1. The OECD Principles & The OECD Guidelines on Corporate Governance of State-Owned Enterprises
Eurasian Corporate Governance Roundtable
Task Force on Corporate Governance of Banks in Eurasia
Janet Holmes, Senior Legal Adviser
Corporate Affairs Division, OECD

2. Overview of Presentation
The OECD Principles of Corporate Governance
Core elements of the OECD Principles
Introduction to new Assessment Methodology
The OECD Guidelines on Corporate Governance of State-Owned Enterprises
Priorities in the SOE Guidelines

3. What is corporate governance?
A set of relationships between a company’s management, its board, its shareholders and other stakeholders
A structure through which the company’s objectives are set
A means for determining how to achieve those objectives and monitor performance
Should provide incentives for the board and management to pursue objectives that are in the interests of the company
Should facilitate monitoring (e.g. by shareholders, stakeholders and regulators)

4. The OECD’s Corporate Governance Principles
First issued in 1999
Revised Principles issued in 2004
OECD Methodology for Assessing Implementation of the OECD Principles released in December 2006

5. Core Elements of the OECD Principles
Chapter I: Ensuring the basis for an effective corporate governance framework
The corporate governance framework should promote transparent and efficient markets, be consistent with the rule of law and clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement authorities
Chapter II: Basic rights of shareholders and key ownership functions
The corporate governance framework should protect and facilitate the exercise of shareholders’ rights
Chapter III: Equitable treatment of shareholders
The corporate governance framework should ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for violation of their rights.

6. The OECD Principles (continued)
Chapter IV: Role of stakeholders in corporate governance
The corporate governance framework should recognise the rights of stakeholders established by law or through mutual agreements and encourage active co-operation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises.
Chapter V: Disclosure and transparency
The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company.
Chapter VI: Board responsibilities
The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the board’s accountability to the company and the shareholders.

7. Assessment Methodology
Methodology developed by OECD Steering Group on Corporate Governance to support implementation of the Principles
Experimental study of corporate governance in Turkey (the “Pilot Study”) carried out to test the draft Methodology
Pilot Study published in November 2006
Final Methodology published in December 2006
What is in the Methodology?
General advice on how to use Methodology
Qualitative assessment scheme: not a “check the box” approach
For each of the 60+ Principles/sub-Principles:
Description of “likely practices” to be examined
One or more essential criteria to be assessed
Advice on how to bring Principle-by-Principle assessments should be pulled together into a final assessment

8. What is special about the OECD Principles and Methodology?
Emphasise “functional equivalence” - the means used to achieve the desired outcomes might vary, depending on:
Legal and institutional frameworks
Economic conditions & market structures
Political and socio-cultural environment
Therefore, the Principles can be applied in any jurisdiction
Effect on overall economic performance, market integrity and incentives for market participants to be considered
Assessments require an evaluation of:
Scope and content of laws, regulations & voluntary codes
Company practices – how widespread is adherence to Principles?
Accessibility and effectiveness of remedies
Efficiency & effectiveness of regulatory supervision & enforcement

9. The SOE Guidelines Rationale for developing the SOE Guidelines
Main characteristics of the SOE Guidelines
Priorities

10. Rationale for the SOE Guidelines
Scale and scope of the state sector in many countries
Impact of SOEs on economic performance
Pressure for reform deriving from globalisation and liberalisation
Expected benefits from improving SOE governance
Strong demand from non-OECD economies
Unique governance challenges

11. Main characteristics of SOE Guidelines
Complementary to the OECD Principles
Non-binding
Do not preclude or alter privatisation policies

12. Priorities in the SOE Guidelines
Ensure a level playing field between SOEs and private companies
The state should act as an informed and active owner
Establish a clear ownership policy
State should not be involved in day-to-day management
Transparency and accountability
Provide for equitable treatment of minority shareholders
State ownership policy should fully recognise SOEs’ responsibilities to stakeholders
Improve transparency of SOEs’ objectives and performance
Strengthen and empower SOE boards

13. For more information … Go to www.oecd.org/daf/corporate-affairs for
Revised OECD Principles
New Methodology
SOE Guidelines
Comparative surveys
Roundtable proceedings
Pilot Study of Corporate Governance in Turkey