Corporate Governance – Current Trends and Perspectives


The configuration of governance in a company is determined by an interest and institutions. Interest refers to property protection and its exploitation, and institutions set the conditions for resource allocation in the economy and protection of private property. Therefore, setting a paradigm on corporate governance models starts from these two fundamental conditions. For example, in continental European countries, legislation plays a significant role in governance models adopted by the companies, compared to countries based on the judicial precedent where voluntary action in private construction plays a prevailing role. Also, the models of financing the economies influences the corporate governance system. In Great Britain and USA, capital markets facilitates financial intermediation for companies, in a relatively equal proportion with banks, while in continental Europe the most important financial intermediaries are banks.
The persistence of efficient or inefficient institutions plays a role in building corporate governance mechanisms or in preserving a particular pattern. For instance, although there is an “European model of corporate governance”, in reality, we do not actually find such a situation. Public institutions that shape a corporate governance system may be the same, but informal institutions and market structuring are different. For example, companies from Italy and Germany operate according to approximately the same rules, since there is a single regulation at the European Union level, but, in fact, the governance of companies in these countries does not resemble. In France, the governance system for large corporations is almost similar to the governance structure of the ministries (for example, the function of general secretary taken over from the bureaucratic structure of the ministry), with extensive bureaucracy.
In Romania, the system of corporate governance legally regulated is a mix between the co-determination model (German) and the traditional model (French, Italian). The first involves the existence of two levels – a shareholder and a directorship (executive management) – and a supervisory board that defends the shareholders’ interests (mainly from the tendency of the executive to maximize its gains to the detriment of shareholders), while the traditional model is structured on 3 levels: shareholder, administrator and executive manager. The role of supervising the interests of shareholders returns to the Board of Directors, but it is not as well defined as in the case of the Supervisory Board.
Corporate governance is one of the key elements needed to create a balance between the statutory entities of a company in order to protect shareholders and achieve constant growth, efficiency, performance and confidence in the competitive market economy. In other words, corporate governance is a set of rules that governs and separates administration/management activity from the control activity, in order to efficiently use the resources and fulfill the responsibilities of those who manage them in a professional, independent and fair manner towards all stakeholders and, implicitly, shareholders. Structuring responsibilities, ensuring effective decisions and good corporate governance represents a challenge and requires a profound focus on the three key principles for an attractive investment environment: transparency, evaluation and policy coherence.
From the perspective of protected interests, several models of corporate governance have emerged in the global economy of the last decades, the most important being named in the economic doctrine under the title of the Shareholder Model (focused on shareholders) and the Stakeholder Model (focused on stakeholders). In Romania, the applied corporate governance model is in fact a combination of the two systems, with a predominant focus on interests and the protection of shareholders.
In Romanian law, the principles of corporate governance having as a direction the harmonization imposed by Community legislation regarding companies and the adaptation of internal legislation to The Organisation for Economic Co-operation and Development (O.E.C.D.) standards in corporate governance have been transposed by Company Law no.31/1990. Due to the fact that the general company law was not adapted to the specifics of state-owned companies, that public enterprises are an important segment of the national economy and that the efficiency of an economic operator depends to a large extent on the performance of its management, the implementation of the corporate governance at the level of public enterprises / entities, materialized quite late, through Government Emergency Ordinance no.109/2011 on Corporate Governance of Public Enterprises. Through this absolutely necessary legislative approach, the implementation of corporate governance has become mandatory for public enterprises, credit institutions and insurance companies.
Previously, the Bucharest Stock Exchange issued in 2001 the “Corporate Governance Code of the Bucharest Stock Exchange”, which was later revised in 2008 and 2015. This is a set of principles and recommendations for companies whose shares are admitted to trading on the regulated market with the aim of creating an attractive capital market both at national and international level, building a strong relationship with shareholders and stakeholders, and increasing trust in listed companies.
Adopting a corporate governance code is a crucial factor in attracting investors to emerging markets and a novelty element that could guide any company towards transparency and streamlining its activities.
In recent years, a number of draft laws which aimed the exempting several state-owned companies from the application of Government Emergency Ordinance no.109/2011, have been debated in Parliament, and were subsequently declared unconstitutional by the Constitutional Court. Although the initial approach consisted in the exemption from the provisions of Government Emergency Ordinance no.109/2011 of a single company, namely the National Meteorological Administration, that proposal has reached at an endless list of exceptions. Excluding from appling corporate management for more than 90 companies would be a huge regress, given that many studies have shown that corporate governance plays a key role in improving business performance, increasing investor confidence and increasing competitiveness. In fact, the paradigm of corporate governance has been reduced to the appointment of independent directors. Practically, the fight is given for the way they are called (politically or professionally), the other potential benefits being passed on to the second.
In the current economic context, companies sustainability also depends on the application of an efficient management system, the implementation of modern management methods, the proper motivation of employees and the promotion of individual and organizational performance.
Strong competition for resources and markets, interconnection of markets and “shortening distances” are all challenges that challenge companies that are not professionally run and are not at a level comparable to those with experience in the open market. Regulatory limitations can be short-term solutions, but market adaptation and sustainable growth are components of any winning paradigm. Corporate governance is not a panacea, but it is the minimum prerequisite for joining the playing field and approaching the chances of not losing it before it starts.