Transcript Center for Competitiveness and Corporate Governance Review of the Report on the Progress of Implementation of the White Paper on CG in Bulgaria and Comparison.

Center for Competitiveness and Corporate Governance
Review of the Report
on the Progress of
Implementation of the White
Paper on CG in Bulgaria and
Comparison with Bosnia &
Herzegovina
7-Nov-15
Hard to Compare
 Two countries different in many aspects;
 Complex structure and organization of the State of
Bosnia and Herzegovina;
 Two countries are in different phases of transition;
 Unlike B&H, Bulgaria does not have two corporate
governance systems;
 Bulgaria has made an effort to actually implement
the White Paper recommendations or at least to
analyze it.
Similarities
•
Legal framework that defines corporate governance system is
relatively good and it is being continuously improved;
•
Lack of implementation and enforcement of the existing
legislation;
•
Inefficient judicial system that needs to be reformed;
•
Absence of involvement of private sector;
Institutional Framework
• Regulatory institutions with broad powers to monitor, investigate,
enforce and render fines;
• Weak investigative capacity of regulatory institutions;
• Securities Commission in Bulgaria took a leading role in creation of
legal framework for sound corporate governance;
• Capital markets small and underdeveloped with little means to impose,
monitor and enforce good corporate governance standards;
• Courts lack resources and expertise and not capable of ensuring
efficient enforcement of laws and regulations and creation of
appropriate environment for functional, efficient and reliable corporate
governance system.
Transparency and Disclosure
• International Accounting Standards (IAS) are being
gradually introduced – Accounting Law in Bulgaria
provides for full application of IAS;
• Accounting Law in FB&H in contradiction with
Accounting Standards and other legislation – Situation
in RS much better;
• No supervisory body that will set up quality standards
and properly monitor accounting and auditing
profession;
• Weak audit and accounting practices;
Transparency and Disclosure II
•Bulgarian legal framework brought up to a satisfactory standard, but
applicable only to one segment of companies;
•Indirect and beneficial ownership well defined but information about it
difficult to obtain;
•Securities Commission has not done much to enforce provisions related
to disclosure of information on the ownership structure;
•Legislation setting requirements for disclosure of significant events
much better developed in Bulgaria.
Transparency and Disclosure (B&H) III
• Information about the identity of large shareholders (over
5% or 10% of shares) is not disclosed.
• Information about management compensations is not available
• Financial reports are not easily available to shareholders and potential
investors but one can access them on request and at a price
• Financial statements do not accurately and correctly represent
companies’ financial positions and business performance.
Instead of Conclusion
Both countries faced with problems of law enforcement, efficiency and
low capacities of regulatory and self-regulatory organizations and
judiciary system;
Capital markets are still in development phase and have questionable
power (or lack of incentive) to impose, monitor and enforce standards of
good corporate governance
The new regulation imposed only to companies which shares are traded
on capital markets and their number is not large. An effort should be
made to impose these regulations to non-listed companies too.
Instead of Conclusion
Changes in legislation took place just recently and there was not enough
time to see what consequences and what impact on improvement of
corporate governance they will have in practice;
Focus should be shifted to reform of judiciary system in order to improve
implementation and law enforcement;
Build capacities of all institutions that are of significant importance for
functioning of corporate governance system;
Focus on development of capital market, increase trust of general public
and companies in its operations and make capital markets valuable
source of financing for companies
THANK YOU
Davorin Pavelic
++387 61 201 187
[email protected]