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Structure of Corporate Governance

The edifice of corporate governance includes, among others, board composition, relationship between the board and the management, internal control mechanisms, independent audit committee etc. The OECD principles of corporate governance cover six key areas of corporate governance –

  1. Ensuring the basis for an effective corporate governance framework;



  • The corporate governance framework should promote transparent and efficient markets, be consistent with the rule of law and clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement authorities.



  1. The rights of shareholders;



  • The corporate governance framework should protect and facilitate the exercise of shareholders’ rights.



  1. The equitable treatment of shareholders;



  • The corporate governance framework should ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for violation of their rights.



  1. The role of stakeholders in corporate governance;



  • The corporate governance framework should recognize the rights of stakeholders established by law or through mutual agreements and encourage active co-operation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises.



  1. Disclosure and transparency;



  • The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company.



  1. The responsibilities of the board



  • The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the board’s accountability to the company and the shareholders.


Key to the success of the Principles is that they are principles-based and non-prescriptive so that they retain their relevance in varying legal, economic and social contexts.
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