The OECD Principles &

The OECD Guidelines on

Corporate Governance of StateOwned Enterprises
Eurasian Corporate Governance Roundtable
Task Force on Corporate Governance of Banks in Eurasia
Janet Holmes, Senior Legal Adviser
Corporate Affairs Division, OECD

Overview of Presentation

The OECD Principles of Corporate Governance

Core elements of the OECD Principles
Introduction to new Assessment Methodology

The OECD Guidelines on Corporate Governance of StateOwned Enterprises

Priorities in the SOE Guidelines

What is corporate governance?

A set of relationships between a companys management, its

board, its shareholders and other stakeholders
A structure through which the companys objectives are set
A means for determining how to achieve those objectives and
monitor performance
Should provide incentives for the board and management to
pursue objectives that are in the interests of the company
Should facilitate monitoring (e.g. by shareholders, stakeholders
and regulators)

The OECDs Corporate Governance

Principles

First issued in 1999

Revised Principles issued in 2004
OECD Methodology for Assessing Implementation of
the OECD Principles released in December 2006

Core Elements of the OECD Principles

Chapter I: Ensuring the basis for an effective corporate

governance framework
The corporate governance framework should promote transparent and
efficient markets, be consistent with the rule of law and clearly articulate the
division of responsibilities among different supervisory, regulatory and
enforcement authorities

Chapter II: Basic rights of shareholders and key ownership

functions
The corporate governance framework should protect and facilitate the
exercise of shareholders rights

Chapter III: Equitable treatment of shareholders

The corporate governance framework should ensure the equitable treatment
of all shareholders, including minority and foreign shareholders. All
shareholders should have the opportunity to obtain effective redress for
violation of their rights.
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The OECD Principles (continued)

Chapter IV: Role of stakeholders in corporate governance

The corporate governance framework should recognise the rights of
stakeholders established by law or through mutual agreements and
encourage active co-operation between corporations and stakeholders in
creating wealth, jobs, and the sustainability of financially sound enterprises.

Chapter V: Disclosure and transparency

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.

Chapter VI: Board responsibilities

The corporate governance framework should ensure the strategic guidance
of the company, the effective monitoring of management by the board, and
the boards accountability to the company and the shareholders.

Assessment Methodology

Methodology developed by OECD Steering Group on Corporate

Governance to support implementation of the Principles
Experimental study of corporate governance in Turkey (the Pilot Study) carried
out to test the draft Methodology
Pilot Study published in November 2006

Final Methodology published in December 2006

What is in the Methodology?

General advice on how to use Methodology
Qualitative assessment scheme: not a check the box approach

For each of the 60+ Principles/sub-Principles:

Description of likely practices to be examined
One or more essential criteria to be assessed

Advice on how to bring Principle-by-Principle assessments should be pulled

together into a final assessment

What is special about the OECD

Principles and Methodology?

Emphasise functional equivalence - the means used to

achieve the desired outcomes might vary, depending on:
Legal and institutional frameworks
Economic conditions & market structures
Political and socio-cultural environment

Therefore, the Principles can be applied in any jurisdiction

Effect on overall economic performance, market integrity and
incentives for market participants to be considered
Assessments require an evaluation of:

Scope and content of laws, regulations & voluntary codes

Company practices how widespread is adherence to Principles?
Accessibility and effectiveness of remedies
Efficiency & effectiveness of regulatory supervision & enforcement
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The SOE Guidelines

Rationale for developing the SOE Guidelines

Main characteristics of the SOE Guidelines
Priorities

Rationale for the SOE Guidelines

Scale and scope of the state sector in many countries

Impact of SOEs on economic performance
Pressure for reform deriving from globalisation and
liberalisation
Expected benefits from improving SOE governance
Strong demand from non-OECD economies
Unique governance challenges

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Main characteristics of SOE Guidelines

Complementary to the OECD Principles

Non-binding
Do not preclude or alter privatisation policies

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Priorities in the SOE Guidelines

Ensure a level playing field between SOEs and private

companies
The state should act as an informed and active owner
Establish a clear ownership policy
State should not be involved in day-to-day management
Transparency and accountability

Provide for equitable treatment of minority shareholders

State ownership policy should fully recognise SOEs
responsibilities to stakeholders
Improve transparency of SOEs objectives and performance
Strengthen and empower SOE boards

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For more information

Go to www.oecd.org/daf/corporate-affairs for

Revised OECD Principles

New Methodology
SOE Guidelines
Comparative surveys
Roundtable proceedings
Pilot Study of Corporate Governance in Turkey

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