Latin American Capital Markets

CORPORATE GOVERNANCE AND CAPITAL MARKET DEVELOPMENT 439A Framework for Appraising Corporate GovernanceThe Principles of Corporate Governance published by the Organisation for EconomicCo-operation and Development (OECD) in May 1999 have come to be the mostbroadly accepted framework for conducting analysis of corporate governance systemsin both OECD and non-OECD countries.The principles were intended to provide acommon point of reference and a common vocabulary rather than a detailed blueprintfor helping those involved in the process of strengthening and enhancing corporategovernance systems, principally for publicly traded companies.The principles are nonbinding and do not aim at detailed prescriptions for nationallegislation; they represent the core elements considered essential for good corporategovernance and are intended to be applied in accordance with national andcompany-specific circumstances. Since their publication, the principles have been theconceptual framework for a series of high-level regional roundtables of policymakers,financial intermediaries, and company chiefs in Latin America, Asia, and the transitioneconomies. 2 The broad backing and high-level recognition given to the principles providea unique international reference point for government policymakers, regulators,and practitioners.The principles have also served as the point of departure for variousefforts to assess or "rate" the corporate governance of markets and individualcompanies.The principles are the basis for the methodology developed by the WorldBank for assessing the quality of the corporate governance in client countries. In connectionwith its work to improve the corporate governance of its client companies,International Finance Corporation (IFC) has elaborated a set of matrices that presentrepresentative trajectories for improvements in company governance. Appendix table14-1 gives the current version of the matrix for publicly listed companies.The principles are organized around five subject areas: rights of shareholders;equitable treatment of shareholders; role of stakeholders in corporate governance;disclosure and transparency; and responsibilities of the board. What follows is a briefsummary of the principles and the explanatory notes published with them.Rights of ShareholdersThe corporate governance framework should protect shareholder rights. Basic shareholderrights include the right to secure methods of ownership registration, convey2 The papers presented at the corporate governance roundtables sponsored by the OECD and World Bank Groupcan be downloaded from the OECD Corporate Affairs Division website (www.oecd.org/daf/corporate-affairs/).Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub