Concept and basic principles of corporate governance

The functioning of the company depends not only on the chosen strategy, but also on the availability of resources and markets for products. Moreover, the success of business development is not conceivable without access to investment capital. It is justifiable that investors do not plan to invest their finances where there are no effective levers of management and audit, called corporate. Therefore, it is important to understand what it is.

This article presents the concept and basic principles of corporate governance in modern companies. This term refers to a complex process in which one person cannot fulfill all managerial roles at the same time. There should be several such people. They have their own defined framework of responsibility. To regulate the relationship between these people created the principles of corporate governance in order to improve management efficiency.

Essence

In the broadest sense, corporate governance is the principles and norms related to the generally accepted management of the organization.

Corporate governance can also be understood as initiatives, development and implementation of the rules (principles) of best management practices in organizations of the private and public sectors.

The concept of corporate governance refers to a specific organization (in particular, to a company) and includes individual rules of management and control, as well as relations between founders (including shareholders) in terms of participation in this organization.

In a broad sense, corporate governance refers to the processes by which organizations are guided, regulated and accounted for.

The following definitions are popular:

• it is a system through which companies are managed and controlled;
• corporate governance defines methods that provide companies' capital providers with confidence in the return on investment.

The difference from conventional management

Corporate governance is often identified with company management. These concepts are different. Company management - the activities of managers and managers engaged in ongoing work and the implementation of goals.

Corporate governance is a broader concept. It represents the initial cooperation of stakeholders in all the qualities of the company. Its goal is to create mechanisms to ensure the solidarity of interests of all those involved in corporate relations. This is the highest, even a kind of political level, than the daily leadership. Two concepts intersect, mainly in the field of company development tactics, since this issue is directly related to the work of the senior management of the corporation. It is important.

OECD Corporate Governance Principles

They represent a set of requirements for the institutional, legal and regulatory aspects of the activities of the governing bodies of companies, as well as practical recommendations for their application.

These principles define the corporate management system as the delineation of rights and responsibilities between all components of the corporate structure of the company: the board, managerial positions, shareholders and other persons. The same principles define the rules and decision-making procedures in management. Due to the principles of corporate governance, a whole system of goals and objectives of the company is formed. Means of implementing the planned plans are also determined, the results are monitored and controlled.

Among the key principles of OECD corporate governance are:

• Management structure - is obliged to protect the existing pava of shareholders and founders. It should ensure equal treatment of shareholders. Each of them should be protected and have the right to effectively defend interests in case of their violation.
• The legal structure should recognize the rights of interested parties by law, encourage active cooperation between corporations and interested parties in creating jobs and wealth, and ensuring financial stability.
• The information structure should ensure disclosure of data on all important and significant issues regarding the corporation: financial indicators, operating results, management fundamentals.
• The supervisory structure should provide strategic management of the company, supervision of management, accountability to shareholders.

Systematization

The basic principles of corporate governance are more clearly presented in the table below. So it will be more convenient for you to figure it out.

Code: concept, characteristic

The Corporate Governance Code (CCU) is usually understood as a set of norms and standards voluntarily adopted by corporate associations that establish and regulate the process of corporate relations.

KKU is a set of general principles and advice on the implementation of the relations under study. Similar codes of corporate governance and the principles underlying them can be developed at two levels: the country as a whole, at the level of one company.

In the first case, they are of a state nature, and in the second they act as a local legislative act.

KKU themselves are not mandatory and are in the format of recommendations. But some information on compliance with the provisions set forth in them may be included in the requirements for mandatory disclosure in the annual report of companies.

English codes

The issues of construction and principles of corporate governance, which are determined by business practice, are usually called professional self-regulation. Responsibility for their formation and development lies with the local business level.

England's more popular corporate governance development is presented in the table below.

The Cadbury Report (1992) aims to increase the reliability and quality of data and information that companies provide to stockholders and other interested groups.

A report by Greenbury (1995) addresses issues that have been related to the remuneration of corporate executives.

A report by Hampel (1998) focuses on the positive changes that may result from an increase in the productivity of the corporate management system in the company. Attention is paid to the organization of annual meetings of shareholders, the work of managers, their remuneration and relations with shareholders.

In addition, issues of audit (internal and external) are considered.

The United Code of England was listed in 1998 by the English Stock Exchange. Its implementation has become a mandatory requirement for those companies whose shares were located on the stock exchange. The main principles of corporate governance covered by this document were:

• organization and activities of the board of leaders;
• relations with owners and investors;
• audit, reporting and audit.

German Management Code

This country has developed its own QCF. It contains a number of conditions that must be observed for all municipal companies. His main task was the desire to ensure the certainty and transparency of the state system, as one of the tools that ensure the growth of stakeholder confidence in corporations.

He emphasizes the need to adhere to the two-tier structure of the supreme bodies, which should include a board of leaders and a supervisory board.

Part of the Code is specifically devoted to these elements, as well as issues related to the organization and nature of cooperation between corporations and their shareholders.

