The governments of the 30 countries have approved a revised version of the Organization for Economic Co-operation and Development’s Principles of Corporate Governance.

The revised Principles respond to a number of issues that have undermined the confidence of investors in company management in recent years, the OECD says. “They call on governments to ensure genuinely effective regulatory frameworks and on companies themselves to be truly accountable. They advocate an increased awareness among institutional investors and an effective role for shareholders in executive compensation. They also urge strengthened transparency and disclosure to counter conflicts of interest,” it says.

Veronique Ingram, from the Australian Treasury who chairs the OECD Steering Group on Corporate Governance, said, “The revised Principles emphasize the importance of a regulatory framework in corporate governance that promotes efficient markets, facilitates effective enforcement and clearly defines the responsibilities between different supervisory, regulatory and enforcement authorities. They also emphasise the need to ensure transparent lines of management responsibility within companies so as to make boards and management truly accountable.”

Other issues addressed by the revised Principles include: institutional investors should disclose their corporate governance policies; shareholder rights must be strengthened; rating agencies and analysts must avoid conflicts of interest which could compromise their advice; the duties of the auditor must be strengthened and include accountability to shareholders and a duty to the company to exercise due professional care when conducting an audit; auditors should be wholly independent and not be compromised by other relations with the company. Also, a new principle advocates protection for whistleblowers. And, the duties of the board have been clarified as fiduciary; and, the principle covering board independence and objectivity has been extended to avoid conflicts of interest and to cover situations characterized by block and controlling shareholders, as well as the board’s responsibility for oversight of internal control systems covering financial reporting.

The OECD Principles of Corporate Governance, first published in 1999, are used as one of 12 key standards by the Financial Stability Forum for ensuring international financial stability and by the World Bank in its work to improve corporate governance in emerging markets. In 2002, OECD governments called for a review of the Principles to take account of developments in the corporate sector.