1. Introduction
This review of Corporate Governance in Costa Rica was prepared for the evaluation by the OECD Corporate Governance Committee in the context of Costa Rica’s accession process to the OECD, to assess the corporate governance arrangements for listed and state-owned enterprises in Costa Rica against the G20/OECD Principles of Corporate Governance and the OECD Guidelines on Corporate Governance of State-Owned Enterprises. This introductory chapter provides an overview of the process and methodology of the review, including reference to the core corporate governance principles used to inform the assessment. The chapter also summarises measures taken by Cost Rica throughout the accession review process to implement OECD recommendations and further align Costa Rica’s legal and regulatory framework and practices with OECD corporate governance standards.
The OECD Council’s Roadmap for the Accession of Costa Rica to the OECD Convention (the Roadmap) called upon the Corporate Governance Committee, supported by its Working Party on State Ownership and Privatisation Practices, to assess Costa Rica’s willingness and ability to implement the OECD’s legal instruments in the field of corporate governance, and to evaluate its policies and practices. This review presents Costa Rica’s progress in implementing the Recommendation of the Council on Principles of Corporate Governance [OECD/LEGAL/0413] (hereafter the “G20/OECD Principles”) and the Recommendation of the Council on Guidelines on Corporate Governance of State-Owned Enterprises [OECD/LEGAL/]0414]. (hereafter the “SOE Guidelines”. In addition, during the review process, a third OECD standard in the field of corporate governance was adopted by the OECD Council, the Recommendation of the Council on Guidelines on Integrity and Anti-Corruption in State-Owned Enterprises [OECD/LEGAL/0451] (the “ACI Guidelines”), which constituted an additional reference for this assessment. The Roadmap [C(2015)93/FINAL] focuses on five core corporate governance principles:
Ensuring a consistent regulatory framework that provides for the existence and effective enforcement of shareholder rights and the equitable treatment of shareholders, including minority and foreign shareholders;
Requiring timely and reliable disclosure of corporate information in accordance with internationally recognised standards of accounting, auditing and non-financial reporting;
Establishing effective separation of the state’s role as an owner of state-owned enterprises and the government’s role as regulator, particularly with regard to market regulation;
Ensuring a level playing field in markets where state-owned enterprises and private sector companies compete in order to avoid market distortions; and
Recognising stakeholder rights as established by law or through mutual agreements and the duties, rights and responsibilities of corporate boards of directors.
The review was guided by the document entitled Concepts to Guide Corporate Governance Accession Reviews (the Concept Paper). The Concept Paper provides a methodology for conducting accession examinations. It identifies which G20/OECD Principles and SOE Guidelines recommendations are most relevant for assessing accession candidate countries against the five Roadmap principles.
The review draws upon a variety of sources including: information provided by the Costa Rican authorities in response to an OECD questionnaire on the Guidelines; Costa Rica’s Self-Assessment against the G20/OECD Principles; and Costa Rica’s Initial Memorandum, stating its position against the Guidelines and G20/OECD Principles. The Secretariat has worked in close co-operation with the Costa Rican authorities to obtain additional information, including through fact-finding missions that included discussions with a range of public officials, managers and board members of listed companies, state-owned enterprises, market participants, and other experts. Oral and written progress reports by the Costa Rican delegation to the Working Party and to the Committee also provided input to the review process. Other OECD Committee reviews of Costa Rica, independent research and press reports were also important sources of information. Successive versions of this review were made available as background to seven separate accession discussions held by the OECD Corporate Governance Committee and its Working Party on State Ownership and Privatisation Practices between October 2016 and October 2019. Box 1.1 summarises the key measures taken by the Costa Rican authorities to implement the recommendations communicated to Costa Rica in the context of the corporate governance accession review process.
To support the implementation of the G20/OECD Principles and the governance of listed companies:
Development of a new Corporate Governance Regulation for listed companies modelled on international best practice.
Implementation of the Corporate Governance Regulation through Risk-Based Supervision.
Engagement of the securities market supervisor with listed companies while implementing the Corporate Governance Regulation, which permitted an exchange of views and adaptation of expectations and approaches.
Development by listed companies of corporate governance codes with feedback from the securities market supervisor.
Raising awareness and commitment to reform amongst the securities market supervisor and companies.
Passage of a regulation that requires regulated financial entities to transition to IFRS.
Enactment of laws to strengthen and consolidate supervisory responsibilities, including reinforced oversight of the audit profession and a requirement to report beneficial ownership to supervisory authorities to enable Costa Rica to become a signatory to the IOSCO Multilateral Memorandum of Understanding on exchange of information for purposes of enforcement.
Introduction of a bill to the Legislative Assembly to modernise Costa Rica’s insolvency framework.
To support the implementation of the SOE Guidelines and the ACI Guidelines:
The creation of an SOE ownership entity (Presidential Advisory Unit)
The staffing of the Presidential Advisory Unit with staff who have developed:
An ownership policy (Protocol of Understanding on the Relations between the state and the Enterprises under its Property)
An aggregate report on SOEs with comparative information on financial and non-financial performance and SOE governance practices
An SOE board member nominations policy
A website to manage board member nominations and an applicant pool
Issuance of legal requirements for compliance with IFRS and commitment to a process of closing the gaps with IFRS
Additional legal and regulatory changes, including:
A law enacted to remove the Minister of Energy and Environment from the board of the state-owned petroleum refinery company RECOPE
A law to establish a deposit insurance programme covering both state-owned and private sector banks to contribute to a more level playing field in the banking sector
A decree on the roles and responsibilities of SOE boards
A decree on the transparency of SOEs
A decree on board performance evaluation
Government’s intent to remove the Minister of Agriculture from the board of the institution that oversees the national liquor production company FANAL and transform it into a government concession
Draft legislation to reform public procurement involving SOEs.
Greater awareness of the importance of corporate governance to the performance of SOEs, an increase in commitment to reform and concrete measures with respect to board composition and board evaluations.
Development of a training programme for SOE board members, executives and government officials on good corporate governance
The review is structured as follows. The Introduction (Chapter 1) is followed by an overview of Costa Rica’s corporate governance landscape (Chapter 2); a detailed review of Costa Rica’s practices against each of the five Roadmap core principles (Chapter 3); Costa Rica’s framework for combatting corruption and review against the OECD Anti-Corruption and Integrity Guidelines for SOEs (Chapter 4); and conclusions and recommendations for strengthening corporate governance in Costa Rica (Chapter 5).
References
OECD (2015), G20/OECD Principles of Corporate Governance, OECD Publishing, Paris, https://doi.org/10.1787/9789264236882-en.
OECD (2015), OECD Guidelines on Corporate Governance of State-Owned Enterprises, 2015 Edition, OECD Publishing, Paris, https://doi.org/10.1787/9789264244160-en.
OECD (2019), Guidelines on Anti-corruption and Integrity in State-Owned
Enterprises, www.oecd.org/corporate/Anti-Corruption-Integrity-Guidelines-for-SOEs.htm
