Applicability of the OECD Principles of Corporate Governance to Italian Non-Listed Companies

Abstract

In 2004 the Organization for Economic Co-operation and Development (OECD) issued a reviewed version of the Principles of Corporate Governance (hereunder the “OECD Principles”), first endorsed in 1999 .As stated in their Preamble, “The Principles focus on publicly traded companies, both financial and non-financial. However, to the extent they are deemed applicable, they might also be a useful tool to improve corporate governance in non-traded companies, for example, privately held and state-owned enterprises.” Furthermore, the Preamble, after declaring that the OECD Principles “…focus on governance problems that result from the separation of ownership and control.”, recognizes that “…this is not simply an issue of the relationship between shareholders and management, although that is indeed the central element. In some jurisdictions, governance issues also arise from the power of certain controlling shareholders over minority shareholders.” Acknowledging that the OECD Principles were meant for listed companies and for their governance issues, this research aims to find out whether they are applicable also to non-listed companies (NLCs), and to what extent. Particularly, whether the OECD Principles also address the peculiar corporate governance issues arising in NLCs and, to the extent they do not – but without striving for completeness – how they can be implemented. There is an increasing need to lay out a framework of corporate governance tailored to NLCs is an increasingly necessity. Not only has the OECD directed its attention to this matter, but also some governments, agencies and organizations have, in fact, already issued principles and recommendations concerning the corporate governance of their domestic NLCs. Furthermore, from an economic point of view, the close NLCs are the prevalent business in a worldwide comparison. For instance, limited companies represent about 55 per cent of registered businesses and 90 per cent of output in OECD countries .