The OECD Principles of Corporate Governance provide a global framework for well-governed corporations and were first published by the OECD in 1999. They establish guidance in six areas, including ensuring an effective governance framework, equitable treatment of shareholders, the role of stakeholders, and disclosure and transparency. In India, the principles have been applied through regulations like Clause 49 of the Listing Agreement and the Companies Act of 2013. For corporations to fully adopt the OECD principles in India, they must embrace values of justice, truth, and harmony; act with fairness, integrity, and care toward stakeholders; and ensure good, reliable direction and governance of the company.

1. OECD Principles of
Corporate Governance
Submitted By:
Roopanshi Virang

2. Corporate Governance
• Corporate Governance is the system by which business corporations are directed
and controlled. The corporate governance structure specifies the distribution of
rights and responsibilities among different participants in the corporation, such
as the board, managers, shareholders and other stakeholders and spells out the
rules and procedures for making decisions on corporate affairs. By doing this, it
also provides the structure through which the company objectives are set, and the
means of attaining those objectives and monitoring performance.
• arose partly in response to pressure from the increasingly prevalent institutional
ownership, and partly in response to financial scandals at the end of 1980s.
• Cadbury Report was a direct reaction to the scandals. This report contained a no
of recommendations regarding good corporate governance also called “best
practice” or code of conduct(1992)

3. In July 2002, less than a year after Enron scandal Sarbanes-Oxley Act popularly
called SOX was enacted, made fundamental changes in
•general and auditor independence,
•conflict of interests,
•corporate responsibility,
•enhanced financial disclosures and
•severe penalties for willful default by managers and auditors, in particular.
The first effort to offer a global set of principles was by the OECD by attempting to
harmonize practices across 29 country members, ranging from the US to South
Korea.

4. Corporate Governance was not in agenda of Indian Companies until early 1990s.
After liberalization major steps are:
•In 1998 by CII giving India first Code on Desirable Corporate governance
•In 1999 by SEBI through Kumar Manglam Birla Committee on CG
•In 2000 SEBI implemented Birla Committee’s proposal through enacting
Clause 49 of Listing Agreement
•In 2002 by DCA through Naresh Chandra committee on corporate Audit and
governance
•In 2003 by SEBI again establishing NR Narayan Murthy committee
•In 2009 SEBI committee on Disclosure and Accounting Standards
•In 2009 Voluntary Guidelines by MCA
•The MCA has set up National Foundation for Corporate Governance (NFCG) in
association with CII, ICSI and ICAI.

5. OECD Principles
•The first global framework of CG has been provided by OECD in 1999 and last
updated in 2004
• used as a benchmark by individual jurisdictions and Financial Stability Board’s
Key Standards for Sound Financial Systems
• provide the basis for assessment of the corporate governance component of the
Reports on the Observance of Standards and Codes of the World Bank.
The Principles provide guidance through six chapters:
a) Ensuring the basis for an effective corporate governance framework
b) The rights and equitable treatment of shareholders and key ownership
functions
c) Institutional investors, stock markets and other intermediaries

6. d. The role of stakeholders in corporate governance
e. Disclosure and transparency;
f. The responsibilities of the board
Application of OECD in India
• SEBI through clause 49
• Companies Act 2013
• Ministry of Corporate Affairs specified Voluntary Guidelines on
Corporate Governance
• In March 2012, Ministry of Corporate Affairs constituted a committee
under the Chairmanship of Mr. Adi Godrej, Chairman, Godrej
Industries Limited, to formulate policy document on Corporate Governance.

7. Suggestions and Conclusion
• Appropriate relationship between shareholders and the management should be
established
• To achieve the right balance between stakeholders and management interest.
• Independent directors should be members of all key committees to bring more
transparency in the operations.
• Corporate governance principles should be strictly followed by the corporate
• Paramount consideration should be given to the interests of the stakeholders
• The governance of Business Corporation must fulfill the requirement of trusteeship of all
stakeholders and not only owner’s interest.
• Good Governance depends on the cooperation and involvement of a large number of
citizens and organizations
• Every corporation should engage itself in complete openness; - spreading of knowledge
in the board's composition; - frequent meetings; - splitting up of special functions; -
thorough preparation and recording of all meetings; - replacement of weak or regularly
absent directors; - sufficient time to discuss.

8. For the effective implementation of OECD Principles in India, corporations
should consider three main values
(a) an orientation towards Justice through the actualization of the fairness,
integrity and objectivity;
(b) an orientation towards Truth through the values of openness, trustfulness, and
transparency;
(c) the orientation wards Harmony through attitudes of collaboration, care and
diligence.
Because today corporate governance stands for a tendency towards a decent, fair
and reliable direction, "to do the right (good) things and to do things right (well)".