Exploring Corporate Governance Around the World

By Allison Garrett, Senior Vice President for Academic Affairs at Oklahoma Christian University

Monday, January 08, 2007

OECD Publishes Assessment Tool

In December, the OECD published Methodology for Assessing the Implementation of the OECD Principles on Corporate Governance. The document is available here.

The OECD's assessment tool contains a chapter on each OECD corporate governance principle and discusses assessment criteria with respect to each principle. The approach used in the methodology is qualitative rather than quantitative, using a scale similar to the scale used in other OECD assessments of observed/implemented, broadly observed/implemented, partly observed/implemented,not observed/implemented, and not applicable. Where a principle has been partly observed/implemented or not observed/implemented, the assessor must analyze why this principle has not been implemented. Is it due to the lack of an appropriate legal framework for regulation or redress of wrongs? Is there poor regulatory enforcement? Are market mechanisms weak?

Due to the qualitative nature of the assessment and the need to apply professional judgment, the OECD notes the importance of a reviewer's familiarity with the corporate landscape in a particular country. Application of anecdotal evidence will be less helpful that application of statistical indicators.

1 comment:

M.D. Fatwa said...

After reading Peter Gourevitch's and James Shinn's "Political Power and Corporate Control" (as well as John Coffee's article "A Theory of Corporate Scandals", which I write a little bit about here), I really question whether the OECD has any business developing these principles in the first place. For one thing, it is pretty clear that a lot of the principles are compromises based on political realities, rather than proposed optimal solutions. (The section on stakeholder rights is a pretty clear example of that.) Second, this new academic research really calls into question whether a one-size fits all approach is the best way to tackle corporate governance issues.