OECD Principles of Corporate Governance

O[8]

LO[9]

MNO[10]

NO[11]

NA[12]

Comments

Principle 1 - Basic shareholder rights. The corporate governance framework should protect shareholders’ rights. Basic shareholder rights include the right to: (i) secure methods of ownership registration; (ii) convey or transfer shares; (iii) obtain relevant information on the corporation on a timely and regular basis; (iv) participate and vote in general shareholder meetings; (v) elect members of the (supervisory) board; and (vi) share in the profits of the corporation.

X

Difficult to access the records of the court enterprise registers and uncertainties in knowing if shareholders are sharing in company’s profits

Principle 2 - Fundamental corporate changes.  Shareholders have the right to participate in, and to be sufficiently informed on, decisions concerning fundamental corporate changes, such as: (i) amendments to the governing documents of the company; (ii) the authorization of additional shares; and (iii) extraordinary transactions that in effect result in the sale of the company.

X

Principle 3 - Shareholder meetings. Shareholders should have the opportunity to participate effectively and vote in general shareholder meetings and should be informed of the rules, including voting procedures that govern shareholder meetings.

X

Not uncommon practice of failing to hold the required shareholders’ meetings

Principle 4 - Proportionate control. Capital structures and arrangements that enable certain shareholders to obtain a degree of control disproportionate to their equity ownership should be disclosed.

X

Principle 5 - Markets for corporate control. Markets for corporate control should be allowed to function in an efficient and transparent manner. The rules and procedures governing the acquisition of corporate control in the capital markets, and extraordinary transactions such as mergers and sales of substantial portions of corporate assets, should be clearly articulated and disclosed so that investors understand their rights and recourse. Transactions should occur at transparent prices and under fair conditions that protect the rights of all shareholders according to their class. Anti-takeover devices should not be used to shield management from accountability.

X

Limited by low liquidity in stock market

Principle 6 - Equal 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.

All shareholders of the same class should be treated equally. Within any class, all shareholders should have the same voting rights. All investors should be able to obtain information about the voting rights attached to all classes of shares before they purchase. Any changes in voting rights should be subject to shareholder vote.

X

Effective redress requires review under a court system that is heavily overburdened and has not yet made any decisions on similar cases

Principle 7 - Procedures for shareholder meetings. Processes and procedures for general shareholder meetings should allow for equitable treatment of all shareholders. Company procedures should not make it unduly difficult or expensive to cast votes.

X

Principle 8 - Insider trading. Insider trading and abusive self-dealing should be prohibited.

X

Effectiveness of legal restrictions limited by low liquidity of the stock exchange and small size of the business community

Principle 9 - Insider disclosure. Members of the (supervisory) board and management board should be required to disclose any material interests they have in transactions or matters affecting the corporation.

X

Minor role played by supervisory boards in the strategic guidance of companies

Principle 10 - Rights of stakeholders. The corporate governance framework should recognize the rights of the stakeholders as established by law and encourage active cooperation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises.

X

Principle 11 - Corporate disclosure. 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. Channels for disseminating information should provide for fair, timely and cost-efficient access to relevant information by users.

Disclosure should include, but not be limited to, material information on: (i) the financial and operating results of the company; (ii) major share ownership and voting rights; (iii) members of the board and key executives, and their remuneration; (iv) material foreseeable risk factors; (v) material issues regarding employees and other stakeholders; (vi) governance structures and policies.

X

Less than complete disclosure by most reporting companies, particularly of financial and operating results

Principle 12 - Accounting and auditing. Information should be prepared, audited and disclosed in accordance with high quality standards of accounting, financial and non-financial disclosure, and audit. An annual audit should be conducted by an independent auditor in order to provide an external and objective assurance on the way in which financial statements have been prepared and presented.

X

Weak auditing practices and an audit law that allows liability to be capped in the contract between the company and the auditor

Principle 13 - (Supervisory) Board responsibilities. The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the (supervisory) board, and the (supervisory) board’s accountability to the company and the shareholders.

(Supervisory) Board members should act on a fully informed basis, in good faith, with due diligence and care, and in the best interests of the company and the shareholders.

X

Absence of detailed guidelines for supervisory boards