1. 1 The OECD Principles of Corporate Governance – Why Corporate Governance Matters Alexander Karpf Corporate Affairs Division, OECD GCGF-IFC PEP SEE Media Corporate Governance Workshop Belgrade 11 May, 2006 The views expressed in this paper are those of the author and do not necessarily represent the opinions of the OECD or its Member Countries.

2. 2 What is Corporate Governance? Corporate governance … involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined.

3. 3 Moreover … Good corporate governance should provide proper incentives for the board and management to pursue objectives that are in the interests of the company and shareholders and should facilitate effective monitoring, thereby encouraging firms to use resources more efficiently.

4. 4 Why does Corporate Governance Matter? Lower capital costs + better management => greater competitiveness + private-sector economic growth Enhanced investor confidence Financial stability Legitimisation of market economy

5. 5 Rationale behind the OECD Principles of Corporate Governance OECD – global standard setter Governance systems vary widely No single model of good corporate governance – need for a global language Common elements and core principles Multilateral policy framework Follow-up at national and regional level

6. 6 Core Elements of the OECD Principles Ensuring the basis of an effective Corporate Governance framework The rights of shareholders and key ownership functions The equitable treatment of shareholders The role of stakeholders in Corporate Governance Disclosure and transparency The responsibilities of the board

7. 7 The Role of the Media Credibility Awareness-raising among –Shareholders –Directors –Stakeholders –General public Disclosure and publicity Promoting CG champions - Naming and shaming

8. 8 OECD – Promoter of Good Corporate Governance Regional Roundtables –South East Europe –Eurasia –Russia –Latin America –Asia Guidelines on CG of State-Owned Enterprises

9. 9 THANK YOU FOR YOUR ATTENTION ! The documents can be downloaded from our Website at: www.oecd.org/daf/corporate-affairs