OECD looks at investment chain as it revises corporate governance principles post-crisis

First draft of new text set to be released for consultation

The Organisation for Economic Co-operation and Development (OECD) has given an indication of its thinking as it reviews its Principles of Corporate Governance in the wake of the global financial crisis.

The six principles (below) were first released in 1999 and were last updated in 2004. The review is being conducted to ensure their “continuing high quality, relevance and usefulness” after the crisis.

The review is being led by Marcello Bianchi, the head of the corporate governance division at Italian regulator Consob, in his role as chair of the OECD’s Committee on Corporate Governance.

A public consultation on a first draft text of the revised Principles is planned for late this year.

But, ahead of that, Gabriela Ramos, the OECD’s Chief of Staff and ‘Sherpa’ for the G20 group of industrial nations, highlighted a range of factors the review is looking at, including the shift from bank finance and the growth in corporate bonds, cash hoarding by large corporates and the growth of financial intermediation.

Speaking at the high-level European Corporate Governance conference in Milan, she also said the standard-setting role of stock exchanges, often listed companies in their own right, needed to be explored. And cash hoarding and buybacks, she said, threatened to cut investment in innovation and the wider economy.There was an “urgent need” to re-align interests in the investment chain to help long-term value creation.

Another issue under debate at the Paris-based body was the growth of financial intermediation: the service providers in an “increasingly complex investment chain”. And fee structures needed to be fully transparent for both pension funds and private individuals.

Ramos also mentioned high speed trading, which she said had “tilted the playing field to short-term trading, we need to take these concerns seriously”.

It’s hoped the review will provide policy makers and regulators “with a sound benchmark for establishing an effective corporate governance framework”.

The review is in tandem with a revision of the OECD’s Guidelines on Corporate Governance of State-Owned Enterprises. A public consultation on this closed on September 8. Link

OECD Corporate Governance Principles:
1. Ensuring the Basis for an Effective Corporate Governance Framework
2. The Rights of Shareholders and Key Ownership Functions
3. The Equitable Treatment of Shareholders
4. The Role of Stakeholders in Corporate Governance
5. Disclosure and Transparency
6. The Responsibilities of the Board