Revising the OECD code

14 January 2004

The OECD is seeking business and public comment in the next few weeks on a new and tougher draft of its corporate governance guidelines. This follows a request from member governments for reinforcement of the principles in response to recent corporate scandals.

"Recent events have highlighted a number of areas in which the Principles can appropriately be strengthened," OECD Secretary-General Donald J. Johnston said. "Once a new text is agreed, it will be up to governments, companies, investor groups and others to implement the recommendations and the OECD will follow this process closely."

The draft text now made public for comment is the result of consultations over the past year with governments and representatives of business, professional groups, labour and civil society in both OECD and non-OECD countries. The draft, issued under the responsibility of the OECD Secretariat, represents work in progress. Subsequent versions will take into account comments received during this consultation as well as additional comments by members of the OECD Steering Group on Corporate Governance.

The new draft text sets more demanding standards in a number of areas. It specifies that investors should have both the right to nominate company directors and a more forceful role in electing them. It states that shareholders should be able to express their views about compensation policy for board members and executives and submit questions to auditors. It calls on institutional investors to disclose their overall voting policies and how they manage material conflicts of interest that may affect the way they exercise key ownership functions, such as voting.

The text also identifies the need for effective protection of creditor rights and an efficient system for dealing with corporate insolvency. It calls on rating agencies, brokers and other providers of information that could influence investor decisions to disclose conflicts of interest and how they are being managed. It also calls on boards to be more rigorous in disclosing related party transactions and to protect so-called "whistle blowers" by allowing them confidential access to a contact at board level.

The OECD hopes to get the final draft approved at its ministerial meeting in May 2004.

Full text of the new draft guidelines (requires Adobe Acrobat)
OECD World Survey (requires Adobe Acrobat)