The Organization for Economic Cooperation and Development has completed a draft of international guidelines for good corporate governance that emphasizes, among other things, promotion and protection of shareholders’ rights.
The draft, obtained Thursday by The Japan Times, also stresses the need for companies to promote information disclosure for investors and enhance the accountability of the board to shareholders. The 29-nation OECD, the Paris-based body often dubbed the “club of the richest,” will submit the guidelines to an annual ministerial meeting of member countries in May, though some amendments are expected through further discussions.
At their last meeting in April, OECD ministers called on the organization to develop a set of standards and guidelines for good corporate governance and submit a draft for final approval this year. The OECD set up an ad hoc task force to meet the request.
The OECD guidelines reflect a strong recognition among member countries that good corporate governance is essential in enhancing their economies’ resiliency to the global financial crisis that erupted in East Asia in July 1997 and has since spread to Russia and Latin America, according to people familiar with the matter.
The guidelines are expected to have a particularly significant impact on Japanese companies, which, unlike their U.S. counterparts, have traditionally placed a greater emphasis on retained earnings and job preservation than on dividends to shareholders.
The draft also comes at a time when debate about corporate governance is becoming increasingly hot in Japanese business circles amid the globalization and liberalization of the economy and after many cases of corruption, including payoffs to “sokaiya” corporate racketeers, were uncovered in recent years. It is also often pointed out that oversight of top management officials is too lax at Japanese companies.
“Work on the international corporate governance guidelines at the OECD has been quite tough,” one Japanese government official involved in the work said, requesting anonymity. “That’s because it concerns a question of what style of capitalism is the best.”
Maximizing shareholder interest is seen as a cornerstone of U.S.-style corporate management practices, and some say that using this cornerstone as a corporate building block is becoming a worldwide trend. Some analysts say this is partly because of strong confidence in the American corporate management model amid the continuing U.S. economic expansion and bull markets.