Responsible corporate governance in Europe

The latest European Union’s (EU) guiding policies are encouraging big businesses and state-owned organisations to provide a fair and truthful view of their respective entities’ environmental, social and governance (ESG) performance. At present, European member states are transposing directive 2014/95/EU on non-financial reporting. The EU’s “comply or explain” approach has presented a significant step forward toward the corporations’ active engagement on corporate governance disclosure and transparency. Hence, this chapter makes specific reference to some of the corporations’ best practices as it identifies areas for improvement in corporate governance issues. It explains how three major European banks have reviewed the roles and responsibilities of corporate boards and management. In many cases, they have anticipated any regulatory, legal, contractual, social and market-driven obligations as they helped stakeholders to exercise their rights. This contribution contends that there are significant implications for financial services corporations who intend following the right path toward responsible corporate governance and ethical behaviours.peer-reviewe

Institutional isomorphism and corporate social responsibility: towards a conceptual model

Purpose: The paper proposes the conceptual framework for understanding the impact of corporate social responsibility (CSR) on companies viewed as the source of institutional pressure. According to the neo-institutional approach the response to institutional change leads to the organizational isomorphism, which means that companies adopt new rules and design and in result become similar following the same managerial practice. The adoption of new designs and practice represents the case of the diffusion and institutionalization of change in formal organization structure.Methodology/approach: The study is of theoretical character. It adopts the contribution proposed by the neo-institutional theory and CSR literature.Findings: The paper ties diffusion process of different CSR modes – defensive, charitable, promotional, strategic, systemic – and strategies with three isomorphism mechanisms - mimetic, coercive and normative. Further the study outlines future research opportunities.Practical implications: We argue that the most mature CSR practice represented by systemic mode is institutionalized from within organization through normative isomorphic pressures rather than as a result of coercive power or mimetic efforts

Corporate governance in founders’ controlled companies

Ownership structure with the reference to the comparative studies worldwide, types, forms and patterns identified in companies as well as the logic behind the behavior of different owners constitutes an important theme in management studies. Research reveals the crucial importance of the ownership patterns with the reference to the shareholder identity and concentration of shares for the standards of corporate governance including control and monitoring mechanisms, transparency, board work. Corporate governance literature indicates that certain shareholder types may have impact on the adoption of pyramidal structures, dual class shares, board independence, structure of executive compensation and disclosure. This paper focuses on the specific type of listed companies which remain under the control of the founder. The goal of the paper is to identify the corporate governance mechanisms adopted by founders in listed companies with respect to the way they exert control. It investigates whether founders tend to increase the control over companies via use of ownership mechanisms adopting dual class shares and pyramidal structures and via dominating the board lowering the number of independent directors. Using the hand collected data of a sample of 100 companies listed on the Warsaw Stock Exchange the paper addresses the gap in the literature of the unique form of ownership characterized by the control of the founders (first generation) who need to confront the entrepreneurial spirit and significant dominance in management and governance in the company with the features of listed companies in which ownership and control is shared among investors.peer-reviewe

Pyramidal structures: The evidence from Poland

Background: Pyramidal structures are a specific ownership pattern adopted worldwide, which increases the power of controlling shareholder allowing for lower capital investment. Existing studies still fail to explain the reasons for their adoption in companies. Objectives: The goal was to explore pyramidal structures as a newly developing ownership pattern in an emerging market and to identify firm-level characteristics that determine their adoption. Specifically, we tested three alternative rationales – control leverage, venture and governance – which provide competitive arguments to explain the formation of pyramids. Method: Adopting a linear panel model, we examined a sample of 168 non-financial companies listed on the Warsaw Stock Exchange over the period 2010–2014. Results: The adoption of a pyramid was associated with higher ownership concentration and with lower ownership concentration by a shareholder coalition. There was also a positive relationship between the use of a pyramid and company operation within a business group as well as a smaller number of affiliated companies. We identified a positive link between the use of a pyramid and investment by financial investors. Conclusion: Pyramids serve as a tool for expansion of the business group, important in an environment of costly access to external capital because the business group enables the raising of capital and lowers the risk posed to a new firm. This confirmed the venture and governance rationales, whereas we did not find evidence for the control leverage hypothesis. Governance in a pyramid by financial entities discourages investment by portfolio-oriented financial investors

