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10 February 2004

FEE comments on OECD Principles of Corporate Governance

FEE welcomed the revision of the OECD Principles of Corporate Governance, commenting upon the proposals, and highlighting the importance of proper corporate governance.

FEE believes it is very important to draw a distinction between information risk, by which we mean the risk that stakeholders are not given sufficient, accurate information on which to base their decisions, and underlying investment or business risk, meaning the risk inherent in a particular activity or the risk appetite of the business’s management team.

FEE therefore suggests that it is a fundamental principle that corporate governance requirements should be designed so as to

  • reduce information risk to stakeholders by ensuring that there is appropriate disclosure and
  • ensure that the organisation’s business risks are properly managed.

    In the latter case, risk management should be set in the context of the on-going need to take calculated risks and make investments to generate profits and ensure the future prosperity of the organisation. This principle, which is recognised by regulators in many countries but often overlooked when setting detailed requirements, should be explicitly stated in the OECD’s guidelines.

    Full paper

    © FEE

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