Author: Florentina Șușnea, Founder & Managing Partner, PKF Finconta
The last years have witnessed an increase in the need for transparency in the Romanian business envi-ronment. Shareholders, stakeholders and third parties have increasingly expressed their desire to in-crease, in particular, the transparency of non-financial information. These developments are partly re-flected in new EU legislation, regulations on non-financial disclosure requirements of public interest entities and the Shareholder Rights Directive.
From the perspective of the stakeholders, credible information about the governance structures, functions and processes of a company has become a major area of interest in this context. This is not just the basis for proper management and monitoring of companies (private or state), but also a strong indicator that they are exposed to a dynamic and complex environment in a rapidly evolving reality.
As a result of increasing stakeholder demand for greater transparency, management should provide information on the maturity level of governance structures, functions and processes. Governing boards should also explain the efficiency of these systems and how they respond to the expectations of stakeholders. The culture of fair governance of a business increasingly plays an important role in integrating good corporate governance into an organization.
The typical challenges faced by boards of directors and other governing bodies, as they review and address their corporate governance culture, may include:
1. Lack of transparency regarding the level of maturity of existing governance on the structures, functi-ons and processes of the company
2. Uncertainty about the adequacy of existing structures, functions, existing corporate governance pro-cesses and organizational culture, considering the size and legal quality of the organization
3. Uncertainty about the efficient and effective functioning of existing structures, functions, governance processes and organizational culture
4. The current governance structures do not meet the expectations of management, investors and other stakeholders
5. Inconsistent, incomplete or redundant processes, inefficient reporting lines and lack of corporate governance documentation
1. Improved transparency of the current maturity level of governance structures, functions and proces-ses, as well as the adequacy of the organization structure and operational effectiveness
2. Modularized approach to corporate governance entities and areas of scope, methods used and depth of analysis (identification of differences between the current and the desired state)
3. Personalized evaluation criteria that reflect international standards (OECD principles) as well as natio-nal and company regulatory requirements
4. Detailed recommendations and action plan to eliminate differences in maturity level
5. Facilitate the launch of a corporate governance dialogue with investors, customers and other stake-holders
Improving the business climate is not an option but a necessity if Romania wants to reach its competitiveness potential. The adoption of the regulatory framework and the implementation of the core elements of corporate governance are the means to this end.
As a consequence, the importance of corporate governance will need to grow in the coming years, and the process must be sustained for companies with a majority state cap, both through the legislative and executive bodies. On the other hand, unlisted companies on the Bucharest Stock Exchange (BVB) should increasingly go into the implementation of corporate governance structures, given its benefits.
The challenge for companies in Romania to be competitive on a changing market will drive them towards an effective corporate governance system if they want to attract financial and human capital.
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For more than 23 years, PKF Finconta is one of the 10 leading professional services companies in Romania. Since 2006, we are a member of PKF International Limited. PKF International is a leading international business advisory organization. The company grew consistently over the years, forming a Group of four companies: PKF Finconta, PKF Finconta Consultanta, PKF Finconta HR and Finconta Consulting SPRL, members of national professional organizations CECCAR, CAFR, CCFR, and UNPIR. We provide a wide range of business advisory and related specialist services. We have seven core areas of expertise and within these areas, we tailor our services to your business and your needs: audit, corporate finance, tax, bookkeeping and accounting advisory services, transfer pricing, payroll and personnel administration, and insolvency.