Remarks by Ángel Gurría
8 June 2019 - Fukuoka, Japan
(as prepared for delivery)
Dear Deputy Prime Minister, Ladies and Gentlemen,
It is a great pleasure to co-host this important seminar with the Government of Japan. I would like to express my sincere gratitude to our Japanese colleagues for this successful initiative.
In an increasingly globalized world, an orderly integration of our capital markets is crucial to strengthen the global economy. Today, one-third of the world’s USD 80 trillion in public equity investments takes place across borders. This provides companies with opportunities to seek finance from a much larger pool of investors, generating higher productivity and creating jobs around the world.
However, an enhanced integration of capital markets also increases the interdependence between investors and corporations from countries with different legal, regulatory, economic and cultural traditions. That is why the G20/OECD Principles are so important in providing a common global language and standard of corporate governance, thereby also promoting higher regulatory convergence.
The Principles help policy makers improve the legal, regulatory and institutional framework for good corporate governance. They provide guidance for stock exchanges, investors and corporations. They support companies in attracting long-term, “patient” capital, critical to ensure their development overtime, as investors develop increasing confidence in their performance and integrity.
The Principles are more needed than ever. Disputes around remuneration and repeated corporate scandals continue to haunt us, reflecting lack of oversight, poor transparency and weak accountability. Business investment growth is still modest and well below pre-crisis levels, moving towards a mere 1¾ per cent per year over 2019-20. In this context, characterised by a growing mistrust of the public vis-à-vis markets and the corporate world, the Principles are a key tool to advance good corporate governance, thus enhancing the much needed trust by investors and consumers in our companies.
This is why the OECD has made sure the Principles are put to active use, as promised when the G20 Leaders endorsed them in 2015 under the Turkish Presidency. In collaboration with the World Bank, we issued a methodology to assess implementation, and the FSB has taken stock of how member jurisdictions have applied the Principles to publicly listed, regulated financial institutions. Our Corporate Governance Committee has carried out thematic peer reviews and through our regional policy hubs we have engaged with countries in Asia, Latin America, the Middle East and North Africa to ensure that corporate governance policies don’t become ends in themselves, but rather effective means to stimulate investment and business dynamics.
The 2019 Edition of the Corporate Governance Factbook that I am launching here today shows the progress that has resulted from these efforts in 49 jurisdictions - including all OECD, G20 and FSB countries - and outlines the challenges ahead. Since the G20/OECD Principles were endorsed in 2015, more than 80 per cent of the 49 tracked jurisdictions have amended either their company law or their securities regulation, or both. Nearly half of all jurisdictions have revised their national corporate governance codes in the past two years and 83% of them follow a “comply or explain” compliance practice. A growing percentage of jurisdictions – 67% – now issue national reports on company implementation of corporate governance codes, up from 58% in 2015.
Reforms have been particularly dynamic with respect to risk management and remuneration, two areas where weaknesses significantly contributed to the global financial crisis. For example, measures regarding the separation of the Board Chair and the CEO have doubled in the last four years and are now in place in 70% of jurisdictions. In 30% of jurisdictions the separation is now a binding requirement. More than 80% of jurisdictions recommend nomination and remuneration committees to be established.
However, despite this progress, much remains to be done, for example regarding the very top level of companies. Even though an increasing number of countries are promoting balanced and diverse compositions of boards, the infamous glass ceiling in corporate leadership is still thick. Women comprise at least one-third of senior management positions in 39% of the 49 jurisdictions covered, whereas only 10% of jurisdictions have women comprising at least one-third of listed company boards. Out of the 49 jurisdictions covered, 21 jurisdictions have less than 15% women on boards. We need much more women in top positions to further advance in management quality and enhance the performance of corporations.
To conclude, I want to highlight that gathering all this information, now publicly available, has been a herculean task, which would have been impossible without the support of Japan and of the OECD Corporate Governance Committee and its Chair Mr. Masato Kanda.
Let’s keep working together to strengthen corporate governance. Present and future OECD work on how digitalisation can enhance transparency, efficiency and trust in markets could help underpin these efforts. Count on the OECD to advance our collective initiatives for a multilateralism that delivers. Thank you!