Flexibility and Proportionality in Corporate Governance

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The quality of corporate governance regulations matters. If they are well designed, they can help governments achieve important policy objectives, such as higher levels of investment, increased productivity and better business sector dynamics. But for this to happen, the rules and regulations must be allowed to evolve over time. They must also be able to meet the many different needs of those entrepreneurs, investors and stakeholders who are supposed to implement them.

This is why the G20/OECD Principles of Corporate Governance state that policy makers have a responsibility to shape a regulatory framework that can meet the needs of corporations that operate under widely different circumstances.

Importantly, this concept of flexibility and proportionality is not about less demanding rules or the acceptance of sub-standard practices. On the contrary, it represents a functional and outcome oriented approach to regulation that facilitates implementation and makes enforcement more effective.

This OECD report presents the results of an OECD review on flexibility and proportionality practices in seven different areas of corporate governance regulation. The review covers 39 jurisdictions and six in-depth country case studies.



Main findings

This report finds that a vast majority of countries have criteria that allow for flexibility and proportionality at company level in all of the seven areas of regulation that are being reviewed. Figure 1. below shows that when it comes to rules about board composition, board committees and board qualifications, all of the 39 jurisdictions included in the survey reported that they had criteria that allowed for flexibility and proportionality. In the other six areas of regulation that were reviewed, between 75 and 85% of the jurisdictions reported that there was scope for flexibility or proportionality in their implementation at company level.


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