OECD Case Studies of Good Corporate Governance Practices OKR Corporate Governance Success Stories
We promote corporate governance for business excellence
What is corporate governance?
- Corporate Governance is a concept that sums up the set of rules and principles according to which a company is run and controlled.
- Corporate governance can be defined as the relationship of a company to its shareholders or, more broadly, to society as a whole (Financial Times, 1997).
- The corporate governance structure specifies the distribution of rights and responsibilities among the different participants in the organisation – such as the board, managers, shareholders and other stakeholders – and lays down the rules and procedures for decision-making (OECD, 1999).
- Good corporate governance ensures the long-term sustainable development of companies in the interest of all stakeholders (shareholders, employees, customers, suppliers, local communities, etc.), while poor governance can lead to bankruptcy.
- As a consequence, corporate governance refers to the board's activity and the manner in which the company is governed.
Who needs corporate governance?
- Companies become more efficient by promoting fairness, transparency and responsibilities at company level and by implementing institutional structures.
- Romanian companies need excellent corporate governance, which would help them to use, in the most efficient way, the resources available to achieve maximum results.
What is the Independent Administrator?
- According to the provisions of the Corporate Governance Code of the Bucarest Stock Exchange, the Independent Administrator is the one who fulfills the following criteria:
- Not to be the CEO/executive officer of the company or of a company controlled by it and not have been in such position for the previous five (5) years.
- Not to be an employee of the company or of a company controlled by it and not have been in such position for the previous five (5) years.
- Not to receive and not have received additional remuneration or other advantages from the company or from a company controlled by it, apart from those corresponding to the quality of non-executive director.
- Is not or has not been an employee of, or has not or had not any contractual relationship, during the previous year, with a significant shareholder of the company, controlling more than 10% of voting rights or with a company controlled by it.
- Not to have and not have had during the previous year a business or professional relationship with the company or with a company controlled by it, either directly or as a customer, partner, shareholder, member of the Board/Director, CEO/executive officer or employee of a company having such a relationship if, by its substantial character, this relationship could affect his/her objectivity.
- Not to be and not have been in the last three years the external or internal auditor or a partner or salaried associate of the current external financial or internal auditor of the company or a company controlled by it.
- Not to be a CEO/executive officer in another company where another CEO/executive officer of the company is a non-executive director.
- Not to have been a non-executive director of the company for more than twelve years.
- Not to have family ties with a person in the situations referred to at points 1 and 4.
What is the role of Independent Administrator?
- The role of the Independent Administrator is to bring a different perspective to the company's business and the environment in which it operates, in order to ensure a diversity of opinions and avoid the group thinking phenomenon.
- The Independent Administrator has a fiduciary responsibility towards the company's shareholders and an obligation to monitor the work of the company he or she represents and always act in the best interest of the company and its shareholders.
- The Independent Administrator is a professional with extensive experience in executive positions in companies, with relevant expertise for the company whose Board of Directors he/she is a member of; is a responsible person with integrity and high standards of good practice in corporate governance.
What are the benefits of appointing an Independent Administrator?
- The benefits of including an Independent Administrator on the Board of Directors are as follows:
- bringing expertise and complementary knowledge to the company,
- providing a distinct external perspective to the copany's activity and strategy,
- identifying delicate issues and offering solutions,
- balancing existing tensions by helping the Board to reach consensus,
- disciplining the discussions and bringing them more rigor,
- helping the CEO to prioritize their goals,
- providing critical analysis of management performance,
- encouraging the promotion and hiring of specialists on objective criteria.
What is the role of the Independent Directors Association?
- The Independent Directors Association aims at contribute to the increase of the professional standards of the Board members, and the development and increase in value of Romanian companies.
- The members of the Independent Directors Association are offering their professional skills to act as Independent Administrators on the Board of Directors, contributing their experience in corporate governance to increasing the companies’ values.