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| 2 minutes read

Influential OECD Principles of Corporate Governance updated, endorsed by G20

At the September G20 Leaders’ Summit in India, the G20 endorsed the revised G20/OECD Principles of Corporate Governance (the “Principles”).

The non-binding Principles provide a global benchmark for legal, regulatory, and institutional frameworks for corporate governance. The update includes new and updated guidance on shareholder rights, the role of institutional investors, corporate disclosure and transparency, the responsibilities of boards, and, for the first time, on sustainability and resilience[1].

Whilst the Principles are directed at policymakers, they will influence the regulatory approach to corporate governance across OECD-aligned jurisdictions. In turn this is likely to support multinational companies’ efforts to address sustainability and broader stakeholder interests throughout their operating environments. 

The most significant change is the new (and now the largest) chapter on sustainability and resilience, which states that corporate governance frameworks should provide incentives for companies and their investors to make decisions and manage their risks in a way that contributes to the sustainability and resilience of the company. The new chapter includes recommendations on: 

  • Disclosure, which should be consistent, comparable and reliable, include material information that is retrospective and forward-looking, and have a degree of external assurance. Over time, disclosure frameworks should converge the level of assurance between financial statements and sustainability-related disclosures, and build on internationally recognised standards to facilitate comparison across companies and markets; 
  • Boards of directors, and their responsibility to consider sustainability-related risks and opportunities, compatibility of the company’s capital structure with its strategic goals, and accountability for driving change. The Principles encourage use of the OECD due diligence standards on responsible business conduct for embedding sustainability factors in risk management systems and processes;
  • Stakeholder engagement (beyond shareholders and the workforce) to inform management’s decision-making and building trust in a long-term business strategy. The Principles note that there may be benefits in recognising broader interests that can influence corporate reputation and performance. The OECD Guidelines for Multinational Enterprises[2] provide risk-based due diligence standards to identify, prevent and mitigate company impacts on stakeholders;
  • Employee engagement: the Principles encourage employee participation in corporate governance structures, such as representation on boards, or works councils, as beneficial for a company, even where not required by national laws and practices;
  • Whistleblowing processes, which should enable individual workers, their representatives and third parties to freely communicate concerns about illegal or unethical practices to the company, with appropriate confidentiality and safe harbour protections; and 
  • Lobbying, which should be coherent with a company’s long-term sustainability-related goals and targets. 

Other sustainability-related recommendations in the Principles include increased diversity across boards and management, linking executive remuneration to sustainability indicators and managing risks of bias arising from the use of digital technology[3]). 

The themes of the new chapter will be familiar to many companies operating in markets which have already legislated, or plan to legislate, on corporate sustainability disclosures and due diligence. Notably however, the Principles call for balance between a company’s sustainability and other objectives (‘companies should still consider the financial interests of their shareholders’) and explicitly recognise the need to develop flexible sustainability disclosure frameworks that do not disincentivise companies from going public). The Principles do not stray into the current debate on double or single materiality and, whilst emphasising the importance and benefits of enhanced corporate sustainability measures, state that ‘corporate directors are not responsible for resolving major environmental and social challenges stemming from their duties alone’. 



[1]Leaders endorse revised G20/OECD Principles of Corporate Governance to promote corporate sustainability, market confidence and financial stability - OECD

[2] These Guidelines were updated in June 2023 and include enhanced provisions on stakeholder engagement, including specifically for Indigenous Peoples.

[3] The Principles recommend maintaining a ‘human element’ in algorithmic decision-making which has a supervisory function to mitigate against risks of incorporating existing biases.