Romania Conference on Corporate Governance

Corporate Governance - the structures, rules, and procedures adopted by corporations to ensure effective and accountable management - is vital to ensuring the development of a competitive commercial sector in today's global economy. As the Asian economic crisis has made clear, the lack of transparency, responsible corporate boards, shareholder rights, and controls on corruption can wreak havoc on even the strongest economies.

CIPE, in cooperation with the Romanian American Enterprise Fund (RAEF), sponsored a conference in Bucharest on December 7 to explore corporate governance in Romania. The conference on "Corporate Governance: Creating Effective Controls for Growth and Investor Confidence," gathered Romanian decisionmakers, international experts, and business people. The conference was followed by a training program to review lessons learned in implementing international "best practices" discussed during the conference. Participants ended the program by drawing up a Romanian Action Plan on corporate governance.

Policy and Institutional Constraints to Corporate Governance
Panelists examined the core elements of corporate governance and constraints, including competition policy, corporate law, contract law, enforcement mechanisms, and the role of financial institutions. Dr. Marek Hessel, a business professor at Fordham University, stressed that corporate laws must be uniformly enforced. He also advocated rapid privatization, saying, "The longer the state owns the business, the worse the situation becomes." Dr. Ion Anton, President of the Romanian Center for Entrepreneurial Studies, noted that Romania has capital, but that it is not liquid or transferable.

Septimiu Stoica, President of RASDAQ, joined fellow Romanians Ion Anton and Radu Sarbur, President of the State Ownership Fund, in examining the role of financial institutions, such as stock markets and investment funds, in overall government policies.

Board Composition and Stakeholder Interests
The pros and cons of Anglo-American and German board models were reviewed by: Daniel Konigsberg of Institutional Share-holder Services; Misu Negritiou, Manager of Capital Markets and Investment Banking at ING Bank; Stere Farmache, President of the Bucharest Stock Exchange.

Farmache called for Romanian private sector leaders to change their way of thinking about business. "As long as the state is the main shareholder," he said, "it is less demanding and strict than a private shareholder...Management does not acknowledge the importance of the shareholder when it comes to business."

Best Practices for Board Leadership
This panel addressed the roles and responsibilities of the board and how its performance can be maximized. Specific areas of discussion included strategic plans, international accounting standards, corporate procurement policies, and management review and board evaluation, with special emphasis on ethical standards.

The Romanian Action Plan
Conference participants identified several key steps that would create effective controls for growth and investor confidence in Romania:

• Predictability in the legal and regulatory environment;
• A strategy for private sector development, including small and medium-sized enterprises (SMEs);
• Government accounting system must be improved;
• Laws must be uniformly enforced;
• Necessity of corporate governance training.

Implementation of the Romanian Action Plan would represent an important first step in that nation's efforts to embrace corporate governance and comply with international standards.