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G20/OECD Principles of Corporate Governance in 2023

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.

Corporate Governance

  • 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.

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