for political actions are highlighted. The

knowledge gained from the round tables has been made available to the public and is
summarized in Experiences from the Regional Corporate Governance Roundtables, an OECD

report that compares the corporate governance problems faced by the different emerging and

emerging economies of development and in which the priorities established by these regions

are addressed in detail. In turn, this experience influenced the revision of the Principles.

Good corporate governance is also necessary for state enterprises. The role of the State as

owner in the companies of which it is a shareholder is far from being fully resolved, even after

considering the beneficial effects of the partial privatization that in many countries has opened

the way to unprecedented restructuring initiatives and has Increased exposure to competition

with private entities. The OECD Working Group on Privatization and Corporate Governance

of State Enterprises is developing a set of guidelines that will allow countries to have better

reference points for the functions of the State as owner. This work is subject to an open

consultation process.

Regulatory reform has often been associated with changes in the corporate governance

framework. The response of the OECD to the growing demand for updated, complete and

comparable information on recent regulatory developments has been the creation of databases

on Corporate Law and Government, a unique interactive tool for the dissemination of related

legal and regulatory information. with corporate governance.

Reference.