Corporate Governance
| Author | Dan-Alexandru Sitaru |
| Pages | 186-199 |
Dan-Alexandru Sitaru Assistant professor, Ph.D. candidate, Law Faculty, „Nicolae Titulescu” University, Bucharest (e-mail: sitaru.alexandru@yahoo.com).
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Corporate governance is a relatively new topic, but one that has quickly extended at all of the social relations levels (global, European, national, local), and most relevant in relation to enterprise activities, i.e. at the commercial legal relations level.
From a legal standpoint, such concept has recently been implemented by introducing the Law no. 441/2006 regarding the modifying and completing of the Law no. 31/1990 on trading companies as republished, this one being the first regulation created to also include the philosophy of corporate governance principles.
Its late appearance was also due to the doctrine, which has not event at the present time reached the development the international one has seen. It is fair to consider that practice was to borrow and implement the international concept, but the same has exercised very little of the potential of corporate governance at the level of Romanian trading companies, and therefore the doctrine was also not forced to answer questions that would have automatically arisen. In time, however, and as a result of the harmonisation with the European legislation, practice has started bringing up different cases. Some of them have set the basis for the legislation within the field as they reached litigation stages.
The development of the concept is however visible, and an example for such purpose would be that within a developed trading company there are also relevant the managemental concepts that involve the hiring by the founders (the principal), for the purpose of attaining their goals, of other persons (the agents), who hold management knowledge and professional skills (know-how). The main dilemma of such a relationship is represented by the fact that the manager is holding more (and more relevant) information about the business than the owner does himself, and thus he could cause significant damage when not acting for the best interest of the same. Continued monitoring of managers’ performance, and proper stimulation of the same byPage 187 shareholders were defined as part of the basic solutions for effective management. This is one step only towards a concept that seems to tend to globalisation.
As regards world literature, the analysis of the concept of corporate governance, and of the principles of the same, were intensely discussed from all standpoints, being also analysed the relations of such concept with the relevant law from the perspective of other social relations it is indissolubly related to. Principles and forms were then stated and examined, and many books were written on the manners and the sources of implementing the same, among which: Jonathan P. Charkham, “Keeping Good Company: A Study of Corporate Governance in Five Countries”, Oxford University Press, 1994; John Colley, Wallace Stettinius, Jacqueline Doyle, George Logan, “What is Corporate Governance?”, McGraw-Hill International publishing house, 2004; James Brickley, Clifford W. Smith, Jerold L. Zimmerman, “Managerial Economics & Organizational Architecture”, McGraw-Hill International publishing house, 2004 edition; Thomas Clarke, "Theories of Corporate Governance: The Philosophical Foundations of Corporate Governance", Routledge London and New York publishing house, 2004 edition; And, not in the last place, the same author’s massive work "Critical Perspectives on Business and Management”, A Series of 5 Volumes on Corporate Governance - Genesis, The Anglo-American System, The European System, The Asian System, and The Contemporary Corporate Governance, Routledge London and New York publishing house, 2004; There were also elaborated and published many articles regarding such topic, from among which we can list for example: Stijn Claessens, Simeon Djankov, Larry H.P. Lang, “Ownership and Control in East Asian Corporations”, Journal of Financial Economics, University of Rochester, no. 58/1.10.2000, pp. 81-112; Simon Johnson, Peter Boone, Alasdair Breach, Eric Friedman, “Corporate governance in the Asian financial crisis”, Journal of Financial Economics, University of Rochester no. 58/1.10.2000, pp. 141-186; Denis, D.K. and J.J. McConnell, “International Corporate Governance”, Journal of Financial and Quantitative Analysis, University of Washington – Foster School of Business, no. 38/2003, pp. 1-36; Denis D. K. and J.J. McConnell (2003), “International corporate governance”, ECGI Working Paper no. 5/2003, published with the Journal of Financial and Quantitative Analysis, no. 38, 1-36. Andrei Shleifer and Robert W. Vishny, “A Survey of Corporate Governance“, The U.S.A. Financial Journal, no. 52/1996, pp. 737-783. M. Bigelli, V. Mehrotra and R. Rau, “Expropriation, Unification, and Corporate Governance in Italy”, ECGI Working Paper no. 180 of 2007; Allison Garrett, "Themes and Variations: The Convergence of Corporate Governance Practices in Major World Markets", Denver Journal of International Law and Policy, of the 22.03.2004.
As for the Romanian law, the main study regarding the concept and the principles of corporate governance is included to Prof. Gheorghe Piperea’s work “Drept comercial” (“Commercial Law”), Editura C.H.Beck, 2008, wherein such notions are approached within the volume I.
The last decade of the just ended century marked the outlining of a particularly relevant field – corporate governance. Many studies, including reports, were made about it by groups of specialists representing major institutions – universities, stock exchanges, banks, governs etc.
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From among them, the most successful and published are the Cadbury Report, made in the United Kingdom, and the King Report, elaborated in South Africa
The Cadbury Code has set the basis for the elaboration of the Corporate Management Code of the London Stock Exchange that includes basic principles and rules for managing a company so that it is made profitable, and any discrimination between shareholders is removed.
Many such codes appeared starting with 1992; for example, strong multinational companies such as Microsoft, General Electric have adopted their own corporate management codes, and have became more and more transparent towards investors.1
Corporate governance has crystallised as an answer to the delimitation of the company management from its owners.
The firm would traditionally be managed by the owners’ family, or by members of the same. Under the conditions of the economic, managemental, technological, and scientific developments during the second half of past century there appeared the need for companies – especially large and medium-sized ones – to be managed by professional managers.
Corporate governance has within a relatively short time drawn the attention of the public mainly due to the impact it wishes to emphasise having upon the healthy development of a trading company, of a corporation, and of the society generally. However, when it comes to define such concept there may be noted that such step is not an easy one as the wide range of potential national areas it touches has led in time to the creation of different definitions meant to answer each of the areas it has found applicability in, the legal one included. As a consequence at the international level, within the doctrine, but not only there, the most suggestive definitions would briefly be the following:
Corporate governance represents the methods financial resources providers of a company use in order to make sure they shall receive the profits they expect from such investment2. The definition is directed towards an emphasis of the idea of investment, of aiming the profitableness of the same, and of taking coverage against any risks.
Another similar definition would be the one according to which corporate governance is the branch of economics that is concerned with the manner companies can become more profitable by employing institutional structures such as articles of incorporation, organisation charts, and the legislation framework. Such branch is in most cases limited to studies regarding the manner shareholders can secure and stimulate company managers so that they receive the profits they expect from their investments.3
In supporting the idea that the impact of such concept at the social level is way larger than the mere profit, Financial Times, one of the titans of economic newspapers of the world, noted in one of its issues back in 1999: Corporate governance can be defined as the assembly of the relationships a company has with its shareholders, or in a wider meaning with the society globally. Corporate governance regards promoting correctness, transparency, and responsibility at the company level4. The emphasis here is set on the interdependence between the managing and direction bodies, and those controlling the financial management within a trading company, which would limit and control each other for proper company operation purposes.
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Then, the European Economic Cooperation and Development Organisation5 establishes a general framework corporate governance is to be carried on within, deeming specific the distribution of rights and...
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