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The OECD Corporate Governance Principles, Shareholders Rights and Implications for the State

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Title: The OECD Corporate Governance Principles, Shareholders Rights and Implications for the State


1
3rd Eurasian Corporate Governance
Roundtable Shareholder Rights, Equitable
Treatment and the Role of the State April
17-18, 2002 hosted by Securities and Stock
Market State Commission of Ukraine State Property
Fund of Ukraine PFTS with the support of The
Government of Japan
The Global Corporate Governance Forum
2
The OECD Corporate Governance Principles,
Shareholders Rights and Implications for the State
  • Introductory Address
  • Mr. Rainer Geiger
  • Deputy Director, Financial, Fiscal and Enterprise
    Affairs
  • Kyiv, 17-18 April, 2002

3
Objectives of the address
  • Discuss the main aspects of the role of the state
    in ensuring good corporate governance
  • Explore the role of the state with respect to
    shareholder rights and equitable treatment of
    shareholders

4
Structure of the address
  • The role of the state in the transition to a
    market economy
  • The corporate governance related role and
    functions of the state
  • Institution building the state and capital
    market development
  • Legal and regulatory functions of the state
  • The role of enforcement
  • Main issues of shareholders rights and equitable
    treatment

5
The role of the state in the transition to a
market economy
  • Macro-economic and structural reform
  • Institution building and legal reform
  • Managing privatisation and residual state assets

6
The State and Corporate Governance
  • Corporate governance as a tool to achieve
    economic performance and policy reform
  • OECD Principles on Corporate Governance
  • The state and corporate governance in OECD
    economies

7
Corporate governance and the state
  • The state has the following functions with
    respect to corporate governance
  • Institution Building
  • Legislative reforms
  • Law enforcement
  • Enforcement

8
Corporate governance and the state (contd)
  • In order to fulfil its role, the state needs to
  • Clearly define its functions
  • Provide for an efficient institutional
    infrastructure
  • Act in a transparent, consistent and credible
    fashion

9
The rule of law Key elements
  • The establishment of rule of law in the economy
    depends on
  • adoption of a proper legal framework of property
    rights, rules for trade, investment and finance,
    and
  • a legal context for the establishment,
    functioning and liquidation of private firms
  • integrity in government and public
    administrations

10
The rule of law as objectives
  • The rule of law describes an economic and social
    environment that is characterised by
  • Predictability
  • Transparency of decisions
  • A level playing field for all economic agents
  • Reliability and accountability
  • Clearly defined rights and fair dispute
    resolution

11
Institution Building
  • The state policy on capital market development
  • Stock exchanges in Eurasia need to improve their
    technical and legal infrastructure
  • Low capitalisation and liquidity need to be
    addressed

12
Institution Building
  • Lack of demand and supply is a problem
  • Delays in the privatisation process
  • Lack of interest from companies in being listed

13
Institution Building (contd)
  • Eurasian Stock Exchanges are still not able to
    fulfil their traditional roles
  • as a source of funding for enterprises
  • as a disciplining mechanism through the take-over
    threat
  • to provide adequate information and fair
    valuations

14
Strengthening stock market development
  • What could give an impulse to Stock Exchange
    development in Eurasia?
  • The recently launched Pension Reforms
  • Speeding up of the privatisation process IPOs
    and secondary markets
  • Regional cooperation may constitute an option

15
Law enforcement
  • Discrepancy between the corporate governance
    framework and practices
  • Insufficient capacity of the judicial and
    administrative systems to enforce the law
  • Insufficient capacities of Securities Exchange
    Commissions

16
Main issues with respect to shareholders rights
  • Access to information on ownership structure
  • Information on shareholders meetings
  • Clear provisions concerning voting procedures
    during the AGM
  • Capacity for shareholders to vote in absentia, by
    proxy or mail
  • Rights to receive dividends

17
Main issues with respect to equitable treatment
  • Dilution of minority stakes during capital
    increases
  • Fair treatment of minority shareholders in case
    of de-listing
  • Related parties transactions
  • Insider dealing and self-trading
  • Possibility of legal redress

18
Strengthening the role of the judiciary
  • Strengthen the capacity of the judiciary to deal
    with commercial disputes
  • Streamline of the rules on jurisdiction over
    commercial disputes throughout the region

19
Challenges ahead
  • Develop a corporate culture
  • Strike a balance between regulation and
    self-regulation
  • Strengthen corporate social responsibility
  • Promote best practice through regional
    co-operation
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