Why is it in the news?
- The G20/OECD Principles of Corporate Governance are the international standard for corporate governance.
- It was first issued in 1999 and the revised Principles were endorsed by G20 Leaders in 2023.
G20/ OECD Principles of Corporate Governance
- Objective: Enhance legal, regulatory, and institutional framework for corporate governance to support economic efficiency, sustainable growth, and financial stability.
- Scope: Applies to publicly traded companies, with consideration for smaller and unlisted companies.
- Non-Binding: These principles are not legally binding and do not replace national laws.
- Monitoring: Used as benchmarks globally and monitored through mechanisms like the OECD Corporate Governance Factbook.
- Structure of the Principles:
- Ensuring an effective corporate governance framework, including digital technology risks.
- Rights and equitable treatment of shareholders, addressing conflicts of interest.
- Institutional investors, stock markets, and intermediaries, with a focus on prohibiting insider trading and market manipulation.
- Disclosure and transparency, covering capital structures, group structures, voting rights, and annual external audits.
- Responsibilities of the board, emphasizing fairness to shareholders, transparent board nomination, and election processes.
- Sustainability and resilience, highlighting corporate governance policies related to sustainability and consistent disclosure with international standards.
- Involves balancing the interests of various stakeholders like shareholders, management, customers, suppliers, government, and the community.
Ethical Issues with Corporate governance in India
- Conflict of Interest: Managers potentially enriching themselves at the cost of shareholders.
- Weak Boards: Lack of diversity and experience in boards.
- Separation of Ownership and Management: A challenge in family-run companies.
- Role of Independent Directors.