Corporate Governance, what the G20/OECD principles are and why they are important

Implementation in the Italian context in the new Assonime guide

The new ones OECD corporate governance principlesadopted by the G20, and their implementation in the Italian context are at the center of a guide by Assonime, the association of joint-stock companies, which analyzes the role of the direction and control of companies in promoting capital market development and sustainability.

Corporate governance is considered crucial not only for individual companies but also for the entire national system. The guide highlights the importance of self-regulation, highlighting the flexibility and evolving nature of this component as a key element of a robust governance framework, in line with the G20/OECD Principles.

What are the G20/OECD principles

The new G20/OECD Corporate Governance Principles, approved in September 2023, reflect the new dimensions of corporate governance, placing greater emphasis on the sustainability and resilience of businesses. These principles were developed with the aim of improve companies’ access to financial marketspromote transparency and accountability to shareholders, and support corporate sustainability and resilience.

Furthermore, the principles address the growing role of institutional investors, promoting stewardship codes and disclosure of conflicts of interest. They also contain new recommendations that reflect the growing importance of corporate debt and the role of bondholders in capital markets. In summary, they aim to create an environment in which evolved investor expectations are met, fostering confidence in financial markets and promoting overall economic sustainability.

Here are some key points regarding the G20/OECD principles and their importance for businesses:

  1. International standards: The G20/OECD principles represent an internationally recognized standard. They provide a common framework that companies can follow to ensure effective and transparent governance. This is particularly important in a global context where companies often operate in international markets and must respond to the expectations of investors from different jurisdictions.

  2. Promotion of transparency: The G20/OECD principles encourage transparency in business practices. Accurate and timely disclosure of financial information, business decisions and policies is critical to building investor and stakeholder trust.

  3. Shareholder rights and fair treatment: The principles address the protection of shareholder rights and promote the fair treatment of all shareholders, regardless of their size or influence. This helps prevent situations of abuse of power and ensures that all stakeholders have a voice in business decisions.

  4. Responsibilities of the board of directors: The G20/OECD Principles establish guidelines for board responsibilities. This includes making informed decisions, identifying and managing risks, and overseeing business practices while respecting the interests of all stakeholders.

  5. Sustainability and CSR: The latest principles also incorporate aspects related to sustainability and CSR, reflecting the growing importance of corporate social and environmental responsibility. This reflects an awareness of the need to balance financial objectives with social and environmental ones.

  6. Access to financial markets: The principles are designed to improve companies’ access to financial markets. Good corporate governance can increase investor confidence, encourage investment and foster economic growth.

  7. Investor confidence: Following the G20/OECD principles helps create a business environment based on transparency, accountability and prudent management. This helps build and maintain the trust of investors and other stakeholders.

The G20/OECD principles offer a fundamental framework for companies interested in implementing effective governance practices adapted to international standards, thus improving their reputation, investor confidence and their access to financial markets.

The Italian panorama of Corporate Governance

The flexibility and evolving nature of self-regulation are highlighted as key elements of a robust governance framework, as recognized by the Principles. The Assonime guide pays particular attention to the area ofself-regulationexamining principles relating to board responsibilities and sustainability governance, as well as other principles relating to the role, characteristics and implementation of the Corporate Governance Code and disclosure of governance practices.

According to Assonime’s analysis, the Italian system shows a high degree of alignment with international standards, especially thanks to the extensive revision of the Italian Corporate Governance Code in 2020, which adopted an “enlightened” vision of corporate governance, in particular with respect to sustainability.

However, it is emphasized that good corporate governance is necessary but not sufficient to achieve the broader goal of creating a capital market capable of supporting growth, innovation and the transition to a sustainable economy.