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April 28, 2004

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OECD Finalizes Updated Corporate Governance Principles

Last week, the OECD Council approved these updated corporate governance principles after much deliberation and changes. The original OECD priniciples were established in 1999. It is expected that these principles will be ratified by the OECD Ministers at a meeting on May 12.

Some of the final principles are bound to be controversial in the US, such as:

– shareholders should have more say in nominating directors and deciding their pay
– shareholders should be able to express their views about compensation policy for board members and executives
– all equity components of an executive pay package, such as options or share incentives, should be subject to shareholders’ approval
– boards should make a clear link between pay and performance when disclosing remuneration policy
– rating agencies, banks, brokers and information providers should disclose and manage conflict of conflicts of interests that may arise in the course of close contacts with a company