REVISED G20-OECD Principles of Corporate Governance, a collaborative effort between G20 and OECD, received strong endorsement at the G20 Leader’s Summit this year. First issued in 1999, these Principles play a vital role in assisting companies in navigating evolving capital markets while fostering market confidence and financial stability.
The revised Principles serve as a global benchmark, encompassing legal, regulatory, and institutional frameworks for corporate governance. Notable updates include fresh guidance on shareholder rights, role of institutional investors, corporate disclosure and transparency, board responsibilities, and, notably, sustainability and resilience, addressing climate-related and other sustainability challenges and opportunities.
Climate challenge focus
OECD Secretary-General Mathias Cormann, while presenting the Principles at the G20 Summit, said, “The revised Principles mark a significant, renewed international consensus and a strong desire from all OECD and G20 Members to strengthen guidance on companies’ sustainability and resilience, to help them support the green transition and adapt to climate risks.” This international effort reflects the global need to support sustainability and address climate challenges.
Masato Kanda, Japan’s ViceMinister of Finance for International Affairs, who chaired the revision, stressed the importance of these Principles in enhancing corporate governance and capital markets.
“The Principles aim to help companies access financing from capital markets, protect investors, and make companies, and hence our economies, more resilient,” said Kanda. The significant revisions align with the evolving landscape of corporate governance and capital markets.
The sectors which have received a nod for major overhaul include a push for sustainability-related disclosures, a clarification on boards’ responsibilities in sustainability matters, and the recommendation of dialogues between companies and shareholders on sustainability issues.
The revisions also address the expanding scope of board responsibilities, encompassing diversity, risk management, and non-shareholder stakeholder interests. The Principles endorse the use of digital technologies in corporate governance practices and supervision and emphasise boards’ management of digital risks.
They acknowledge the growing role of institutional investors through recommendations on stewardship codes, ESG rating, and index providers, as well as proxy advisors. Recent developments in ownership concentration, including company groups, are also covered. The Principles provide new recommendations regarding bondholder rights and debt contracts in response to the increasing corporate debt landscape.