Remarks by Angel Gurría
Palais Brongniart, Paris, Wednesday 6 December 2017
(As prepared for delivery)
Ladies and Gentlemen,
I am pleased to join you today at the Paris Conference of the International Corporate Governance Network on the Path Towards Financial Market Stability and Sustainable Growth.
Over the next two days, you will be focusing on a wide range of issues, from sustainable finance, efficient capital allocation, the quality of shareholder engagement, and long-term thinking in the investment chain.
All these issues lie at the heart of the OECD’s efforts to create fairer, more sustainable and more inclusive economies. And in this respect, corporate governance – together with our work on investment and trade, tax, competition, responsible business conduct and anti-corruption – is a key tool to promote a global level playing field and to ensure a fairer globalisation.
We come together at a critical time.
For the first time in a decade, the world is growing in sync, with none of the large economies experiencing a recession. According to the latest OECD Economic Outlook, which I launched only a week ago, global growth is projected to pick up to 3.6% in 2017 and 3.7% in 2018, up from 3.1% in 2016.
The situation may be better, but it’s still not good enough. There are significant threats to the sustainability of this growth. Particularly worrying are the high levels and continued growth of corporate debt levels in China. Also of concern are the high levels of household debt in a number of advanced economies, mainly associated with mortgage lending. Real estate boom-and-bust cycles have been good predictors of recession in OECD economies, and danger signs are flashing in a number of them.
Policymakers as well as private sector stakeholders are also challenged by a fast-moving financial sector.
The OECD Principles of Corporate Governance remain the uncontested international reference point for best practice. They have been continuously updated since their launch in 1999 and provide recommendations for national policymakers on shareholder rights, executive remuneration, financial disclosure, the behaviour of institutional investors and how stock markets should function, to name just a few key areas.
Following the endorsement by the G20 Leaders of the G20/OECD Principles of Corporate Governance in 2015, a number of major economies, including China and Brazil, have started participating directly in our work on corporate governance. Nine countries, including Japan and Korea, have revised their national corporate governance codes based on the new Principles. The Financial Stability Board has also concluded a peer review of how the financial institutions of its 24 members implement the Principles.
This has been important progress, helping to deliver a better and a sounder financial system that serves people and helps rebuild the trust our economies need for investment and growth.
However this is just the beginning.
There is still much to be done to better equip ourselves to handle the next crisis. Reforms in the financial sector have still not gone far enough and “too big to fail” remains a big concern. We have not made the most of the opportunity to deal with the structural separation of banks’ risky activities, especially in Europe. Shadow banking has increased a lot in advanced economies due to tougher banking regulations.
At the OECD we are working to stay ahead of the curve.
We are challenging our own knowledge and established truths through our New Approaches to Economic Challenges, an initiative we launched in 2012 to bring our analytical tools in line with the complexity and interconnectedness of the modern world – including, of course, our work on business and finance. This initiative has been particularly useful in helping us understand the many lessons of the financial crisis, and especially the need to rethink our regulatory framework.
In 2015 we updated our Guidelines on Corporate Governance of State-Owned Enterprises, which advise countries on how to manage more effectively their responsibilities as company owners. These reflect the experiences of the growing number of countries that have implemented them. We also just revised and expanded the Guidelines on Insurer Governance to reflect evolving market practices and updates to international guidance following the financial crisis.
Finally, in terms of the G20/OECD Corporate Governance Principles, we are currently looking at how the implementation of the G20/OECD Principles could be adapted to different economic and legal contexts. Nearly 40 countries are participating in this work, and the OECD looks forward to sharing the results when they are published in April next year.
Ladies and Gentlemen,
To support the ongoing recovery, policymakers must take an integrated policy approach that will balance actions to boost inclusive and sustainable growth, mitigate risks in the financial sector and improve resilience. For this, we need to get corporate governance right!
Please count on the OECD’s support. We stand ready to work with you to improve and renew a corporate governance framework that effectively supports high-quality investment, financial stability and a more inclusive and sustainable growth. Thank you.