OECD Corporate Governance Rules:

UNIVERSITY OF HARIPUR 24/2/015OECD Corporate Governance Rules:Submitted to: Sir Muhammad SohailSubmitted by: Syed Rameez ul Hassan (6868)University of Haripur Hattar road kpk Pakistan

OECD Corporate Governance Rules:The OECD Principles of Corporate Governance were endorsed by OECD Ministers in 1999 and have since become an international benchmark for policy makers, investors, corporations and other stakeholders worldwide. They have advanced the corporate governance agenda and provided specific guidance for legislative and regulatory initiatives in both OECD and non OECD countries. The Financial Stability Forum has designated the Principles as one of the 12 key standards for sound financial systems. The Principles also provide the basis for an extensive program of cooperation between OECD and non-OECD countries and underpin theCorporate governance component of World Bank/IMF Reports on the Observance of Standards and Codes (ROSC)1. Ensuring the Basis for an Effective Corporate Governance Framework:Corporate Governance Framework (CGF) has to create transparent and efficient markets. It has to clarify the division of responsibilities among different supervisory, regulatory and enforcement authorities.

For all market participants CGF develop overall economic performance, honestly provision of information about market to make it more transparent and efficient.

Set legal and regulatory frame work which will enforce CG and ensure its transparency.

CGF identify divisional responsibilities of authorities in their prescribed jurisdiction to secure public interest.Regulatory authorities should consist of honorable professional persons and equip with full resources and they must be fully devoted to assign responsibilities and provide timely transparent information.2. The Rights of Shareholders and Key Ownership Functions:

Share holders have several rights including right of securing their ownership, Transferability of shares, timely relevant info should be communicated to share holders, having voting right to appoint or dismiss members of boards in meetings and right on profit of corporation.

Share holders are allow to interfere in fundamental corporate changes related to article of memorandum, issuance of additional shares and liquidation of company.

Share holders should be properly inform about their voting rights and rules regarding those voting at general shareholders meetings. Where meeting will hold at what time, what is issue or agenda of meeting? Shareholders have rights to ask any query about agenda and any protections about external audit report. They have right to know the remunerations of board members and executives in terms of financial rewards and equity rewards and their approval for equity rewards. They can authorize a person for vote at their absence.

Degree of Control of share holders should be disclosed irrespective of their equity participation.

Mergers, Sales of assets should be clearly disclosed for share holders in order to protect their rights. Management should not used anti take over practices to exploit share holders rights.

Institutional investor s capacity voting polices, rights with respect to their investment should be disclosed. All shareholders have right to consult with institutional investors for issues regarding their own rights.

3. The Equitable Treatment of Shareholders: Equitable Treatments of Share holders: The CGF ensures that shareholders of similar class should be equally treated including minority and foreign shareholders of same class and have same rights, before investing they have right to obtain all relevant information and any change in that right should be prior approved by related class of shareholders. Minority shareholders rights must be protected from abusive actions of majority shareholders or they should not act in their own favor and should not exploit rights of minority shareholders.Vote cast by shareholders representative must be accepted in manner agreed by original owner.All the hurdles in voting for foreign shareholder must be eliminated to secure their voting right.Process of voting should be equally simple and in expensive for all shareholders.

Insider trading and abusive self dealing should be prohibitedAny material interest of board which can affect the corporation member should be disclosed by members of boards and key executives.

4. The Role of Stakeholders in Corporate Governance:

Stakeholders rights should be recognized in CGF these rights may established by law or agreements between corporation and stakeholders, they have right of remedy against violation of their rights. Performance-enhancing mechanisms for employee participation should be permitted to develop. Stake holders have right to access the relevant sufficient reliable information regularly. All stakeholders including employees should be clearly communicated against any unethical or illegal practice which harms their rights. CGF should be highly effective to protect the rights of creditors.

5. Disclosure and Transparency:

All the material and matters related to corporation must be disclosed about its financial situation, performance, ownership and governance. It is not only restrained to material info but also disclose the results, objectives, major shareholders info their voting rights, remuneration of board member their selection criteria, associated risk, info about several structure and policies and how they are implemented in the company. Financial and non financial disclosure should be at high quality standards.External audit must be conducted by independent and competent auditors in order to present fair picture of financial position of company. These external auditors are accountable to the shareholders and conduct audit in high professional care.Provision of Information should be equal through cost effective, timely and efficient channel for users.6. The Responsibilities of the Board:It is responsibly of members of the boar to formulate effective strategies for corporation and monitor and evaluate the performance of its management in best interest of company on the basis of useful information. Board should fairly treat all shareholders; they should set high ethaical standards for all stake holders.

Board is responsible for setting broad objectives, make polices, plan of action, setting annual budgets, monitor and evaluate performance of the company and major capital expenditures, acquisitions and divestures. They must chalk out Contingency plans, Fair election process, managing conflicts and avoid misuse of corporate resources are also responsibilities of the board. They are liable for maintaining true books of accounts and fair financial reporting by independent auditors and disclose and communicate every aspect which must be disclosed.

Board structure should be mix of non executive members for independent judgments, board should be clear about their mandate, working procedures should be clearly disclose by boardand they own their responsibilities effectively. Board members have access to accurate, relevant and timely information for best decision making.

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