Implementation of Corporate Governance Standards for Company Growth and Development23 dicembre 2017 -
Contributo selezionato da Filodiritto tra quelli pubblicati nella Rivista “International Review – N.1-2/2017”
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Tomaš Miskin Sonja, Milošević Šnjegota Branka
Corporate Governance Standards (standards of corporation management) provide good grounds for effective implementation of key management principles, exercise of shareholders’ rights and their equity stakes, equal treatment of shareholders, appropriate role of all other stakeholders in the manner of governance of a corporation, disclosure and transparency of information on company operation and appropriate role and responsibility of the boards established within the company. These standards are established on the basis of the Principles of Corporate Governance adopted by the Organization for Economic Cooperation and Development (OECD), and they are generally intended for use by developed corporations with a significant dispersion of ownership. Nevertheless, implementation of corporate governance standards was introduced also in the territory of Bosnia and Herzegovina, although in recent years, its capital markets (Sarajevo and Banja Luka) have been mainly trading in (short-term and long-term) debt securities issued by the Entity governments and, to a much lesser extent, in equity securities of incorporated state-owned enterprises. The aim of this paper is to show that implementation of corporate governance standards provides greater transparency in the operation of domestic listed companies, as well as a higher level of alignment of the domestic regulatory framework with the principles applied in the developed economies. This makes the domestic economic space more attractive for foreign investors, which implies that corporate governance standards directly support the growth and development of domestic companies and the economy as a whole. Basic scientific methods used to research the described issues include analysis methods (primarily the level of implementation of corporate governance standards in the country and its neighborhood), synthesis (in order to form conclusions about the effects of the attained corporate governance level) and comparison of solutions present in the practice of corporate governance in Bosnia and Herzegovina with the modalities present in its neighboring countries.
Introducing corporate governance standards in the countries of the former Yugoslavia has been gaining popularity in recent years as the state capital privatization process opened new possibilities to improve the system of operation in privatized companies. The term “corporate governance” involves an entirety of relationships between a company's management, its management board and other boards established within, its shareholders and other stakeholders (OECD, 2015) and it is associated only with the companies not managed by their owners but rather by professional managers. Corporate governance standards, or standards of corporation management13, specify in detail the mechanisms of exercising and protecting the interests in mutual relations between various stakeholders in the operation of a corporation (joint stock company, company). Compliance with those standards should ensure improvement of the competitive ability of a company, achievement of more favorable conditions for investments activities, as well as a more efficient functioning of the financial market in general.
Corporate governance standards, established on the basis of the Principles of Corporate Governance adopted by the Organization for Economic Cooperation and Development (OECD) were last published in the Republic of Srpska in 2011 (Official Gazette of the Republic of Srpska, 2011), and in the Federation of BiH in 2010 (Official Gazette of the Federation of BiH, 2010). Their implementation should ensure:
- basis for effective implementation of corporate governance principles,
- rights of shareholders and key ownership functions,
- equal treatment of shareholders,
- appropriate role of all stakeholders in corporation governance,
- disclosure and transparency of information about the company, and
- appropriate role and responsibility of the boards established within the
Due to the fact that company’s ability to generate operating profit in a long run can be designated as the main presumption for its growth and development, profitability can be deemed a common interest of the existing and potential shareholders, creditors, company management, the state and its institutions, as well as all other stakeholders. However, although all those parties have at least a minimum of common interests, each of them can have also their individual interests which need not be aligned with the interests of the company as a whole.
Generally, whenever a party has a discretionary possibility to make decisions which affect the interests of other stakeholders, potential conflicts of their interests (the so-called agency problems) arise due to a possibility of that party giving priority to their personal interests over those common. Within the corporate governance context, corporate governance standards may represent a significant factor of growth and development of a company, precisely because their implementation should ensure optimum exercise and protection of interests of all stakeholders in its operation.
Implementation of corporate governance standards in bosnia and herzegovina and neighboring countries
The OECD Principles of Corporate Governance are established with a view to optimum organizational structure of a company, through which the objectives are set, the means of attaining those objectives are identified and the achieved results are monitored.
An effective implementation of corporate governance standards is possible only with the appropriate knowledge of and compliance with the legal and economic laws of operation in a corporate setting and by accepting the fact that such a form of business operation may affect significantly the achievement of general interests of the social community as a whole.
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