Vlasenko M.

Oles Honchar Dnipropetrovsk National University (Ukraine)


The Organization for Economic Co-operation and Development (OECD) defines corporate governance as «the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set and the means of attaining those objectives and monitoring performance» [1].

An effective corporate governance framework requires a number of components: rights to enable shareholders to hold companies to account; the availability of information needed to assess the performance and governance of companies; and an expectation of certain behaviours on the part of companies, promulgated either through law or codes. Since the early 1990’s, governments and regulators have relied on codes to encourage the development of best practice in how businesses are organized and how they behave [2].

Improvement of corporate governance standards was essential for the development of corporate ownership in continental Europe. Concerning European integration of Ukraine, improvement of corporate governance practices is becoming increasingly important. The quality of corporate governance, namely the rights of shareholders, dividends, transparency, corporate governance procedures, building efficient organizational structures and consideration of other factors – all this leads to an increase in equity of companies and is one of the key conditions that improves investment climate in the country and influences the efficiency of the companies.

In Ukraine, the corporate governance principles were adopted in 2003 as amended in 2008. In practice innovations associated with the introduction of corporate governance in Ukraine, can be manifested in strong and weak sides:

1) strengths: regular general meetings of shareholders, including early ones, for solving urgent problems; formation of supervisory boards and audit committees; involvement of the supervisory boards of companies that are strategically important, state representatives; using the services of external auditors and financial advisors; creation of special units responsible for dealing with shareholders, internal Regulations as for the company’s activity;

2) weaknesses: lack of independent control over the course of shareholders registration at a general meeting and poor conditions for free expression of will during the vote; non-compliance to the quantitative and qualitative composition of the Supervisory Board and the frequency of its meetings, no committees in the Supervisory Board and corporate secretary position; formal character of the Audit Committee activities; redistribution of powers in the corporation in favour of supervisory and management boards; low level of stock market infrastructure and financial instruments of capital formation; lack of internal Regulations in the key areas of joint-stock company, corporate governance code provisions on officials of the company, profit distribution, dividend policy etc. [3].

Amendments to the Law of Ukraine «On joint stock companies» for the improvement of legal regulation of joint stock companies, is an urgent matter which can solve a number of problems of corporate legislation in Ukraine by:

  1. –  creation of effective mechanisms for prosecution of the Board of directors members for the damage caused to society by their actions (or inaction), as well as for violation of rights and legitimate interests of shareholders;
  2. –  the abolition of discriminatory rules to disclose the duty of the person who has acquired a controlling stake in the result of privatization process, to repurchase shares from minority shareholders at their request;
  3. –  issuer’s obligation to implement a mandatory redemption of shares from minority shareholders who voted against the decision to commit the transaction, for which there is interest [4].

Also the accounting system of securities ownership and the procedure for dividends payment need improvement; it is necessary to change the taxation system of securities sale in the stock market; to create a favourable investment climate in the country; to restore confidence in the securities of domestic companies; to get rid of double-entry bookkeeping and to prevent the capture of a controlling stake by one shareholder.

Strengthening the regulation itself does not mean improving investor protection, as minority shareholders do not automatically get the right to protect their interests. Improving corporate governance is impossible without creating an effective system of disclosure and transparency of securities issuers whose shares must be in public circulation.

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