The OECD Principles of Corporate Governance were developed with a view to assist OECD and non-OECD governments in their efforts to evaluate and improve the legal, institutional and regulatory framework for corporate governance in their countries, and to provide guidance and suggestions for stock exchanges, investors, corporations, and other parties that have a role in the process of developing good corporate governance. Although, these principles mainly focuses on publicly traded companies (both financial and non-financial), they also act as a useful tool to improve corporate governance in non-traded companies, for example, privately held and state owned enterprises.

These principles majorly include:-

• An effective corporate governance framework should be developed with a view to its impact on overall economic performance, market integrity and the incentives it creates for market participants as well as for the promotion of transparent and efficient markets. The legal and regulatory requirements that affect corporate governance practices in a jurisdiction should be consistent with the rule of law, transparent and enforceable. They should clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement authorities.
• The corporate governance framework should protect and facilitate the exercise of basic shareholders’ rights, which should include the right to: (i) secure methods of ownership registration; (ii) convey or transfer shares; (iii) obtain relevant and material information on the corporation on a timely and regular basis; (iv) participate and vote in general shareholder meetings; (v) elect and remove members of the board; and (vi) share in the profits of the corporation. Shareholders should have the right to participate in, and to be sufficiently informed on, decisions concerning fundamental corporate changes, such as, amendments to the statutes or articles of incorporation; authorisation of additional shares; etc.
• Capital structures and arrangements that enable certain shareholders to obtain a degree of control disproportionate to their equity ownership should be disclosed. The rules and procedures governing the acquisition of corporate control in the capital markets, and extraordinary transactions, such as mergers and sales of substantial portions of corporate assets, should be clearly articulated and disclosed so that investors understand their rights and recourse. Transactions should occur at transparent prices and under fair conditions that protect the rights of all shareholders according to their class.
• All shareholders of the same series of a class, including minority and foreign shareholders, should be treated equally. Within any series of a class, all shares should carry the same rights. All investors should be able to obtain information about the rights attached to all series and classes of shares before they purchase. Besides, all shareholders should have the opportunity to obtain effective redress for violation of their rights.
• Insider trading and abusive self-dealing should be prohibited.
• The corporate governance framework should recognise the rights of stakeholders established by law or through mutual agreements and encourage active co-operation between corporations and stakeholders in creating wealth, jobs and the sustainability of financially sound enterprises. Further, it should be complemented by an effective, efficient insolvency framework and by effective enforcement of creditor rights.
• Performance-enhancing mechanisms for employee participation should be permitted to develop.
• The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, operating results, objectives, performance, ownership, remuneration policy and governance of the company. Information should be prepared and disclosed in accordance with high quality standards of accounting and financial and non-financial disclosure.
• An annual audit should be conducted by an independent, competent and qualified auditor in order to provide an external and objective assurance to the board and shareholders, such that the financial statements fairly represent the financial position and performance of the company in all material respects. External auditors should be accountable to the shareholders and owe a duty to the company to exercise due professional care in the conduct of the audit.
• The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the board's accountability to the company and its shareholders. That is, the Board members should act on a fully informed basis, in good faith, with due diligence and care, and in the best interest of the company and the shareholders. It should review and guide corporate strategy, major plans of action, risk policy, annual budgets, business plans, performance objectives, etc. as well as monitor the effectiveness of company's governance practices and make changes, wherever needed.

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