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
SUMMARY

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... (see full summary)

 
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Corporate governance in state-owned companies in Hungary
1
PhD Habil, professor Tekla PAPP
2
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
23
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.
4
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.
5
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.
6
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
5
MNV Zrt .’s FVA recommendations on sup ervisory-board no.59-77, on HR criteria 13
6
To this as a summary see: Papp (ed.): „Társasági jog”, Lectum, (Szeged, 2011) pp . 249-251.

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