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The role of stakeholders in corporate governance
(OECD, 2015) (General…
The role of stakeholders in corporate governance
(OECD, 2015)
Basis of CG
encouraging the various stakeholders in the firm to undertake economically optimal levels of investment in firm-specific human and physical capital.
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the contributions of stakeholders constitute a valuable resource for building competitive and profitable companies.
the governance framework should recognise the interests of stakeholders and their contribution to the long-term success of the corporation.
General Guidance
A. The rights of stakeholders that are established by law
or through mutual agreements are to be respected.
B. Where stakeholder interests are protected by law, stakeholders should have the opportunity to obtain
effective redress for violation of their rights.
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D. Where stakeholders participate in the corporate governance process, they should have access to
relevant, sufficient and reliable information
on a timely and regular basis.
in areas where stakeholder interests are not legislated, many firms make additional commitments to stakeholders, and concern over corporate reputation and corporate performance often requires the recognition of broader interests.
The legal framework and process should be transparent and not impede the ability of stakeholders to communicate
and to obtain redress for the violation of rights.
depends on national laws and practices, and
may vary from company to company as well.
may benefit companies directly as well as indirectly
through the readiness by employees to invest
in firm specific skills.
it is important that stakeholders have access to
information necessary to fulfil their responsibilities
E. Stakeholders should be able to freely communicate their concerns about illegal or unethical practices to the board and to the competent public authorities and their rights should not be compromised for doing this.
Unethical and illegal practices by corporate officers may:
not only violate the rights of stakeholders but also be to the detriment of the company and its shareholders in terms of reputation effects and an increasing risk of future
F. The corporate governance framework should be complemented by an effective, efficient insolvency framework and by effective enforcement of creditor rights.
Companies with a good corporate governance record are often able to borrow larger sums and on more favourable terms than those with poor records or which operate in less transparent markets.