Corporate Governance - Enterprise Performance Assessment Tool

• Author: Nicoleta Constandache, Carmen-Mihaela Cresu, Gheorghe Chiru
• Pages: 217-234

Performance and Risks in the European Economy

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Corporate Governance - Enterprise Performance Assessment Tool

Nicoleta Constandache1, Carmen-Mihaela Crețu2, Gheorghe Chiru3

Abstract: Within an enterprise, whether pub lic or private, there are interests between managers and partners:

shareholders, creditors, employees, suppliers, customers etc. It is imperative that these interests be

harmonized because the company's performance is significantly influenced by the form of corporate

governance. Performance and sustainable growth in the long term are essential attributes of corporate

governance, which depend on concern of companies on social responsibility towards the environment,

satisfaction of shareholders, customer satisfaction, ensuring good working conditions for employees,

concerns which must be incorporated into processes of decision making. In this study, the purpose of research

is to analyze corporate governance issues and objectives involved to provide an o verview of the positive

effects generated by the implementation of its principles.

Keywords: corporate governance; corporate governance principles; enterprise performance; shareholder;

stakeholder; transparency.

JEL Classification: G30; M41

1. Introduction

Starting from expression that the company's financial performance is incomplete if it does not take

into account the risk taken to achieve such performance (Buglea, 2005, p. 282) there is another way of

management - the governance, which monitors and assesses the performance, satisfy stakeholders and

creates added value helping to maximize enterprise value. Consequently, only after studying the field

of corporate governance we can address the true value of risk management and internal audit, ensuring

performance and accountability.

Corporate governance mechanisms are relevant for large economic entities, where there is a separation

between ownership on the stakeholders and the effective administration of the business. Joint stock

companies represent specific form of legal organization of this type of arrangement. Typically, these

are listed on organized markets like stock exchanges. For small economic entities in which the

investor or a small number of investors are directly involved in company management, corporate

governance is relevant only in certain aspects, such as relations with employees, creditors. (Sitaru,

2009, p. 206).

1 Senior Lecturer, PhD, Department of Economics, Danubius University of Galati, Romania, Address: 3 Galati Blvd., Galati

800654, Romania, Tel.: +40372361102, Corresponding author: constandache.nicoleta@univ-danubius.ro

2 Associate Professor, PhD, Department of Economics, Danubius University of Galati, Romania, Address: 3 Galati Blvd.,

Galati 800654, Romania, Tel.: +40372361102, Corresponding author: carmencretu@univ-danubius.ro

3 Senior Lecturer, PhD, Department of Economics, Danubius University of Galati, Romania, Address: 3 Galati Blvd., Galati

800654, Romania, Tel.: +40372361102, Corresponding author: gheorghechiru@univ-danubius.ro

European Integration - Realities and Perspectives. Proceedings 2016

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This performance assessment tool has attracted our attention during the research and we consider that

is an area of wide interest currently. Given that the company which we intend to analyze is a company

whose securities are traded on a regulated market, as required by law, it is mandatory annual reporting

of information on corporate governance, information on enterprise business performance, financial

position, internal control and the governance code which it applies and which must contain: corporate

governance practices, explanations of principles of the code, which does not apply and the reasons

were not applied, risk management systems, the duties of the General Meeting of Shareholders,

shareholders' rights, the structure of the administrative, management and supervisory bodies.

2. Literature Review

2.1. Definition

In literature, the term “corporate governance” takes over a terminology consecrated worldwide to

denote a well-defined problematic area, related to conducting large companies in the interest and under

the control of shareholders and respecting the rights of other parties holding interests in company. This

problematic area is slightly different from the one designated by terms such as “corporate governance”

or “management” (Corporate governance in Romania - OECD 2001, p. 16).

Corporate governance can be defined by some perspectives:

 Investors' perspective - is considering the ways that investors ensure that they will receive the

expected benefits by making an investment in the enterprise;

 Perspective of business relations with third parties - can be defined as the ensemble of

relationships with its shareholders, on the one hand and society as a whole, on the other hand

(employees, government, regulatory bodies and other groups interested in the management of business

enterprise);

 Perspective of rights and responsibilities within the company – distributed for those categories

involved in decision-making (Board of Directors, Executive Management, shareholders and other

categories), such as: promoting fairness, transparency and accountability at the enterprise level;

 Perspective of law sources - Corporate governance is a set of rules under which companies are

directed and controlled, it is the result of rules, traditions and behavioral models developed by each

legal system;

 Science perspective - Corporate governance is branch of economics studying the efficiency of some

documents such as Articles of Incorporation, organizational chart, internal rules and legislative

framework, without limitation just how managers are paid by shareholders for generate dividends as a

result of investments.

Currently, the concept is used to describe the act of governing, the manner to endorse, manage, both at

the state level, global bodies and businesses (Paşcu, 2011, p. 587). At the enterprise level, corporate

governance examines the organization of power and distribution of responsibilities between

shareholders, directors and managers. Contemporary economic activities are dominated by the

internationalization of markets. This causes severe direct competition, which requires companies to

innovate constantly and to restructure. The rhythm of change and adaptation to this rhythm has

become the key the performance and survival of these entities. The stake is increasing the response