- 5 Marks
Question
The OECD Principles of Corporate Governance, as an international statement of principles about corporate governance, establishes minimum acceptable standards of corporate governance. However, like any such document on corporate governance, it has several limitations.
Required:
Identify and explain TWO (2) limitations of the OECD Principles of Corporate Governance.
(5 marks)
Answer
The two main limitations of the OECD Principles of Corporate Governance are:
- Relevance to Countries with High Standards of Governance:
The OECD principles are aimed at improving corporate governance in countries with lower standards. For countries with well-developed governance systems, the OECD guidelines may seem less relevant, as their governance standards often exceed the minimum requirements set by the OECD. - Lack of Legal/Regulatory Authority:
Unlike national corporate governance codes, the OECD principles lack legal or regulatory backing. This means they do not have the force of law, and countries are not mandated to adopt them. In contrast, national laws and governance codes often have enforcement mechanisms, ensuring compliance. For example, Ghana’s Corporate Governance Directive issued by the Central Bank in 2018 has legal backing, making it compulsory and enforceable, unlike the OECD guidelines.
(Marks allocation: 2 points @ 2.5 marks each = 5 marks)
- Tags: Corporate Governance, International Standards, Limitations, OECD principles
- Level: Level 3
- Topic: Professional practice and codes of ethics
- Series: NOV 2023
- Uploader: Dotse