Russian code

In Russia, the practice and basic principles of corporate governance are still in their infancy. At the state level, two points can be distinguished:

• 2001 Code;
• 2014 Codex.

Initially, they were prepared under the direction of the Federal Commission for the Securities Market in 2001. Thirteen years later, in 2014, the Central Bank of the Russian Federation issued a new Code, which practically replaced the previous one. It reflects provisions on the rights of shareholders, the role of management boards, and remuneration policies.

To a significant extent, it complies with the OECD concept and principles of corporate governance. It takes into account arbitration experience.

According to this Russian code, the principles of corporate governance include:

• the equality of all shareholders and the formation of criteria in order to fulfill their rights;
• building productive work of the Board of Directors;
• the construction of remuneration systems for members of governing bodies and main managing corporate structures;
• creation of control procedures, risk management system;
• ensuring the highest degree of disclosure of significant information about the company and organizations that are under its control, as well as about their internal policies;
• conducting important corporate events.

Path to the result

The following principles of effective corporate finance management can be distinguished:

• transparency;
• disclosure of monetary and other information about the company;
• the presence of internal control over the activities of managers;
• protection of the rights and interests of all shareholders;
• development of company tactics.

The importance of corporate management can be evaluated from various points of view. Well-managed companies achieve great results in the long run, it is easier for them to access capital. Highest management standards reduce investment dangers. This is due to the presence of highly paid highly qualified managers in such corporations.

For an investor, this is a prerequisite for providing capital at a lower cost. Well-established corporate governance companies provide increased resources for stockholders, employees and the state as a whole. They also contribute to economic growth. Note the basic principles of effective corporate finance management, contributing to the productivity of the system:

1. The presence of well-defined strategic guidelines. Innovations in production, marketing, and resource management should be determined by a desire to overtake rivals and prevent the loss of market positions. At the same time, it’s important to constantly ensure that the financial effect of innovations exceeds the costs of their implementation.
2. Minimization of management costs. In a situation where management costs are higher than a positive result, the question should be raised about restructuring the entire management system or some of its links.
3. Improving the internal structure.
4. Institutional Nuances. Development of a regulatory framework. This factor relates to the state. For the progress of financial systems that meet interstate standards, it is necessary to create technological and financial institutions that take into account international and Russian experience in commercial activities. An innovation policy is also needed.

Corporate Finance Management Fundamentals

They are as follows:

1. Increasing company performance. Corporate management creates business processes more optimal, provides strict reporting by managers at various levels, reduces dangers, reduces serious costs. The construction of an accurate corporate management system allows us to prevent expensive litigation in court arising between the parties to the relationship due to inconsistency of interests, corruption, obscure transactions and more.
2. Simplification of procedures for access to capital markets. Companies with successful management experience have aroused greater investor confidence. Here transparency is also fundamental: having data on the work of the company, financiers have the opportunity to assess prospects and dangers. This increases loyalty, even if the open data is negative, as the unknown is sharply reduced. The amount of attracted investments and capitalization are specific indicators of the financial performance of the company.
3. Lowering the cost of raising capital, increasing the price of company assets. Successful corporate management not only helps to increase investment activity, but also allows you to get borrowed capital on more profitable terms (lower interest rates, increase the terms of return, etc.).

As a result, corporate governance creates the principles of openness, transparency and integrity of the company as mandatory elements. They can be summarized as follows, as reflected in the table below.

The principles of corporate finance management are key elements of the studied system as a whole, which are constantly developing and changing depending on the external environment.

Application problems in Russia

The basic principles of corporate finance management in Russia have a number of problematic aspects of their application and implementation. Among them:

• ownership and management are combined in one person;
• mechanisms for controlling the activities of companies are weakened;
• low transparency of operations by the company, the complexity of information disclosure;
• the use of illegal methods of work.

Almost all companies are not profitable to increase transparency, as this makes them vulnerable to regulatory authorities and security forces. A developed system of corruption retains the risk for shareholders to lose property through the intervention of public servants. There is a big difference between the standard of living of wealthy citizens and people with low incomes, as a result of this, the difference in values ​​and attitude to the goals of the company.

Another acute problem is the lack of experienced managers and managers. In practice, company management is often carried out by shareholders who can act virtually uncontrollably, make transactions in their own personal interests, and reduce the amount of work with subordinates.

Based on the foregoing, we can conclude that there is no perfect model of corporate governance principles in general, and in the Russian Federation in particular. However, there is a tendency to strengthen this system and understanding of its significance in society. Of course, the development of corporate governance is based on international experience. Its final strengthening requires the participation of executive and regulatory bodies, the judicial and tax systems, as well as companies interested in the existence of the Russian model. The proper application of the OECD principles covers the sphere of corporate governance in Russia with the aim of improving it and bringing it to a global level.

Conclusion

The modern market is an investment market. Without such resources, no organization can develop. , . . , . , . .

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