DOBRE PRAKTYKI ŁADU KORPORACYJNEGO. PERSPEKTYWA RADY NADZORCZEJ

Corporate governance best practice remains an important element to direct and organize the cooperation between shareholders and stakeholders in a listed company. The goal of the paper is to identify the perception of corporate governance best practice by board directors. For the purpose of the paper a series of interviews with 21 heavily interlocked board directors of companies listed on the Warsaw Stock Exchange were conducted. Our analysis reveals different views and opinions of the interviewees on the role of best practice on the development of corporate governance in Poland. The clarification and improvement of standards of relations between different stakeholders were viewed as the main strengths, while the low adaptability of the code guidelines of the specificity of the Polish stock market and weak compliance were noted as main shortcomings of corporate governance best practice.Key words: supervisory board, board of directors, corporate governance best practice, corporate governanceJEL: M10Dobre praktyki ładu korporacyjnego stanowią istotny element w procesie tworzenia i kształtowania zasad współpracy między poszczególnymi akcjonariuszami i interesariuszami w spółce giełdowej. Celem artykułu jest określenie sposobu postrzegania przez badanych członków rad nadzorczych dobrych praktyk ładu korporacyjnego. Dla realizacji celu badawczego przeprowadzono wywiady z 21 rozmówcami posiadającymi doświadczenia z wielu rad nadzorczych polskich spółek notowanych na GPW w Warszawie. Analiza wyników badań wskazuje, że badani członkowie rad w dużym stopniu postrzegali pozytywnie dobre praktyki ładu korporacyjnego. Do kluczowych korzyści wynikających z ich obecności zaliczyli m.in. uporządkowanie i ucywilizowanie relacji między kluczowymi organami w spółce, jak również wzrost przejrzystości jej działania. Za słabości uznali natomiast brak dopasowania tych zasad do potrzeb polskich spółek, jak również sposób ich podejścia do zasad.Słowa kluczowe: rada nadzorcza, dobre praktyki ładu korporacyjnego, nadzór korporacyjny/ład korporacyjn

Do financial investors mitigate agency problems? Evidence from an emerging market

Purpose: The paper aims to identify the monitoring effect by financial investors and their potential role to mitigate agency costs resulting from concentrated and dispersed ownership. Design/Methodology/Approach: Using the sample of 440 companies from the Warsaw Stock Exchange listed in 2010-2014, we examine whether financial investors may mitigate the agency problems of dispersed and concentrated ownership. Findings: We observe that ownership by financial investors is positively correlated with company value. Adding to the debate on the monitoring role of financial investors, we note that investments by control-oriented institutions and portfolio-oriented investors are correlated with higher Tobin’s Q. Practical implications: The results indicate the positive effect of the monitoring by financial investors, which can offset some limitations of insufficient investor protection in emerging markets. Originality: The study is based on a unique sample of companies listed on the Warsaw Stock Exchange, distinguishing between control-oriented and portfolio-oriented financial investors.peer-reviewe

Integrated Reporting Narratives:The Case of an Industry Leader

In this paper, we investigate the integrated reporting practice of the second-largest Polish petroleum company. Using the qualitative research method of narrative analysis, the paper draws upon the practice of integrated reporting by the domestic and sector leader, the second-largest Polish petroleum company, LOTOS Group. By analyzing the content of integrated reports for the years 2006–2015, alongside the main actors and themes involved, we distinguish three main narrative strategies, including: legitimacy, shareholder-agency, and signaling. In addition, we reveal the evolutionary transition of integrated reporting and identify its phase of development. Reporting appears to be conjoined rather than integrated. The study’s results imply that the implementation of integrated reporting may be limited by its insufficient institutionalization in the organizational context and the lack of recognized standards

Using Internet for creating investor relations

The article presents the opportunities offered by the use of Internet for creating investor relations, whose development, that can be noticed in recent years, has been juxtaposed with the changes at capital markets, particularly in the area of corporate governance. The meaning of investor relations was compared with the requirements binding in Poland and was illustrated by the practices of the WSE listed companies. The first part of the paper discusses the investor relations and points to their functions, tasks and the role in corporate governance system. The benefits from using Internet for creating investor relations in order to improve the transparency of listed companies and to increase the activity of shareholders were described in the second part of the article. Finally, in the third part the author presents the practices of selected Polish WSE listed companies in the context of using websites for creating investor relations