- OECD Principles of Corporate Governance (2004), 29–30.
- In 2000 the average figure for market capitalisation as a share of GDP in transition economies was 19%, with Estonia reaching by far the highest figure of 35%, while some countries being as low as 9% (Latvia) and 1% (Romania). Compare this to the figures for developed markets such as US (150%), Sweden (100%) or Germany (50%). See A Pajuste, “Corporate Governance and Stock Market Performance in Central and Eastern Europe. A Study of Nine Countries: 1994–2001”, Working Paper No 5367 (SSEES and University College London, Centre for the Study of Economics and Social Change in Europe, 2002), 4.
- ibid, 5–7. See also E Berglöf and A Pajuste, “Emerging Owners, Eclipsing Markets? Corporate Governance in Central and Eastern Europe”, in PK Cornelius and B Kogut (eds), Corporate Governance and Capital Flows in a Global Economy (Oxford University Press, 2003), 267, 270–74.
- M Dzierzanowski and P Tamowicz, “Setting Standards of Corporate Governance: A Polish Experience With Drafting Codes” (2003) 4 European Business Organization Law Review, 273, 276.
- ibid, 276.
- A Durnev, R Morck and B Yeung, “Capital Markets and Capital Allocation: Implications for Economies in Transition”, draft (2000), 41. Available at http://www.ssrn.com, accessed on 29 August 2004.
- Dzierzanowski and Tamowicz, supra n 4, 277.
- C Jordan and M Lubrano, “How Effective are Capital Markets in Exerting Governance on Corporations? Lessons of Recent Experience With Private and Public Legal Rules in Emerging Markets”, in RE Litan, M Pomerleano and V Sundararajan (eds), Financial Sector Governance: The Roles of The Public and Private Sectors (Washington, DC, Brookings Institution Press, 2002), 327, 328.
- K Pistor, M Raiser and S Gelfer, “Law and Finance in Transition Economies”, EBRD Working Paper No 48 (2000) 5.
- R Heinrich, “Corporate Governance: A Systemic Approach with an Application to Eastern Europe”, in EF Rosenbaum, F Bonker and H Wagener (eds), Privatization, Corporate Governance And Emergence of Markets (Basingstoke, Macmillan, 2000), 83, 84.
- See, eg E Berglöf and EL Von Thadden, “The Changing Corporate Governance Paradigm: Implications for Developing and Transition Economies”, in S Cohen and G Boyd (eds), Corporate Governance and Globalizations (Cheltenham, Edward Elgar Press, 2000), 275–76.
- An extensive list and full-text copies of the codes are available at http://www.ecgi.org/codes/all_codes.php, accessed on 16 September 2004.
- Note that the Czech and Polish codes were reviewed and amended in 2004 and 2005, respectively.
- See M Becht, P Bolton and A Roell, “Corporate Governance and Control”, ECGI Finance Working Paper No 02/2002 (2002), 66–67.
- See, eg the Polish, Czech and Slovenian codes.
- Dzierzanowski and Tamowicz, supra n 4, 285.
- BR Cheffins, Company Law: Theory, Structure and Operation (Oxford, Clarendon Press, 1997), 364.
- ibid, 365.
- ibid, 365.
- Compare with the German code that was adopted by a government commission appointed by the German Justice Minister.
- See the Czech code, draft 2001, 3 and the Slovakian code, 5.
- See Dzierzanowski and Tamowicz, supra n 4, 297.
- In the UK, on the other hand, the Combined Code is nowadays well incorporated into the regulatory system of corporate governance via means of enforcement mechanisms. Listed companies that depart from the Combined Code provisions without disclosing this fact breach the UK Listing Rules, which have the status of subordinate legislation. UK Listing Rules are managed by the UK Listing Authority, a body created by the government, acting pursuant to a legislative mandate and authorised by legislation to impose sanctions if listed companies breach the Listing Rules (see Financial and Services and Markets Act 2000, ss 1 and 2, and pt VI as well as Listing Rules, ch 1).
- It is important to bear in mind, however, that the comply or explain system cannot be equated with self-regulation, nor its inherent part. It is a somewhat recent invention, having only been in existence in the UK from 1992.
- It has to be noted, however, that compliance with the Code provisions is nevertheless expected for most of the time (Preamble of the Combined Code, para 5).
- See, eg the Polish, Czech, Slovakian, Romanian and Slovenian codes.
- In adopting the comply or explain approach, CEE countries have also been influenced by EU recommendations. The Commission recommends that each member state should adopt one corporate governance code and that publicly quoted companies should disclose non-compliance with code provisions (Communication from the Commission to the Council and the European Parliament, “Modernizing Company Law and Enhancing Corporate Governance in the European Union—A Plan to Move Forward”, Brussels, 21 May 2003, 16–17).
- See, eg Cadbury Report (1992), para 3.15, Higgs Report (2003), para 16.5 and Preamble of the Combined Code, para 6.
- Dzierzanowski and Tamowicz, supra n 4, 285. For advantages of self-regulatory mechanisms in general, see Cheffins, supra n 17, 378–97.
- Dzierzanowski and Tamowicz, supra n 4, 285.
- Berglöf and Pajuste, supra n 3, 299 and Jordan and Lubrano, supra n 8, 359.
- On the evidence of compliance with the UK code see Hampel Report (1998), paras 1.8. and 1.10, and Higgs Report (2003), paras 1.14 and 1.15.
- Cadbury Report (1992). Note, however, that this is the most commonly accepted definition of corporate governance, which can be defined in many ways. Perhaps the most noticeable is a distinction between a narrowly defined notion of corporate governance (so as to encompass the conventional relationship between management and shareholders only) as opposed to a more broadly defined version of corporate governance (so as to also include stakeholders such as employees, creditors and wider environment).
