Corporate governance in state-owned companies in Hungary

• Author: Tekla Papp - Ádám Auer
• Position: National University of Public Service, Faculty of Political Sciences and Public Administration Civilistic Institute, Budapest, Hungary - National University of Public Service, Faculty of Political Sciences and Public Administration Civilistic Institute, Budapest, Hungary
• Pages: 22-39

Corporate governance in state-owned companies in Hungary

1

PhD Habil, professor Tekla PAPP

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Assistant professor Ádám AUER

3

Abstrac t

At th e develo pment and to th e comprehensi on of th e regulat ion it is necessa ry to

ascerta in th at in our view, the subject of the regulatio n is th e operat ion of th e company .

The regu lation regula tes the p roblems arisin g specificall y during the course o f t he

operat ion of the company , as a n „ex ante” tool and by the avo idance o f t hat upo n the

cessatio n of t he public compa ny, any unjustified o r i nconcievab le co sts (so cial costs)

shoul d rise. As a n exa mple, th ere are the infamous earlier corporate scand als ( Enron,

Parmalat , Viven di Universal), the infringements of w hich drew cri tical social (budg et)

costs, a s they l eft behind unsettled creditors’ claims, plenty of work places go t terminated,

etc. To p revent th is, one o f t he techni ques is corporate governance , a s it focuse s on such

mechani sms during the cou rse of the operation of the company a s directio n and control.

With this, the cessa tion of the company ca n presumably be avo ided, as it is pub licly

ack nowledge d t hat the majorit y of c orporate scan dals d escend from the faul ts of

leade rship, direction a nd control. Based on the abo ve, w e may a scertain that in our

percept ion, u nder ’co rporate governa nce’ it ’s the leg al facts o r interests relevant in the

course of t he operatio n of the company wh at become regul ated in terms of corpo rate law.

Keywords: company law, busi ness law , corpo rate g overnance, stat e-owned

compan y

JEL Cla ssification: K20, K22

The phenomenon, the subject of corporate governance is one such topic on

corporate law, that has received a distinguished attention for the past decade from

professional literature and the side of policy makers. The legal definition of

corporate governance was set by the Cadbury Report in 1991 as: Corporate

governance is the system by which companies are directed and controlled. Abstract

as needed, this definition is appropriate to be applicable to define corporate

governence in all parts of the world, yet further approaches are required to the

unfolding of the content of the topic.

1

This art icle was s ubmitt ed to 6th International Conference “Persp ectives of Business Law in t he

Third M illennium”, 25 -26 November 2016, the Bucharest University of Economic Studies,

Bucharest, Romania.

2

Tekla P app - National University of Public Service, Faculty of Political Sciences and Public

Administration Civilistic Institut e, Budapest, Hungary, pap p.tekla@uni-nke.hu

3

Ádám A uer - National University of Public Service, Faculty of P olitical Sciences and Public

Administration Civilistic Institut e, Budapest, Hungary, auer.adam@uni-nke.hu

Juridical Tribune Volume 6, Issue 2, De cember 2016

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1. What is re gulated by corporate governance?

At the development and to the comprehension of the regulation it is

necessary to ascertain that in our view, the subject of the regulation is the operation

of the company. The regulation regulates the problems arising specifically during

the course of the operation of the company, as an „ex ante” tool and by the

avoidance of that upon the cessation of the public company, any unjustified or

inconcievable costs (social costs) should rise. As an example, there are the

infamous earlier corporate scandals (Enron, Parmalat, Vivendi Universal), the

infringements of which drew critical social (budget) costs, as they left behind

unsettled creditors’ claims, plenty of workplaces got terminated, etc. To prevent

this, one of the techniques is corporate governance, as it focuses on such

mechanisms during the course of the operation of the company as direction and

control. With this, the cessation of the company can presumably be avoided, as it is

publicly acknowledged that the majority of corporate scandals descend from the

faults of leadership, direction and control. Based on the above, we may ascertain

that in our perception, under ’corporate governance’ it’s the legal facts or interests

relevant in the course of the operation of the company what become regulated in

terms of corporate law.

1.1. The subject of corporate governance regulations

The first key-term generated from the above approach is which situations,

state of affairs, interests are regulated by law? Having reviewed the corporate

governance rules (codes on best practices), we may constate that such situations are

regulated by law as state of affairs, which cannot traditionally be considered as a

field of corporate law. For instance how to (technically) summon the general

assembly, what instruments should be applied for the efficient conduction of the

general assembly.

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What sort of legal powers the company should assign to the

nomination committee, how it should regulate the standing orders and daily work-

schedule of the managing directorship, what HR selection criteria should be

applied.

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None of these fields have formed the set of regulations to corporate law

before. This statement certainly needs fine adjustments made, as the set of rules on

corporate law can alter by eras and economic settlements. The continuous

expansion of the rules of responsibility in Hungary can serve as an example to the

continuous development.

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At the examination of the classical fields of regulation of

corporate law, we may claim that the rules of corporate law have covered the

categories of economic companies (numerus clausus), the foundation mechanism

(company procedure), and rules of the same branch applied to the termination as

well: especially to the procedures of liquidation and bankruptcy as linked with

4

E.g. t he Corporate Governance Recommendations [hereinafter: FVA] of the Hungarian National

Assets M anagement plc as p er recommendations no.15-33, especially 17 and 18

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MNV Zrt .’s FVA recommendations on sup ervisory-board no.59-77, on HR criteria 13

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To this as a summary see: Papp (ed.): „Társasági jog”, Lectum, (Szeged, 2011) pp . 249-251.