Oecd legal Instruments

III.G. 
Stock markets should provide fair and efficient price discovery as a means to help promote 
effective corporate governance.
Effective corporate governance means that shareholders should be able to monitor and assess their 
corporate investments by comparing market-related information with the company’s information about its 
prospects and performance. When shareholders believe it is advantageous, they can either use their voice 
to influence corporate behaviour, sell their shares (or buy additional shares), or re-evaluate a company’s 
shares in their portfolios. The quality of and access to market information including fair and efficient price 
discovery regarding their investments is therefore important for shareholders to exercise their rights. 
OECD/LEGAL/0413
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All types of investors, whether they follow active or passive investment strategies, have relevant roles to play 
in contributing to well-functioning capital markets and efficient price discovery. In this regard, the quality of 
and access to market and company-specific information is key, notably for those using this information to 
follow active corporate governance strategies. 
IV. Disclosure and transparency 
The corporate governance framework should ensure that timely and accurate disclosure is made on 
all material matters regarding the corporation, including the financial situation, performance, 
sustainability, ownership, and governance of the company. 
In most jurisdictions a large amount of information, both mandatory and voluntary, is compiled on publicly 
traded and large unlisted companies, and subsequently disseminated to a broad range of users. Public 
disclosure is typically required, at a minimum, on an annual basis though some jurisdictions require periodic 
disclosure on a semi-annual or quarterly basis, or ad hoc disclosure in the case of material related party 
transactions and other material developments affecting the company. Companies often make voluntary 
disclosure that goes beyond minimum disclosure requirements in response to market demand. 
The Principles support timely disclosure of all material developments that arise between regular reports. 
They also support simultaneous reporting of material or required information to all shareholders in order to 
ensure their equitable treatment, a fundamental principle that companies must uphold. 
Disclosure requirements should not place unreasonable administrative or cost burdens on companies. Nor 
should companies be expected to disclose information that may endanger their competitive position unless 
disclosure is necessary to fully inform an investor’s decisions and to avoid misleading the investor. In order 
to determine what information should be disclosed at a minimum, many jurisdictions apply the concept of 
materiality. Material information can be defined as information whose omission or misstatement can 
reasonably be expected to influence an investor’s assessment of a company’s value. This would typically 
include the value, timing and certainty of a company’s future cash flows. Material information can also be 
defined as information that a reasonable investor would consider important in making an investment or voting 
decision. 
A strong disclosure regime that promotes real transparency is a pivotal feature of market-based monitoring 
of companies and is central to shareholders’ ability to exercise their shareholder rights on an informed basis. 
Experience shows that disclosure can also be a powerful tool for influencing the behaviour of companies 
and for protecting investors. A strong disclosure regime can help to attract capital and maintain confidence 
in capital markets. By contrast, weak disclosure and non-transparent practices can contribute to unethical 
behaviour and to a loss of market integrity at great cost, not just to the company and its shareholders but 
also to the economy as a whole. Shareholders and potential investors require access to regular, timely, 
reliable and comparable information in sufficient detail for them to assess the performance of the company’s 
management, and make informed decisions about the valuation, ownership and voting of shares. Insufficient 
or unclear information may hamper the ability of the markets to function, increase the cost of capital, and 
result in a poor allocation of resources. 
While corporate disclosure should focus on what is material to investors’ decisions and may include an 
assessment of a company’s value, it may also help improve public understanding of the structure and 
activities of companies, corporate policies and performance with respect to environmental, social and 
governance matters.