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.