- Berglöf and Von Thadden, supra n 11, 278.
- For a detailed discussion on political and economic transition, see L Balcerowicz, “The Interplay Between Economic and Political Transition”, in S Zecchini (ed), Lessons from the Economic Transition: Central and Eastern Europe in The 1990s (Dordrecht, Kluwer Academic Publishers, 1997), 153.
- For an overview and classification of methods of privatisation, see WL Megginson and JM Netter, “From State to Market: A Survey of Empirical Studies on Privatization” (2001) 39 Journal of Economic Literature 321, 339–46 and G Hunya, “Large Privatisation, Restructuring and Foreign Direct Investment”, in S Zecchini (ed), Lessons from the Economic Transition: Central and Eastern Europe in The 1990s (Dordrecht, Kluwer Academic Publishers, 1997), 275, 281–86.
- On these differences, see P Aghion and W Carlin, “Restructuring Outcomes and the Evolution of Ownership Patters in Central and Eastern Europe”, in S Zecchini (ed), Lessons from the Economic Transition: Central and Eastern Europe in the 1990s (Dordrecht, Kluwer Academic Publishers, 1997), 241.
- BS Black and R Kraakman, “A Self-enforcing Model of Corporate Law” (1996) 109 Harvard Law Review 1911, 1924.
- E Berglöf, “Corporate Governance in Transition Economies: The Theory and Its Policy Implications”, in M Aoki and H Kim (eds), Corporate Governance in Transitional Economies: Insider Control and the Role of Banks (Washington, DC, The World Bank, 1995), 59, 63–64.
- Aghion and Carlin, supra n 37, 251.
- Certain countries, however, chose an outsider privatisation, thereby giving rise to a class of outsider owners. Outside privatisation was carried out in the Czech Republic by voucher privatisation and in Estonia by direct sales of state property (ibid, 251–52). In these countries, as well as in Slovakia, insider control is weaker. There, special investment privatisation funds were created specifically for the purpose of ensuring the accountability of management.
- M Dzierzanowski and P Tamowicz, “Ownership and Control of Polish Listed Corporations”, Working Paper Series, draft (Gdansk Institute for Market Economics, 2002), 7–8, available at http://www.ssrn.com, accessed on 15 July 2004.
- See R Frydman, K Pistor and A Rapaczynski, “Investing in Insider-dominated Firms: A Study of Russian Voucher Privatization Funds”, in R Frydman, CW Gray and A Rapaczynski (eds), Corporate Governance in Central Europe and Russia, Volume 1. Banks, Funds, and Foreign Investors (Budapest, Central European University Press, 1996), 187, 190, and W Carlin, “Empirical Analysis of Corporate Governance in Transition”, in EF Rosenbaum, F Bonker and H Wagener (eds), Privatization, Corporate Governance and Emergence of Markets (Basingstoke, Macmillan, 2000), 98, 112.
- See M Simoneti and A Gregoric, “Managerial Ownership and Corporate Performance in Slovenian Post-privatisation Period” (2004) 1 The European Journal of Comparative Economics, 217–18.
- Dzierzanowski and Tamowicz, supra n 42, 8.
- Nowadays, however, most transition countries have an obligatory block-holding disclosure threshold (usually at 5%) as well as the mandatory bid rule (Berglöf and Pajuste, supra n 3, 286 and 293).
- ibid, 295.
- ibid, 279.
- Dzierzanowski and Tamowicz, supra n 42, 8–9.
- For concentration trends in privatised companies, see Megginson and Netter, supra n 36, 379. For ownership concentration in European countries, see F Barca and M Becht (eds), The Control of Corporate Europe (Oxford University Press, 2001).
- Pistor et al, supra n 9, 1.
- A Berle and G Means, The Modern Corporation and Private Property (New York, Harcourt, Brace & World Inc, 1932).
- See supra n 45 and accompanying text.
- Berglöf and Pajuste, supra n 3, 295.
- ibid, 296–97.
- ibid, 267.
- K Gugler, “Conclusion and Policy Implications”, in K Gugler (ed), Corporate Governance and Economic Performance (Oxford University Press, 2001), 201, 202.
- Dzierzanowski and Tamowicz, supra n 4, 276.
- See, eg Becht et al, supra n 14, 112.
- Dzierzanowski and Tamowicz, supra n 4, 286.
- A Bhide, “The Hidden Costs of Stock Market Liquidity” (1993) 34 Journal of Financial Economics 31–33 and 43.
- R Levine, “Financial Development and Economic Growth: Views and Agenda” (1997) 35 Journal of Economic Literature 688, 692.
- Berglöf and Pajuste, supra n 3, 299.
- K Pistor, “Standardization of Law and Its Effect on Developing Economies” (2002) 50 American Journal of Comparative Law 97, 112.
- See supra n 32.
- Berglöf and Pajuste, supra n 3, 298.
- ibid, 297.
- Berglöf and Von Thadden, supra n 11, 296.
- Berglöf and Pajuste, supra n 3, 269–70 and 295.
- MJ Roe, Political Determinants of Corporate Governance (Oxford University Press, 2003), 106.
- Dzierzanowski and Tamowicz, supra n 4, 296.
- Berglöf and Von Thadden, supra n 11, 297.
- Berglöf and Pajuste, supra n 3, 298.
- Note that the EU Commission has expressly recognised that a self-regulatory approach based only on non-binding recommendations is not sufficient to ensure the adherence to good corporate governance practices. See Communication from the Commission, supra n 27, 12.
- Berglöf and Pajuste, supra n 3, 298.
- Jordan and Lubrano, supra n 8, 363.
- Supra n 1, 13.
- See supra n 23.
Journal of Corporate Law Studies
Volume 5, 2005 - Issue 2