International Corporate

Governance Principles









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What is inside?
OECD Principles
ADB Principles
Basel Committee Principles
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OECD Principles
Organization of Economic Co-operation
and Development (OECD) is the first
international institution which introduced
principles of corporate governance.
Established in 1961, presently 30 member
countries, headquarter in Paris.
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Objective of the principles
The Principles are intended to assist OECD and
non-OECD governments in their efforts to
evaluate and improve the legal, institutional and
regulatory framework for corporate governance
in their countries, and to provide guidance and
suggestions for stock exchanges, investors,
corporations, and other parties that have a role
in the process of developing good corporate
governance. The Principles focus on publicly
traded companies, both financial and non-
financial.

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OECD Principles 1999
Rights of the Shareholders and Key
Ownership functions
Equitable Treatment of Shareholders
Role of the Stakeholders in Corporate
Governance
Disclosures and Transparency
Responsibilities of the Board of Directors
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OECD Principles 2004
Ensuring the Basis for 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
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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.
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Content under this principle
The corporate governance framework should be developed
with a view to its impact on overall economic performance,
market integrity and the incentives it creates for market
participants and the promotion of transparent and efficient
markets.
The legal and regulatory requirements that affect corporate
governance practices in a jurisdiction should be consistent
with the rule of law, transparent and enforceable.
The division of responsibilities among different authorities in a
jurisdiction should be clearly articulated and ensure that the
public interest is served.
Supervisory, regulatory and enforcement authorities should
have the authority, integrity and resources to fulfill their duties
in a professional and objective manner. Moreover, their
rulings should be timely, transparent and fully explained.
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The Rights of Shareholders and
Key Ownership Functions
The corporate governance framework
should protect and facilitate the exercise of
shareholders rights.

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Basic shareholder rights should
include
Secure methods of ownership registration
Convey or transfer shares
Obtain relevant and material information
on the corporation on a timely and regular
basis
Participate and vote in general
shareholder meetings
Elect and remove members of the board
Share in the profits of the corporation.
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Continued.

Shareholders should have the right to participate in,
and to be sufficiently informed on, decisions
concerning fundamental corporate changes such as:
1) amendments to the statutes, or articles of incorporation or
similar governing documents of the company;
2) the authorization of additional shares; and 3)
extraordinary transactions, including the transfer of all or
substantially all assets, that in effect result in the sale of the
company.
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Shareholders should have the opportunity to
participate and vote in AGM
Shareholders should be furnished with sufficient and timely
information concerning the date, location and agenda of general
meetings, as well as full and timely information regarding the issues
to be decided at the meeting.
Shareholders should have the opportunity to ask questions to the
board, including questions relating to the annual external audit, to
place items on the agenda of general meetings, and to propose
resolutions, subject to reasonable limitations.
Effective shareholder participation in key corporate governance
decisions, such as the nomination and election of board members,
should be facilitated. Shareholders should be able to make their
views known on the remuneration policy for board members and key
executives. The equity component of compensation schemes for
board members and employees should be subject to shareholder
approval.
Shareholders should be able to vote in person or in absentia, and
equal effect should be given to votes whether cast in person or in
absentia.
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Other contents of this principle
Capital structures and arrangements that enable certain
shareholders to obtain a degree of control
disproportionate to their equity ownership should be
disclosed.
Markets for corporate control should be allowed to
function in an efficient and transparent manner.
The exercise of ownership rights by all shareholders,
including institutional investors, should be facilitated.
Shareholders, including institutional shareholders,
should be allowed to consult with each other on issues
concerning their basic shareholder rights as defined in
the Principles, subject to exceptions to prevent abuse.
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The 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.
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Other contents of this principle
All shareholders of the same series of a class
should be treated equally.
Insider trading and abusive self-dealing should
be prohibited.
Members of the board and key executives
should be required to disclose to the board
whether they, directly, indirectly or on behalf of
third parties, have a material interest in any
transaction or matter directly affecting the
corporation.

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The Role of Stakeholders in
Corporate Governance
The corporate governance framework
should recognize 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.
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Other contents of this principle
The rights of stakeholders that are established
by law or through mutual agreements are to be
respected.
Where stakeholder interests are protected by
law, stakeholders should have the opportunity to
obtain effective redress for violation of their
rights.
Performance-enhancing mechanisms for
employee participation should be permitted to
develop.
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Continued.
Where stakeholders participate in the corporate
governance process, they should have access to
relevant, sufficient and reliable information on a timely
and regular basis.
Stakeholders, including individual employees and their
representative bodies, should be able to freely
communicate their concerns about illegal or unethical
practices to the board and their rights should not be
compromised for doing this.
The corporate governance framework should be
complemented by an effective, efficient insolvency
framework and by effective enforcement of creditor
rights.
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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.

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Other contents of this principle
Disclosure should include, but not be limited to, material
information on:
The financial and operating results of the company.
Company objectives.
Major share ownership and voting rights.
Remuneration policy for members of the board and key
executives, and information about board members,
including their qualifications, the selection process, other
company directorships and whether they are
regarded as independent by the board.
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Continued.
Related party transactions.
Foreseeable risk factors.
Issues regarding employees and other
stakeholders.
Governance structures and policies, in
particular, the content of any corporate
governance code or policy and the
process by which it is implemented.
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Standard and independent
Information should be prepared and disclosed in accordance with
high quality standards of accounting and financial and non-financial
disclosure.
An annual audit should be conducted by an independent, competent
and qualified, auditor in order to provide an external and objective
assurance to the board and shareholders that the financial
statements fairly represent the financial position and performance of
the company in all material respects.
External auditors should be accountable to the shareholders and
owe a duty to the company to exercise due professional care in the
conduct of the audit.
Channels for disseminating information should provide for equal,
timely and cost efficient access to relevant information by users.
The corporate governance framework should be complemented by
an effective approach that addresses and promotes the provision of
analysis or advice by analysts, brokers, rating agencies and others,
that is relevant to decisions by investors, free from material conflicts
of interest that might compromise the integrity of their analysis or
advice. 22
The Responsibilities of the Board
The corporate governance framework
should ensure the strategic guidance of
the company, the effective monitoring of
management by the board, and the
boards accountability to the company and
the shareholders.
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Other contents of this principle
Board members should act on a fully informed basis, in
good faith, with due diligence and care, and in the best
interest of the company and the shareholders.
Where board decisions may affect different shareholder
groups differently, the board should treat all
shareholders fairly.
The board should apply high ethical standards. It should
take into account the interests of stakeholders.
The board should fulfill certain key functions.
The board should be able to exercise objective
independent judgment on corporate affairs.
In order to fulfill their responsibilities, board members
should have access to accurate, relevant and timely
information.
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Key functions of the board.
Reviewing and guiding corporate strategy, major plans of
action, risk policy, annual budgets and business plans;
setting performance objectives; monitoring
implementation and corporate performance; and
overseeing major capital expenditures, acquisitions and
divestitures.
Monitoring the effectiveness of the companys
governance practices and making changes as needed.
Selecting, compensating, monitoring and, when
necessary, replacing key executives and overseeing
succession planning.
Aligning key executive and board remuneration with the
longer term interests of the company and its
shareholders.
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Continued.
Ensuring a formal and transparent board nomination and
election process.
Monitoring and managing potential conflicts of interest of
management, board members and shareholders,
including misuse of corporate assets and abuse in
related party transactions.
Ensuring the integrity of the corporations accounting and
financial reporting systems, including the independent
audit, and that appropriate systems of control are in
place, in particular, systems for risk management,
financial and operational control, and compliance with
the law and relevant standards.
Overseeing the process of disclosure and
communications.
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ADB Principles of Corporate
Governance
ADB with collaboration with HERMES Pension
Fund has developed a list of CG principles to
assist:
(i) enterprises design and implement their own
corporate governance guidelines by benchmarking
their practices against these principles;
(ii) domestic and institutional investors, fund managers,
as well as ADB, in their quest for excellence in
corporate governance in investee enterprises;
(iii) governments in designing corporate governance
regulations.
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ADB Principles of CG Include
Performance Orientation
The principal objective of business enterprises is to
enhance economic value for all shareholders by making
the most efficient use of resources. A company that
meets this shareholder value creation objective will have
greater internally generated resources, improving its
prospects for meeting its environmental, community, and
social obligations; pay taxes; reward, train, and retain
key staff; and enhance employee satisfaction. A key
focus area is a companys human capital strategy, which
is a lead indicator of corporate success.

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Nomination and Compensation
Committees
A nomination committee with a written mandate and
terms of reference consistent with good practice may
ensure the selection of directors and a chief executive
officer (CEO) of the highest caliber. Comprising mainly of
independent directors, the committee should have a
written definition of independence, inclusive of both
subjective and objective criteria.
A compensation committee should set the compensation
policy for directors and senior management,
commensurate with performance measured against
comparable industry benchmarks and key performance
indicators such as economic value added.
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Disclosure
To ensure transparency, companies annual reports should
disclose true and fair accounting information prepared in
accordance with applicable standards; consider
substance over form in the presentation of accounts;
disclose and discuss all material risks; disclose and
explain the rationale for all material estimates; show
manner of compliance, or explain deviations, if any, with
applicable corporate governance codes; discuss goals,
plans, and progress; and provide access to the register
of shareholders showing beneficial ownership. In
addition to annual disclosures, enterprises should
comply with applicable continuous disclosure
requirements. Disclosures should be timely and
adequate to enable investors, third party analysts, or
rating agencies to assess the quality of corporate
governance and the true financial condition of the
enterprise.
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Audit Committee
Audit committees with the following attributes are more
effective:
Composed solely of independent directors, at least two
of whom should have the requisite knowledge of
accountancy, financial analysis, and financial reporting;
At least one member should have a good understanding
of the business of the enterprise;
Have a written mandate and terms of reference;
Engage only independent external auditors who should
be answerable to the committee;
Require that a suitable system of internal control and risk
management is embedded into the fabric of the
company;
Focus on the substance of underlying transactions.
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Code of Conduct
All enterprises must have a written code of
business conduct and establish systems to
ensure that it and all applicable laws are
followed in letter and spirit.

