As a contribution to the debate on the proposed new “Global Standard” (see: www.oecd.org/globalstandard) an Italian-led working group has drawn up, with the assistance of the OECD, a list of 12 “common principles and standards” designed to support efforts to relaunch the world economy on a new and more stable growth path.
Drawing on existing agreements and instruments where available and on newly developed codes where needed, the 12-point proposal would provide an ethical and legal framework to underpin propriety, integrity and transparency in international business dealings.
The proposed “12 commandments” were prepared with OECD help by a working group including legal and financial experts, academics and politicians in support of discussions hosted by the Italian Ministry of Economy and Finance in Villa Madama, Rome, on 11-12 May 2009. Those discussions fed into the so-called Lecce Framework for the global economy endorsed by G8 Finance Ministers at their meeting in Lecce, Italy, on 12-13 June 2009. G8 leaders will further discuss the principles of propriety, integrity and transparency at their L'Aquila Summit later this week.
The working group’s proposal takes as its starting point the notion that “a strong, fair and clean economy must be based on the values of propriety, integrity and transparency (and that) these values should be promoted by public policies and be upheld by business.”
The proposal calls for international cooperation to avoid any “race to the bottom” in labour, socal and environmental standards and regulatory arbitrage. It condemns tax evasion and corruption, and calls for accountability and fairness in relations between company management, boards, shareholders and other stakeholders.
The full text is as follows:
Common Principles and Standards on Propriety, Integrity and Transparency
1) A strong, fair and clean economy must be based on the values of propriety, integrity and transparency. These values should be promoted by public policies and be upheld by business. Effective monitoring of the implementation of these principles and standards should be undertaken on a regular basis.
2) Governments, companies and all business entities, irrespective of their legal form, around the world should recognise that these values are the keystone of a market economy which serves the needs and aspirations of citizens of every country and which deserves their respect and confidence.
3) Any “race to the bottom” in labour, social and environmental standards and regulatory arbitrage among jurisdictions should be prevented through international cooperation and convergence of domestic legal frameworks.
4) Tax evasion and avoidance are harmful to society as a whole and companies and all business entities, irrespective of their legal form, should fulfil their fiscal duties, including by respecting the arm’s length principle in transfer pricing practices.
5) Government / business interaction, including lobbying and “revolving door”, should be conducted in accordance with principles which are balanced, transparent, fair to all parties, and enforceable.
6) Business practices and governance of companies and all business entities, irrespective of their legal form - whether traded or non-traded, private or State-owned - should ensure accountability and fairness in the relationship between management, the board, shareholders and other stakeholders. Financial structures and instruments should not be misused in order to hide the true beneficial owner and corporate vehicles, in their various forms, should not be used for illicit activities, including money laundering, bribery, shielding assets from creditors, illicit tax practices, self-dealing and diversion of assets, market fraud and circumvention of disclosure requirements.
7) Disclosure of timely and accurate information regarding the activities, structure, ownership, financial situation and performance of companies should be ensured.
8) Pay and compensation schemes should be sustainable and consistent with companies’ and all business entities’, irrespective of their legal form, long-term goals and prudent risk-taking.
9) Bribery, including bribery in international business transactions, should be established as a criminal offence and effectively prosecuted and punished.
10) Money laundering should be criminalised and the crime of money laundering should be applied to all serious offences, with a view to including the widest range of predicate offences.
11) Any form of protectionism should be banned.
12) Bank secrecy should not constitute an obstacle to the application of the above mentioned principles , including tax compliance worldwide.