Policy makers around the world are increasingly paying close attention to corporate governance and it isn’t hard to understand why.
‘When you think about it, all these laws and regulations that determine how corporations are run and investments are done go to the very heart of how our market economies function. If we get it wrong, we will undermine the very conditions for development and prosperity,’ says Mats Isaksson, head of the corporate affairs division at the Organisation for Economic Co-operation and Development (OECD).
‘I always remind my team, that corporate governance is not an end in itself. It is a means of ensuring that capital markets effectively serve their core function of providing the most promising business ventures with access to capital. It’s that process of smart capital formation that will pay the pensions of today’s workers and create jobs for our children.’
As can be expected, Isaksson says getting it right can indeed be a balancing act between different interests.
‘Entrepreneurs and executives, on the one hand, need to feel comfortable in letting new owners on board that can help finance and expand their businesses. And the investors, on the other hand, need to be assured that their rights and interests are respected. Striking a functional balance require a culture of accountability and transparency that is based on a common understanding of the company’s objective.’
A ground-breaking milestone in the history of international corporate governance was when the G20 leaders endorsed the G20/OECD Principles of Corporate Governance in 2015.