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Conflict of Interest
Directors owe a fiduciary duty to the company
that requires them to act in the best interest of
the company. Actual and potential conflicts of
interest should be identified, disclosed, and
explained in sufficient detail to enable valid
judgments to be made on their adverse impact.
The persons who are conflicted should not
participate in discussion and decision of the
issue in question, nor be entitled to vote on any
resolution where they are conflicted. Related
party contracts should be disclosed in the
annual report.

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Environmental and Social
Commitment
There is an inextricable relationship
among the objectives of corporate
performance, social development, and
environmental protection. Enterprises, to
be sustainable, will need to recognize and
effectively deal with this triad of concerns,
which, at times, may conflict with each
other.

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Conduct of the Board of Directors
Directors are expected to preserve and enhance
shareholder value. Their effectiveness can be enhanced
if they are legally empowered, have the requisite
qualifications for the board committees on which they sit,
make the needed time commitment, given the
appropriate directorship training, are suitably
compensated, receive proper notice of meetings, have
the right to propose agenda items, consult each other
privately in the absence of management and executive
directors, and provided with appropriate information to
enable them to perform their monitoring role and
evaluate the performance of directors. They should be
proactive and diligent.
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Responsibility of Investors
The pursuit of good corporate governance in investee
enterprises is a risk management tool. Institutional
investors, general partners, and fund managers have a
fiduciary duty to actively monitor and vote on issues vital
to the success of enterprises in which they invest as
guardians of the savings entrusted to them. Enterprises
will find it helpful to communicate with them, deliver in a
timely manner true and fair disclosure reports, and
remove impediments from voting by all shareholders by
taking advantage of modern communications and follow
a one-vote for one-share policy. The fair treatment of
minority shareholders must be ensured and large
institutional investors should lead the pursuit of
shareholder rights.
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Enhancing Corporate Governance
for Banking Organizations
The Committee is publishing this paper to
reinforce the importance for banks of the
OECD principles, to draw attention to
corporate governance issues addressed in
previous Committee papers, and to
present some new topics related to
corporate governance for banks and their
supervisors to consider.

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Continued.
According to Basel Committee, from a banking industry
perspective, corporate governance involves the manner
in which the business and affairs of individual institutions
are governed by their boards of directors and senior
management, affecting how banks:
Set corporate objectives;
Run the day-to-day operations of the business;
Consider the interests of recognized stakeholders;
Align corporate activities and behaviors with the expectation that
banks will operate in a safe and sound manner, and in
compliance with applicable laws and regulations;
Protect the interests of depositors.
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SOUND CORPORATE
GOVERNANCE PRACTICES

Establishing strategic objectives and a set of
corporate values that are communicated
throughout the banking organization
Setting and enforcing clear lines of responsibility
and accountability throughout the organization.
Ensuring that board members are qualified for
their positions, have a clear understanding of
their role in corporate governance and are not
subject to undue influence from management or
outside concerns.
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Continued.
Ensuring that there is appropriate oversight by
senior management
Effectively utilizing the work conducted by
internal and external auditors, in recognition of
the important control function they provide
Ensuring that compensation approaches are
consistent with the banks ethical values,
objectives, strategy and control environment.
Conducting corporate governance in a
transparent manner
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Ensuring an Environment
Supportive of Sound CG
Committee recognizes that primary responsibility for
good corporate governance rests with boards of
directors and senior management of banks; however,
there are many other ways that corporate governance
can be promoted, including by:
Governments through laws;
Securities regulators, stock exchanges through disclosure and
listing requirements;
Auditors through audit standards on communications to boards
of directors, senior management and supervisors; and
Banking industry associations through initiatives related to
voluntary industry principles and agreement on and publication
of sound practices.
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The Role of Supervisor
Supervisors should be aware of the importance
of corporate governance and its impact on
corporate performance. They should expect
banks to implement organizational structures
that include the appropriate checks and
balances.
Regulatory safeguards must emphasise
accountability and transparency. Supervisors
should determine that the boards and senior
management of individual institutions have in
place processes that ensure they are fulfilling all
of their duties and responsibilities.
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Continued.
A banks board of directors and senior management are ultimately
responsible for the performance of the bank. As such, supervisors
typically check to ensure that a bank is being properly governed and
bring to managements attention any problems that they detect
through their supervisory efforts.
When the bank takes risks that it cannot measure or control,
supervisors must hold the board of directors accountable and
require that corrective measures be taken in a timely manner.
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Continued.
Supervisors should be attentive to any warning signs of
deterioration in the management of the banks activities.
They should consider issuing guidance to banks on
sound corporate governance and the pro-active
practices that need to be in place. They should also take
account of corporate governance issues in issuing
guidance on other topics.
Sound corporate governance considers the interests of
all stakeholders, including depositors, whose interests
may not always be recognised. Therefore, it is necessary
for supervisors to determine that individual banks are
conducting their business in such a way as not to harm
depositors.

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Thank You !
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