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Below
is a brief introduction to Corporate Governance
by Dr. Demir Yener, senior financial advisor and
expert on corporate governance & corporate
finance issues.
Of
late,
corporate governance has become a central item
on the agenda of international business and development.
Especially as a result of the recent financial
crises in Asia, Russia and Latin America in the
1997-1998 period, corporate governance has become
a major issue in international development for
financial institutions and countries alike, with
implications on the development of democratic,
private sector driven market economies.
In
the wake of the recent financial crises in Asia,
the Financial Stability Forum (FSF) was established
and held its first meeting in April 1999. Its
mandate has three components:
(1)
assessing the vulnerabilities affecting the
global financial system;
(2) identifying and overseeing action
needed to address those vulnerabilities; and
(3) improving coordination and information
exchange among the various authorities responsible
for financial stability.
The Genesis of OECD Principles of Corporate Governance:
The
Finance Ministers of the G7 group of leading countries,
World Bank and IMF, the BIS, OECD, the international
regulatory bodies and senior representatives of
some Asian and European countries participated
in the FSF. One of the significant outcomes of
the Forum was the emergence of series of standards
of conduct in internationally accepted accounting
principles, corporate governance, securities markets
regulations, banking, international trade and
measures against corruption. The group decided
to strengthen corporate governance as part of
the effort to avoid costly future financial crises.
OECD
Principles of Corporate Governance, is the direct
outcome of the FSF. The IOSCO Principles and Objectives
of Securities Regulation and others are the examples
of the emerging standards of conduct to provide
a global framework of reference in the development
of financial markets
Openness,
fairness and ethical conduct
in the management of the privately or publicly
owned market institutions, and corporations characterize
transparency. Transparency
will promote the maximum participation in the
organized financial markets as well as the most
efficient market behavior. These three factors
are the fundamental qualities sought in the creation
and development of vibrant, liquid and active
financial markets, in which financial resources
are allocated into their most efficient uses.
The
Impact of the Legal Framework on Effective Corporate
Governance Practice
Numerous
scholars have attributed the strength or weakness
of corporate governance models to the differences
between the existing legal systems and traditions.
The direction and implications of economic reforms
in many countries have been shaped largely by
whether or not the legal frameworks in a given
country is based on the civil law or the common
law system.
Current Degree of Development
in Corporate Governance
The
corporate governance system in the eastern europe
and central asia region is at its early to intermediate
stages of development, depending on the country.
However, the legal and regulatory framework for
capital formation and the operation of a market
for corporate control is in a better state than
the flows of capital and practice suggests - that
is, the cup is less than half full. One of the
most important impediments to the healthy development
of the markets is in the weaknesses in regulatory
and juridical enforcement area.
This
is consistent with the fact that the regional
economies continue to be in transition from a
centralized, command economy to a decentralized,
mixed market economy. A good benchmark for the
improvement in corporate governance practice would
be the increased use of equity capital in the
private sector, reflecting the stage that the
country has reached in this transition process.
OECD Principles of Corporate Governance
: A Summary
1.
The rights of shareholders: The corporate
governance framework should protect shareholder's
rights
2.
The equitable treatment of shareholders: The
corporate governance framework should ensure the
equitable treatment of all shareholders including
minority and foreign shareholders. All shareholders
should have the opportunity to obtain effective
redress for violation of their rights.
3.
The role of stakeholders in corporate governance:
The corporate governance framework should recognize
the rights of stakeholders as established by law
and encourage active cooperation between corporations
and stakeholders in creating wealth, jobs, and
sustainability of financially sound enterprises.
4.
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, ownership and
governance of the company.
5.
The responsibilities of the board: The corporate
governance framework should ensure the strategic
guidance of the company, the effective monitoring
of management by the board, and the board's accountability
to the company and the shareholders.
For
detailed information on corporate governance,
send an e-mail to
info@tangram.com.tr
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