OECD Secretary General Angel Gurria Speech to WFE 50th Annual Meeting
It is my pleasure to participate in the celebrations of the World Federation of Exchanges’ 50th Anniversary and to join this distinguished panel. The OECD will also soon celebrate its 50th anniversary. Anniversaries are important moments and an opportunity to reflect on what has been achieved and where we want to go in the future.
And our respective anniversaries come at a critical juncture for the world economy. The financial crisis has been the worst one in our lifetime. It exposed massive failures in regulation, in supervision, in corporate governance and in risk management. The crisis also resulted in a major loss of confidence by the public in governments, in business and in finance.
We need to address this. Indeed, “the circulation of confidence is better than the circulation of money”, as James Madison said. It is thus crucial to restore confidence. It is a key ingredient to place the world economy on a new, firmer path to sustainable growth. Today, I will outline what we are doing at the OECD to contribute to restore confidence. I would also like to reflect on how we can work with the world’s exchanges to further this goal.
Corporate governance is one area where the failings have been obvious; where there is clearly a need for action; and where the OECD and the world’s stock exchanges can continue their work together. Indeed, the OECD Principles of Corporate Governance are the internationally recognised corporate governance standard, and have been endorsed as such by your general assembly.
In the aftermath of the crisis, we have gone through an intensive process to test the Principles in light of these failings. Our key conclusion is that the Principles are still valid, but have not always been properly implemented. We have therefore embarked on a process of systematic peer reviews with OECD members and G20 countries to encourage greater compliance. The first of these reviews is testing the extent to which company boards are ensuring that executive remuneration is properly aligned with company performance.
But to ensure greater compliance, we need help from the stock exchanges. You are indeed key players in promoting good corporate governance, through your codes, listing requirements, and regulatory powers. This has been documented in one of our studies conducted in 2008 with your support. Exchanges can fulfil this role by providing incentives to already listed companies to commit to higher governance standards. A high profile example of this approach has been the establishment of the Novo Mercado by the Brazilian Stock Exchange, with the support of the OECD Corporate Governance Roundtable for Latin America.
Following examples like this, the OECD will continue to work with exchanges all over the world in order to create a regulatory framework that facilitates market transparency. Indeed, we are already working with many of you and your regional associations with our corporate governance roundtables in Latin America, Asia and the Middle East and North Africa.
We are working towards the same objectives as you, towards board accountability, equitable treatment of shareholders and appropriate cooperation with stakeholders. Towards aligning remuneration and incentives with companies' long term goals and risk policy. Towards greater transparency on company activities and, quite importantly, on social, ethical and environmental risks.
Indeed, there is a growing demand for such transparency. Restoring confidence will require enhancing disclosure in this regard. Recent examples have damaged public confidence in business’s willingness and capacity to handle these risks properly. Therefore debating these environmental and social aspects of governance is very timely.
This is the reason why, as a key part of the OECD response to the financial crisis, OECD member governments, as well as Brazil and the Russian Federation, adopted in May this year a “Declaration on Propriety, Integrity and Transparency in the Conduct of International Business and Finance”. This Declaration notes that “Propriety, integrity and transparency are the keystone of an economy which commands the support and confidence of the people and serves their needs and aspirations.”
This Declaration was born of OECD Ministers' agreement to develop a set of common standards regarding the conduct of international business and finance. Through this Declaration, the OECD provides a comprehensive “code of conduct” for international business and gives governments a roadmap to achieve a stronger, cleaner, fairer world economy. Indeed, the Declaration establishes a broad and coherent framework of public policy principles in areas at the core of corporate responsibility, including corporate governance, taxation, competition, anticorruption and interaction between the public and the private sector.
This approach has also been picked up by the G20 and further work on propriety, integrity and transparency will be conducted by the G20 under the French presidency.
Using our proven expertise in monitoring and reviewing, we are now working with governments to ensure that these standards are implemented in a coordinated and coherent manner.
Let me give you a couple of examples.
In the field of anti-corruption, the OECD is developing a comprehensive initiative to help stakeholders, governments, corporations and civil society progress in the fight against corruption. It is focussed on the implementation of commitments against corruption in a number of areas, including the bribery of foreign public officials, public procurement and export credits.
