Corporate governance

The need for a global standard

 

Remarks by Angel Gurría, OECD Secretary-General, delivered at the G7 Finance Ministers Dinner


Rome, 13 February 2009


Minister Tremonti, Ministers, Governors, Colleagues heading the major international institutions,


It is an honour to join this distinguished gathering, especially at a moment when we are facing such critical challenges.


The situation on the financial, economic and employment fronts continues to deteriorate. Our latest updates point to an acceleration of the downturn in all OECD regions, while trade and labour market conditions have started to act as shock amplifiers. We are working with all of you on these issues in the EPC led by Christina Romer, Head of the CEA, and the WP3, until recently chaired by Randall Kroszner and now by Philipp Hildebrand, of the Swiss National Bank.


Last week, when we hosted a delegation of senior economists of the IMF and WB in Paris to compare notes and coordinate responses to the crisis, we confirmed our concerns regarding the economic and social implications of the downturn for OECD Members, but particularly for emerging and developing countries.


The OECD’s “Strategic Response to the Crisis” is making the case for both addressing the failures of the system and embarking on policies for recovery and long-term growth. We are feeding our policy recommendations into the G8 and G20 processes, as we work closely with both presidencies. Among other issues, the Ministerial Meeting of the OECD next June will look at the impact of the fiscal stimulus packages. We will also look at labour market developments and the policy responses. Pension problems loom large. And as we develop our agendas to sort out the crisis, low-carbon or “green recovery” measures will be essential. I invite you all to join us on 24-25 June, when I am afraid the outlook may be even gloomier than today.


Minister Tremonti has asked me to make some introductory remarks on integrity and ethics in the world economy.


There were many causes for the crisis, including massive regulatory, supervisory, corporate governance and risk management failures. There are also questions regarding honesty, propriety and transparency in the conduct of business. These issues may not be the direct cause of the crisis, but they are perceived to be closely linked to it, as multipliers of its effects and potential obstacles to its rapid solution.


Efforts to improve the framework within which business, markets and governments should operate, to achieve a stronger, cleaner and fairer world economy, deserve all our attention. They are complementary to the actions you are taking on the reform of the world financial system which world leaders have launched in Washington last November. Minister Tremonti and the G8 Presidency are promoting a worldwide “Legal Standard” for sound and more ethical business behaviour. In a similar vein, Chancellor Merkel has proposed a “Global Charter” for a sustainable world economy. Both initiatives seek to restore confidence and avoid a recurrence of the present crisis. Both seek to avoid a backlash against open markets, and against globalisation.


Be it a “Legal Standard”, a “Global Charter” or perhaps a “Global Standard”, which would combine both initiatives, the proposal of a compact of policy instruments and co-operative processes related to transparency and propriety in the conduct of international businesses is very welcome.


Economically, it makes sense. Politically it seems inevitable.


Over the last 15 years, together with Member countries and many other players in the global economy, the OECD has developed a dense, far reaching and comprehensive set of policy rules. Whether legally binding, in the form of “soft law” or as policy recommendations, they provide best practices for policy makers in designing and carrying out sound policies and they also offer guidelines for the conduct of private sector business. This body of provisions exists in separate, individual “niches”, but we must now bring them together in a systematic and coherent way for easy use and effective guidance. We must also provide strong political support so that their adoption is generalised, and an effective monitoring system so that their implementation is assured.


The reach of this Standard can certainly be subject to discussion, as well as the approach to make it an attractive instrument for a large number of countries and the private sector. I offer the rich experience of the OECD, but others around the table have also much to contribute. Below are some of the OECD’s core rules and principles to ensure the integrity of the international business environment:


Other institutions are contributing to these efforts: the work of the IMF in developing a transparent framework for fiscal policy; the OECD and the World Bank’s joint work to disseminate the OECD Principles of Corporate Governance in all regions of the world; the ILO’s “Decent Work” agenda, and so on.


These could be the building blocks of the “Global Standard”.


In order to complement and reinforce each other, these “bricks” need to be updated, upgraded and consolidated into a single framework. And in so doing we need to involve all major players. The OECD stands ready to take on the job. We have a strong record of forging consensus around proposals and standards on global issues that go beyond our membership: we have significant experience in working with emerging economies. We work with G8 and G5 countries in the Heiligendamm process, and with Brazil, China, India, Indonesia and South Africa in our “Enhanced Engagement” outreach. These fora for policy discussions could certainly play an effective role in building widespread support for the new instrument and in encouraging other countries – both in the G8 and in the G20 and beyond – to join it.  


A Global Standard cannot only include what already exists. We have to review some of the instruments in light of the crisis. How can we increase their compatibility and coherence? What needs to be improved for more stringent implementation? How can we establish a strong and unified monitoring mechanism?


We believe there are real opportunities: the opportunity to put “policy ahead the curve” and the opportunity to take “des décisions structurelles”. We are pleased to see that the group gathered here is taking a serious look at this initiative of Minister Tremonti. With your advice and political support, we can achieve this ambitious goal. The OECD stands ready to help you.


Thank you very much.

 

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