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Remuneration at heart of new OECD guidelines for multinationals

Tougher standards to protect human rights and social development

The Organisation for Economic Cooperation and Development (OECD) has unveiled updated guidelines to promote responsible business by multinational firms – with top executive pay a key feature.
The OECD said 42 countries will commit to new, tougher standards of corporate behaviour in the updated Guidelines for Multinational Enterprises.
“Companies are also expected to disclose sufficient information on the remuneration of board members and key executives (either individually or in the aggregate) for investors to properly assess the costs and benefits of remuneration plans and the contribution of incentive schemes, such as stock option schemes, to performance,” the new guidelines state.
They also call on multinationals to apply good corporate governance practices drawn from the OECD Principles of Corporate Governance. The principles call for the protection and facilitation of the exercise of shareholder rights, including the equitable treatment of shareholders.
The updated 86-page guidelines – first adopted in 1976 – include new recommendations on human rights abuse and company responsibility for supply chains, making them the first inter-governmental agreement in this area.The non-binding guidelines say firms should respect human rights in every country in which they operate.

Companies should also respect environmental and labour standards – and have due diligence processes in place.
The guidance also notes the role of environmental management systems in assuring shareholders that firms are actively working to protect the environment.
The Guidelines are part of the wider OECD Declaration on International Investment and Multinational Enterprises.
They are set to be debated at the 11th OECD Roundtable on Corporate Responsibility in Paris on June 29.
“The business community shares responsibility for restoring growth and trust in markets,” said OECD Secretary-General Angel Gurría. “These guidelines will help the private sector grow their businesses responsibly by promoting human rights and boosting social development around the world.”
In addition, OECD member states have also agreed to a recommendation designed to combat the illicit trade in minerals that finance armed conflict. This clarifies how companies can identify and better manage risks throughout the supply chain.