Corporate Governance and Economic Integration

Abstract

Strategic top-level of business system's structure consists usually of two different kinds of authority. The first one is based on ownership and generates the processes of governance while the other one is based on skills and competencies and, according to the contractual framework, generates the processes of management. Corporate governance is dealing with relationship of these two aspects of authority, but not isolated of stakeholder’ s interest. Significant differences of local managerial practice in many countries can not support the integration processes among their economies. International investors usually seek for friendly and stabile environment, while the differences of managerial practice can increase the risk at capital markets. The large companies usually have two boards, with different tasks, though in some countries the same person can act in both boards at the same time. The most significant differences of corporate governance practices are usually described as Continental vs. Anglo-American model, though the UN OECD Principles of Corporate Governance tend to standardize the best practice of running the corporations, especially of those that are listed on different stock exchanges. If the owners are not directly included in managerial processes they may become suspicious towards the experts who are involved in running the companies only on the contractual basis. Traditional monitoring through the process of auditing can not meet all stakeholder’ s expectation especially according to the need for getting the reliable, on-time information. In order to keep control, but avoid the interference in running the business processes, owners can establish several sub-comities as a permanent or just from time to time control. However these comities are not supposed to serve under managerial authority but they are rather to be dependent of ownership. The two lines of internal control could be established simultaneously in a company but they should not interfere each other. Even when the independent auditor expresses the approval of financial reports, all stakeholders are responsible for the business result and its communication to the all relevant parties.