Latin American Capital Markets

CORPORATE GOVERNANCE AND CAPITAL MARKET DEVELOPMENT 441to, material information on the financial and operating results of the corporation, corporationobjectives, major share ownership and voting rights, members of the boardand key executives and their remuneration, foreseeable risk factors, material issues regardingemployees and other stockholders, and governance structures and policies.The principles state that all financial information should be prepared, audited,and disclosed in accordance with high-quality standards of accounting, financial andnonfinancial disclosure, and auditing. The principles strongly support the relevance ofan annual audit that is conducted by an external auditor to provide independent andobjective assurance on the way in which financial statements have been prepared andpresented. Finally, the principles advocate that channels for disseminating informationshould provide for fain timely, and cost-efficient access to relevant information by users.Responsibilities of the BoardThe principles assign special importance to the board of directors as the key mechanismto ensure the strategic guidance of the corporation and effectively monitor thequality of management.The board should pay special attention to its own accountabilityto the corporation and the shareholders. Members of the board should act ona fully informed basis, in good faith, with due diligence and care, and in the best interestsof the corporation and shareholders. Box 14-1 summarizes some of the keyfunctions of the board as presented by the principles.The principles also emphasize that the board should exercise objective judgmenton corporate affairs and, in particular; be independent of management. Examplesof such key responsibilities are financial reporting, nomination, and executive and boardremuneration.The responsibility of board members to exercise independent judgmentwhere there is potential for conflicts of interest is particularly highlighted. Finally, in additionto stressing the importance of the central duties of care and loyalty, the principlesemphasize that board members should devote sufficient time to their responsibilities,for which they should have access to accurate, relevant, and timely information.Overview of Corporate Governance Reform EffortsImproving the Legal FrameworkWhen corporate governance issues become popular fodder for the national press, asthey have in both mature and emerging markets in recent years, it is unusual for na-Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub