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The OECD Principles of Corporate Governance – Why Corporate

Governance Matters

Alexander KarpfCorporate Affairs Division, OECD

GCGF-IFC PEP SEE Media Corporate Governance Workshop

Belgrade11 May, 2006

The views expressed in this paper are those of the author and do not necessarily represent the opinions of the OECD or its Member Countries.

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What is Corporate Governance?

Corporate governance … involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined.

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Moreover …

Good corporate governance should provide proper incentives for the board and management to pursue objectives that are in the interests of the company and shareholders and should facilitate effective monitoring, thereby encouraging firms to use resources more efficiently.

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Why does Corporate Governance Matter?

Lower capital costs + better management => greater competitiveness + private-sector economic growth

Enhanced investor confidence Financial stability Legitimisation of market economy

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Rationale behind the OECD Principles of Corporate Governance

OECD – global standard setter Governance systems vary widely No single model of good corporate

governance – need for a global language Common elements and core principles Multilateral policy framework Follow-up at national and regional level

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Core Elements of the OECD Principles

Ensuring the basis of an effective Corporate Governance framework

The rights of shareholders and key ownership functions

The equitable treatment of shareholders The role of stakeholders in Corporate

Governance Disclosure and transparency The responsibilities of the board

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The Role of the Media

Credibility Awareness-raising among

– Shareholders– Directors– Stakeholders– General public

Disclosure and publicity Promoting CG champions - Naming and

shaming

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OECD – Promoter of Good Corporate Governance

Regional Roundtables– South East Europe– Eurasia – Russia– Latin America– Asia

Guidelines on CG of State-Owned Enterprises

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THANK YOU FOR YOUR ATTENTION !

The documents can be downloaded from our Website at:

www.oecd.org/daf/corporate-affairs