Koszalin Institute
of Comparative European Studies (KICES)

ul. Zielona 13/1
75664 Koszalin
 
Poland

info@kices.org
www.kices.org

An International Comparison of Corporate Governance
Researcher responsible: Dr Andreas Heinrich
Duration: 2005 - 2009

Research questions and analytical framework

Globalisation in general and the enlargement of the European Union (EU) in particular have fostered the adaptation of and the harmonisation towards international standards and norms throughout central and eastern Europe.

The intended international and interdisciplinary research project analyses the development of a western-oriented business culture in the post-socialist countries of central and eastern Europe. The aspect of corporate governance, seen here as the way an enterprise behaves towards its owners (shareholder approach), will serve as an indicator for this western-oriented business culture. Corporate governance is analysed on both the country and the company levels. Using the shareholder approach this project focuses on the common minimum standards of corporate governance as they have been defined e.g. in the OECD corporate governance standards. These minimum standards can be found in all four western corporate governance models commonly identified in the literature. In this context, it will be analysed on which of these models the countries and companies under review orient themselves.

In the socialist system, there was no need for corporate governance in the sense of the shareholder approach, as all bigger companies were state-owned and -controlled. Therefore, no corporate governance regulations were in place when the socialist system disappeared, nor were there state agencies capable of controlling private companies.

However, establishing western-oriented corporate governance standards from scratch and changing business behaviour have proven difficult due to socialist legacies. These legacies - in combination with cultural and historical differences between the countries under review - make a simple mergence of business behaviour in ”East” and ”West” quite unlikely. Even among the different central and eastern European countries under review their willingness and ability to adapt international corporate governance standards has varied significantly.

The proposed project is investigating how international corporate governance standards emerge in central and eastern Europe and how they are adapted or refused by the countries and companies under review. It also aims to identify the explaining variables for this development by analysing the factors which influence the corporate governance development in central and eastern Europe. The project would like to raise the question if and to what extent the post-socialist countries (and companies) in central and eastern Europe are able to adapt and harmonise their systems to integrate them into the international framework of corporate governance standards.

The project aims to examine about 500 large industrial enterprises in nine post-socialist countries (Bulgaria, Czech Republic, Lithuania, Hungary, Poland, Russia, Slovakia, Slovenia and Ukraine). In order to have been selected for analysis, companies had to be at least partly privatised and fall into one of the following industrial sectors: oil and gas, mining and metals, automobile manufacture, machine building, chemicals and foodstuffs.

There is already a considerable body of literature on the corporate governance of post-socialist companies. However, the majority of analyses treatments is mostly descriptive and focuses only on single aspects of corporate governance in post-socialist countries, such as ownership structure, legal regulations, business culture or global factors. Accordingly, a real comparative dimension is mostly lacking as is a comprehensive analytical framework to explain corporate governance performance in post-socialist countries.

The proposed research project develops a comprehensive framework to explain corporate governance improvements in post-socialist countries with a small number of explaining variables in order to allow for quantitative tests between different companies and across several countries.

Research on this topic could help to assess a number of important developments. First, it would represent a vital indicator for the real adoption of international corporate governance standards at the company level, resulting in corporate governance improvements, as opposed to a merely formal adaptation or harmonisation at the country level which does not necessarily result in any improvements at the company level. Second, it would offer a new perspective on how corporate governance can be improved and what type of influence international organisations can exert. Third, it might help to understand the persistence of socialist and country-specific legacies and provide hints on how to include these legacies in an overall improvement of corporate governance performance in the countries under review. Therefore, the project can provide new insights into the variety and heterogeneity of institutional settings in Europe, thereby, enabling a better comprehension of the foundations and requirements of current endeavours to enlarge the EU.

The proposed research project uses an inter-disciplinary approach; in a first step, western corporate governance models with a focus on common aspects will be summarised as a reference point for further research. Simultaneously, the situation in the countries under review is analysed with emphasis on their socialist legacy, privatisation efforts and development and implementation of corporate governance regulations. In the next step, the project identifies ways of adaptation and innovation of business behaviour on the company level, conducted through case studies. Finally, the major hypotheses are tested through quantitative research. Five indices have already been developed for that purpose.

In order to conduct a systematic comparison between different companies and across countries, corporate governance performance will be measured with the help of an index which comprises all its relevant aspects according to the shareholder approach. It consists of the following indicators: disclosure of financial information, transparency of ownership structure, management and supervisory board structure, dividend payments, and corporate violation of shareholders’ rights.

The planned project assumes that there are four factors which can influence corporate governance performance: (1) pressure from majority shareholders, (2) pressure from outside minority shareholders, (3) pressure resulting from internationalisation/ globalisation and (4) pressure exerted by the state in the form of legal regulation.

Progress report

The project began in late 2005. External funding was applied for in 2006 in order to continue the project until 2009.

In the first project phase, an analytical framework has been developed and methodological questions have been resolved. Additionally, the research team is acquiring national and international co-operating partners to conduct the project.

Publications

Globale Einflußfaktoren auf das Unternehmensverhalten. Die corporate governance des russischen Erdöl und Erdgassektors [Global influences on enterprise behaviour: the corporate governance of the Russian oil and gas sector].
Münster: Lit-Verlag 2004 (Osteuropa: Geschichte, Wirtschaft, Politik, Band 36).

Der Einfluß der Globalisierung auf die Corporate Governance des russischen Erdöl- und Erdgassektors [The Influence of Globalisation on the Corporate Governance in the Russian Oil and Gas Sector].
In: Krylov, Alexander (Ed.) Korporativnoe upravlenie kak faktor konkurentocposobnosti na mirobom rynke/ Corporate Governance als Erfolgsfaktor im internationalen Wettbewerb. Moscow: Izdatel’stvo Natsional’nogo instituta biznesa
2004, pp. 57-59.

“Going global. Internationalisierung und corporate governance in der russischen Erdöl- und Erdgaswirtschaft” [Going Global: Internationalization and Corporate Governance in the Russian Oil and Gas Sector].
In: Russlandanalysen http://www.russlandanalysen.de, 28/2004, pp. 7-8.

Globalisation and corporate governance in the Russian oil and gas sector.
Paper presented at the conference “Corporate Governance als Erfolgsfaktor im internationalen Wettbewerb”, Moscow, Russia, 14-15 September 2004.

“Globalisierung und corporate governance. Rußlands Erdöl- und Erdgassektors” [Globalization and Corporate Governance. Russia’s Oil and Gas Sector].
In: Osteuropa, 9-10/2004, pp. 355-365.

“Why Corporate Governance in the Russian Oil and Gas Industry Is Improving.”
In: Corporate Governance: The International Journal of Business in Society 4/2005, pp.3-9.

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