© REUTERS/Finbarr O'Reilly
The global nature of 21st century business makes corporate governance a complex affair. When a factory collapses on the other side of the world, killing hundreds of people, we are all shocked by the human tragedy. Knowing that these strangers were making clothes we see in our stores every day brings it much closer to home. But who is responsible for preventing it from happening again?
Shareholders, whether individual or institutional investors, are concerned about a return on their investment, and that a company is run in a way that will deliver growth in the longer term. But who is responsible for ensuring that raw materials do not come from conflict zones, or that boardroom practices are ethically sound?
The OECD has been helping navigate these issues since 1976, through its Guidelines for Multinational Enterprises and, since 1999, the Principles of Corporate Governance. Between them, these instruments cover corporate conduct from shareholder rights to human rights, from boardroom practice to environmental protection. Both have been updated several times.
The 2011 update of the MNE Guidelines included new recommendations on human rights abuse and company responsibility for their supply chains, including when sourcing minerals or metals from conflict-affected and high-risk regions, making them the first inter-governmental agreement in this area.
The Guidelines are also the only international corporate responsibility instrument with a built-in grievance mechanism. The Guidelines are backed by National Contact Points (NCPs) in 45 countries where anyone can raise a complaint about the behaviour of companies based in that country.
In June 2013, the OECD held a Responsible Business Conduct Forum around issues related to implementation of the Guidelines, including a special session on lessons learned from the collapse of a garment factory complex in Bangladesh in April 2013 in which more than 1,000 people died. Many of the factories involved were making clothes for foreign and international brands.
Six months after that tragedy, Bangladesh is updating its labour laws, many companies have signed up to worker safety guarantees and compensation is being renegotiated. As part of the international effort to prevent such events in the future, NCPs have reaffirmed that they will meet their responsibilities under the OECD Guidelines in the textile sector by undertaking, where appropriate, stakeholder consultations at the national level.
The OECD continues to help countries navigate the myriad issues of corporate governance – the rules and practices that govern the relationship between the managers and stakeholders of corporations – through a series of regional round tables. The most recent, held in Russia on 22-13 October 2013, looked at issues around implementing a new corporate governance code in Russia, as well as the broader question of corporate governance in emerging markets. Other issues dealt with this year include choosing board members in Asia and meeting the corporate governance challenge for small and medium-sized enterprises in Latin America.
- Corporate governance is a gender issue too. In Bangladesh, women make up about 80% of the ready-made garment (RMG) workforce, but are not represented in either trade unions or factory management. – Bangladesh session in the first Responsible Business Conduct Forum in June 2013 (PDF)
- As equity markets change in terms of structure, participants, investment strategies and trading practices, so do the conditions for exercising corporate governance. To be effective, policy makers need to recognise these changes, consider their impact and understand their consequences for the design of rules and regulations. – Who Cares? Corporate Governance in Today's Equity Markets