top of page
This site was designed with the
.com
website builder. Create your website today.Start Now

Corporate Governance Rules/Guidance:

Who Set the Rules?

There are variety of rules and guidance available for corporate governance for companies, organizations or businesses. Some of the rule setters are given below:

 

1.Global:

OECD (Organization for economics Co-operation and development):

The OECD is a unique forum where the 34 countries democracies with market economies work with each other, as well as more than 7o non-member countries economies to promote economic growth, prosperity and sustainable development. The first OECD principles of corporate governance were published 0n 27-28 April 1998. The first report was on the ‘Corporate Governance: improving competitiveness and access to capital in global Markets’ by the business sector advisory group on corporate governance. This report acknowledge that the company mission should be the long-term improvement of shareholder value but that companies operate in the larger society, and that there may be different society pressure and expectations which may impact on the financial objective to some extent so that non financial objectives may need to be addressed as well.

 

In 1999 OECD includes few development regarding the Principles, OECD include the role of stakeholders in corporate governance. The principles state that ‘the corporate governance framework should acknowledge the rights of shareholders as established by law and this encourage active co-operation with the large companies and stakeholders in creating wealth, Jobs and the sustainability of financially sound enterprises’.In 1999 OECD highlights two aspects which are;firstly they discuss the right of stakeholder which depends on the legal provision of stakeholders in any given country and secondly, that stakeholder do have a role to play in the long-term future of businesses and that the corporate governance framework should 'permit performance-enhancing mechanisms for stakeholder participation' and that stakeholders should have access to relevant information in order to participate effectively.

 

OECD provides a forum in which governments can work together to share the experiences and seek solutions to common promblems.OECD work with governements to intend what drives economic, social and environmental change.OECD measures the productivity and global flows of trade and investment.OECD analyse and predict the future trends. OECD Set international standards ,from agriculture to safety of chemicals and taxation. 

OECD at 50 and Beyond:

According to OECD Website"Nowadays OECD focused on helping the government around the world to:

  • Restoring the confidence in markets and institutions that make them functions.

  • Re-establish healthy public finances on a basis for future sustainable economic growth.

  • Ensure that people of all age can develop skills to work productively and satisfying in the jobs of tomorrow.

  • Foster and support new sources of growth through innovation,environmentally friendly'Green growth' strategies and the development of emerging economies."

The ICGN(International Corporate Governance Network) has used its membership to create its own more detailed guidelines built around the OECD code,and designed for use by any country.

 

2.National:

Many countries have developed their own systems, and sometimes as laws(e.g. Sarbanes Oxley in the USA) and sometime use as a code(e.g. UK Corporate Governance Code).

  • RSA(Tomorrow's Company):

        The Royal Society of Arts(RSA) is a multidisciplinary independent body in the UK which has commissioned reports in various  areas including one called 'Tomorrow's Company' which was led by Mark Goyder.The Tomorrow's company report (1995) recommended an approach for business in its relationships with various stakeholders groups.This approach recognizes that there is an interdependence between the employees,investors,suppliers,customers which increasingly means that the business needs to take a long-term views rather than short-term focus.

  •  Hermes Principle:

    Hermes is one of the largest institutional investors and operating in the UK and almost million people relying on Hermes investments to generate their retirement income.Hermes has been the most active institutional investors in corporate governance and in 2002 it published the hermes principles.Hermes State that:

        "Hermes overriding requirement is that companies be run in the long-term interest of shareholders.Companies adhering to this principles will not only benefit their shareholders,but also we would argue,the wider economy in which the company and its shareholders participate.We believe a company run in the longterm interest of shareholders will need to manage effectively relationships with its employees,suppliers and customers tobehave ethically and have regards for the environment and society as a whole."

 

3.Companies:

Many of the companies have tried their own policies on corporate governance,some of which go further than the rules or code their country expects them to follow.

 

4. Others:

In some countries,a regulatory body will set some rules.For example, something that appears to be "voluntary" can effectively become law(e.g. in UK all listed companies are required to either follow the UK corporate governance code, or explain why they have not followed it-Stock Exchange Rules).

 

 

 

bottom of page