The OECD recently updated the Principles of Corporate Governance for both its member countries and the G20, a document that seeks to help policymakers assess and improve the legal, regulatory and institutional framework for corporate governance, with the aim of promoting economic efficiency, financial stability and sustainable economic growth.
The guidelines were updated to reflect the latest developments in the capital markets and in corporate governance policies and practices, which motivated BH Compliance to organize a webinar that addressed both the new features of the G20 and OECD Corporate Governance Principles, as well as the implications of this document for regulators and private companies in our country and Latin America.
The main new features of these principles were discussed, as well as the aspects that companies should consider and the challenges for Latin America in general, and Chile in particular, to adapt to the emerging trends in corporate governance.
Alejandra Medina, Financial Economist at the OECD, began the presentations by explaining the six pillars of the principles: how to have an effective corporate governance framework; rights and equitable treatment of shareholders and key ownership functions; institutional investors, securities markets and other intermediaries; information disclosure and transparency; the responsibilities of the board of directors; and finally a new chapter on sustainability and resilience. Although he indicated that there is no legal obligation to apply them, they are the standard to which every country should aim, implementing them in the way that best suits its culture.
Finally, he explained that the strategic priorities of the principles are to promote access to financing, innovation and entrepreneurship; to provide a framework to protect investors; and to support sustainability and resilience in the business sector.
Next, Mauricio Larraín, professor at the Universidad de Los Andes and former commissioner of the Financial Market Commission (CMF), discussed recent changes and advances in Chile regarding the regulatory and legislative framework for corporate governance, how they relate to the OECD principles and what are the main challenges that corporate governance faces in Latin America.
He described Norm 461 as the main of these advances, since it requires companies to report an integrated report, explaining how they integrate environmental and social issues into their corporate governance and strategic decisions. He also mentioned the rule issued by the Superintendency of Pensions on sustainability in AFP policies; the policy of regularity in operations between related parties (RPOs); the possibility that shareholders’ meetings can be held remotely (driven by the pandemic), and finally the lock-up period that prevents directors and executives from using privileged information prior to the disclosure of the company’s financial statements.
Although he valued these advances, he detailed a series of aspects that have yet to materialize, such as the creation of a corporate governance code, mechanisms to increase female participation on boards of directors – where Chile is still below the OECD average – and the implementation of the Law on Economic and Environmental Crimes, among others.
From Colombia, Francisco Prada, Corporate Governance Officer of the International Finance Corporation (IFC), referred to the state of governance issues in Latin America, pointing out that in the case of Chile the greatest challenge is that of integration. He mentioned as an example the case of the stock exchange, which is integrating its operations with those of Colombia and Peru, so that they have the challenge of implementing the OECD principles in the three countries despite the fact that they respond to different models. For this reason, he said that regulators should implement the principles in a way that makes them interoperable so that it is easier to work with them. He recalled that a survey of 900 board members in Latin America showed that 69% of companies have a sustainability strategy, although 59% do not have a sustainability expert and only 23% have established KPIs to measure performance. In her opinion, this demonstrates the challenge involved in implementing the OECD principles so that they are effectively included in corporate culture and decision-making.
Finally, Susana Sierra, CEO of BH Compliance, stressed the importance of understanding that governance goes far beyond the effectiveness of the board, but encompasses areas such as compensation and remuneration, incentive policy and the relationship with stakeholders, among others. Therefore, he called to join the “Movement for the G” and change the order of the letters of ESG to GSE, considering that the OECD provided many contents to work on governance and that instead of waiting for laws to be passed to implement these issues, companies should go ahead and apply these principles to be more competitive and be in line with the highest global standards.
