Mats Isaksson

The aim of the OECD's work on corporate governance in developing and transition economies is to build functional institutions for sustainable private sector development. The work is carried out in close co-operation with the World Bank and national private and public sector partners; supported by multilateral and bilateral donors.

Corporations of every size are key to the creation of wealth in modern societies. They are the main creators of economic value and employment. The way they are built and governed is crucial to a countrys economic development. Good corporate governance means more efficient utilisation of resources, better access to capital, better and higher quality employment opportunities, and a better chance of developing in a sustained way efficient domestic or regional capital markets. Corporate governance is also important for the effectiveness of public institutions; better-governed companies are less likely to bribe regulators and judges.

Good corporate governance is a prerequisite for attracting patient equity capital that can contribute to domestic sustainable growth. A recent survey by management consultants McKinsey showed that investors are ready to pay a substantial premium for good corporate governance, especially in non-OECD economies. But governance does not only serve to attract foreign portfolio investors. Credible transparency, accountability and shareholder protection mechanisms are also important in attracting foreign direct investment, especially when joint ventures and other co-investment patterns are widely used.

As a response to these concerns the OECD Principles on Corporate Governance were adopted by ministers from member countries in June 1999. They cover five main areas: the rights of shareholders, the equitable treatment of all shareholders, the role of stakeholders, the importance of transparency and disclosure and the responsibilities of boards.

To implement these principles and to bring private sector representatives and public policy-makers together for policy dialogue the OECD and the World Bank have established a global co-operation framework comprising regional corporate governance roundtables.

The roundtables, in which various regional partners such as securities commissions, stock exchanges and institutes of directors play an active role, have so far been established in five regions: Asia, Russia, Latin America, Southeast Europe and Eurasia (the Former Soviet Union excluding Russia and the Baltic states). Similar fora in Africa and the Middle East are being considered. The roundtables consist of a cycle of meetings taking place over a two-and-a-half to three-year period.

The conclusions of the roundtable discussions will eventually be reflected in a White Paper on corporate governance for each region. These will serve as a practical reform agenda that connects local corporate environments with the global standard, the OECD Principles.

The emphasis on policy dialogue and regional presence over a sustained period is important for institution building. The OECD is a unique depository of rich and diverse country experiences of building corporate sectors. It should be noted that the OECD Principles of Corporate Governance form part of a broader international effort to promote increased transparency, integrity and the rule of law. Other OECD initiatives that have contributed to this effort include the Convention on Combating Bribery in International Business Transactions, the Guidelines for Multinational Enterprises, instruments aimed at disciplining harmful tax competition and hard core cartels, the Recommendations on Improving Ethical Conduct in Public Services, and the work on the Financial Action Task Force on Money Laundering, to name just a few.

More detailed information about OECD corporate governance activities can be found at www.oecd.org/daf/corporate-affairs