In the area of taxation, all G20 countries are members of the Global Forum on Transparency and Exchange of Information for Tax Purposes, which includes a peer review process. Moreover, we carry out an annual assessment of over 80 jurisdictions on the availability of ownership information for tax purposes, thus helping assess where greater transparency is needed.
On competition, all parties to the Declaration have agreed to the OECD methodology to help governments improve public procurement by fighting bid rigging.
We will also use the Declaration to promote consistent principles and good practices for financial education and awareness.
As you can see, the Declaration provides useful guidance in a number of areas relevant to the debate on economic and social governance. It covers the Corporate Governance Principles, and particularly their chapter on the treatment of stakeholders, but also, importantly, the OECD Guidelines for Multinational Enterprises that promote responsible business conduct throughout the world. These Guidelines provide a global framework for responsible business conduct. They cover all areas of business ethics, including for instance in labour and human rights, and the environment.
The 42 adhering governments are committed to promoting the Guidelines and to making them influential among their companies worldwide. And the OECD publishes annual reports describing what governments have done to live up to this commitment. National contact points serve as radars in this regard. They are responsible for the implementation of the Guidelines and meet annually to address emerging issues and new developments.
These Guidelines are currently being reviewed. A major objective of the update is to address more thoroughly issues of human rights abuse and company responsibility for their supply chains. The Guidelines’ unique mediation mechanism, which operates through the National Contact Points designated by each of the participating countries, will also be strengthened.
As you can see, the OECD has been very active in promoting good business conduct. This can be supported by the role of the exchanges in promoting environmental, social, and governance (ESG) standards. Indeed, your role in establishing and promoting corporate governance standards has by now been established. But this role in promoting environmental or social practices is only now being shaped. Some of you are constructing ESG indicators and then forming market indices or market segments around these. Just as the OECD’s Principles of Corporate Governance have helped shape stock exchanges’ corporate governance recommendations, I can envisage that elements of the OECD’s Propriety, Integrity and Transparency Declaration may help shape your response to economic and social governance.
Stock exchanges are in a unique position to influence corporate behaviour. This has been shown in the field of corporate governance. As the OECD moves forward to implement the PIT Declaration and to discuss its components within the G20, we look forward to developing a deeper level of cooperation with the world’s exchanges. Indeed, we must work together to improve people’s confidence in the conduct of business. This is essential for placing the world economy on a new, firmer path.
About Angel Gurria
Born on May 8th, 1950, in Tampico, Mexico, Angel Gurría came to the OECD following a distinguished career in public service, including two ministerial posts. As Mexico’s Minister of Foreign Affairs from December 1994 to January 1998, he made dialogue and consensus-building one of the hallmarks of his approach to global issues. From January 1998 to December 2000, he was Mexico’s Minister of Finance and Public Credit. For the first time in a generation, he steered Mexico’s economy through a change of Administration without a recurrence of the financial crises that had previously dogged such changes.
As OECD Secretary-General, since June 2006, he has reinforced the OECD's role as a ‘hub” for global dialogue and debate on economic policy issues while pursuing internal modernization and reform. Under his leadership, OECD has agreed to open membership talks with Chile, Estonia, Israel, Russia and Slovenia and to strengthen links with other major emerging economies, including Brazil, China, India, Indonesia and South Africa, with a view to possible membership. The OECD is now an active participant in both the G-8 and the G-20 Summit processes. Mr. Gurría has participated in various international not-for-profit bodies, including the Population Council, based in New York, and the Center for Global Development based in Washington. He chaired the International Task Force on Financing Water for All and continues to be deeply involved in water issues. He is a member of the International Advisory Board of Governors of the Centre for International Governance Innovation, based in Canada, and was the first recipient of the Globalist of the Year Award of the Canadian International Council to honour his efforts as a global citizen to promote trans-nationalism, inclusiveness, and a global consciousness.
Mr. Gurría holds a B.A. degree in Economics from UNAM (Mexico), and a M.A. degree in Economics from Leeds University (United Kingdom). He speaks: Spanish, French, English, Portuguese, Italian and some German. He is married to Dr. Lulu Quintana, a distinguished ophthalmologist, and they have three adult children.