OECD plans global Corporate Governance probe into state concerns

7 May 2004

The OECD is planning to investigate corporate governance in state-owned enterprises and in business under partial government control.

Having completed draft corporate governance guidelines for the private sector OECD corporate governance specialists believe there should also be a code for the many thousands of corporations that are run as government monopolies or near monopolies.

The OECD move is likely to be seen as controversial since the boards of directors serving these quangos, as they are sometimes called, are often appointed by politicians, and, in many cases, their independence from the ruling government is questionable.

But OECD officials believe that as many of these bodies compete with the private sector it is only fair that corporate governance rules should, where possible or sensible, be similar.

The corporations in question include airlines, transport companies, energy and water utilities, and a range of manufacturing concerns.

The OECD does not expect the codes to be in place quickly. As with its recently published code for listed companies, there will be months of consultation with OECD member governments, and with the concerns themselves. A draft will then be produced for discussion prior to agreement by ministers. It is understood the first public meeting to discuss the state owned enterprises will take place in September.

Grant Kirkpatrick, a senior member of the OECD's corporate governance team, confirmed that it was the rising number of cases of fraud or clear breaches of corporate governance that led the OECD to stiffen their guidelines as reported here.

He described the verdict in the Delaware court on Hollinger-Conrad Black case as "required reading" for those interested in corporate governance, saying it raised the important issues of the 'fiduciary duty of majority shareholders to all stakeholders" as well as the independence of boards.

"A board, whatever its composition, has got to be seen as being capable of objectivity and independence", he said. "We have really tightened up conflict of interest quite a lot".

Kirkpatrick said he thought it also important that institutional shareholders should disclose voting policies and how these policies were reached.

For full details of OECD guidelines click here