Formation of corporate governance in Ukraine

Formation of corporate governance in Ukraine

01.02.2017 Analytics

According to the State Statistics Service on January 1, 2017 it is registered in Ukraine 15 206 join – stock companies, among them there are 3 122 public companies.

Despite the 25-year anniversary of the Ukrainian state, the national business has only recently started to rethink management system and effective implementation of global corporate governance practices. However, this phenomenon in Ukraine is so young that not everyone understands that the creation of corporations is not identical to the emergence of an effective corporate governance system.

Corporate governance is a system of rules, methods and procedures by which management of the company takes place and the system of relationships between all interested parties of the corporation. The aim of good corporate governance should be the achievement of an optimal balance of interests of all stakeholders: shareholders, management, customers, suppliers, financiers, government and society. Corporate governance covers almost all areas – from the action plans and internal controls to assess the effectiveness of the production and disclosure. The level of perfection of this system shows the investor and community the effectiveness of the company’s prospects, and hence – its capacity in the relevant market. Its same imbalance or incorrect risk assessment lead to inefficient operation of the company or reducing the period of effective activity.

How it was conceived a corporate governance

The history of Ukrainian corporatization can be divided into two periods: the pre-Soviet and post-Soviet. In the largest cities of Ukraine, which was a part of the Russian Empire, at the end of IX-th and in the first decade of the XX-th century operated large and powerful corporate enterprises and a lot of small but efficient companies. By its level of concentration of industrial production, Ukraine took one of the first places in the world. In large enterprises were employing more than 44% of all workers (in the USA – 33%). This situation contributed to the process of monopolization, which began in some sectors of the domestic economy.

Powerful syndicates had huge power plants. For example, one of these syndicates Produhol, which was founded in 1904, was combining the 18 joint-stock companies and controlled 75% of coal production in the Donetsk Basin. But exactly a century ago, well-known events that rocked the then Empire for many years has frozen the history of Ukrainian corporatization. A significant part of the business was liquidated and their property was nationalized. Joint-stock companies with state participation and its tight control preserved only in the sphere of foreign economic activity. The last attempt to form a joint-stock relations in the public sector has been carried out through the issuance of shares of the workforce and the company’s shares, according to the decree of the USSR Council of Ministers “On the issue of businesses and securities organizations the financial credit documents in October 1988.”. Given that this issue was not widespread, in 1992 it was stopped.

Formation of a new history

The recent history of corporate governance began after independence of Ukraine and the adoption of the Law of Ukraine “On Business Associations”. He defined the joint stock companies as an independent form and secured the legal basis for their establishment and functioning. But corporate relations, which were introduced at that time, were very imperfect: deprivation of the rights of “small” shareholders, multiple registers of shareholders and raider attacks. A separate major problem was the corporatization of the privatized enterprises, which was lasting for many years and proved its fairly low efficiency. In 2008, with the adoption of the Law of Ukraine “On Joint Stock Companies”, began a new stage in the history of corporatization of domestic production. This law-making instrument became the result of the struggle, diligence and extraordinary efforts of a wide range of professionals, including international.

The investigation of corporate management system, conducted by KPMG in September 2013 showed that more or less effectively formed corporate governance system actually began to appear even before the adoption of the law – in 2005. And after the adoption of it the number of companies that have begun to use such tools, jumped tenfold. In addition, in 2014 the National Commission on Securities and Stock Market approved a new version of the strategically important document – Principles of Corporate Governance. He not only codified the status and mechanisms of corporate governance provisions, but also summarized the global trends in this area, because it was established on the basis of the OECD Corporate Governance Principles. It is believed that this document summarizes the global vision of the components of effective corporate governance.

However, despite the adoption of a fairly broad regulatory framework, many problems are still to be resolved. Corporate governance in tote remained at a fairly low level. Among the most important issues and challenges for its improvement are the following:

  • a low level of protection of the rights of shareholders,
  • the problem of information disclosure and transparency issues as a whole,
  • solution of problems of corporate governance in state enterprises,
  • the gradual narrowing of the stock market volumes and an increasing reduction in the number of companies that can be listed on the stock exchange by increasing the rigidity of the requirements to these companies,
  • the absence of a mandatory standard fastening position of the Corporate Secretary,
  • inability and unwillingness to take into account the interests of corporate management, and assess the impact of stakeholders (both internal and external)
  • the lack of a balanced risk management system, and still imperfect legislation and government regulation.

The practical implementation of the system

According to the practical implementation of corporate governance, revealing on the situation that prevailed in Ukraine can serve the study of Rating Agency IBI-Rating in March-April 2016 among commercial banks in Ukraine. Research has shown (11 members), that generally increasing in regulatory requirements contributed to the improvement of corporate governance in the banking system. Despite this, not all banks are based on advanced principles of corporate governance, and many banks are performed only mandatory legal requirements in this area, and recommendations and international experience are embodied only by a few partially. It was found that the average level of compliance of banks with international and Ukrainian progressive principles of corporate governance and implementation of the experience of innovation in this field is quite low and indicates a significant risk of the shareholders, investors and stakeholders.

In general, the positive is that the percentage of companies that have successfully implemented the corporate governance system is steadily increasing. Even before the mandatory fixing the position of Corporate Secretary / Director, many companies introduced such a position as the mandatory. The rating agency IBI-Rating in 2016 conducted a study in which it was analized the corporate governance performance of 55 companies whose shares are traded on the international and Ukrainian stock exchanges: 12 companies whose shares are traded on international stock exchanges, and 43 companies whose shares are traded on the Ukrainian stock exchanges. According to the survey it were identified their ratings on the level of corporate governance.

Among the companies whose shares are traded on international markets, in the top five rated were: ASTARTA HOLDING N.V, KERNEL HOLDING S.A., Industrial Milk Company, Ovostar Union, Cadogan Petroleum.

Among the companies whose shares are traded on the Ukrainian platforms, the top five includes: Ukrtelecom, Halnaftohaz, Farmak, Kyivenerho, Centrenerho.

Now the state is lobbying for the adoption of the Law “On corporate governance”, which must reform, and de facto – introduce a system of good corporate governance in all kinds of national enterprises.

Other articles

  • Investment in industrial solar power plants fell significantly in 2020
    News

    Investment in industrial solar power plants fell significantly in 2020

    Company representatives, who engaged in the design, construction and equipment for solar power plants, note a significant decline in demand for their services. This is due to instability of the industry and growing debts for “green” electricity. “We are talking about 1260 MW of RES generation that has been launched in the first three quarters […]

  • Musk promises that the Tesla plant near Berlin will become the world’s largest battery manufacturer
    News

    Musk promises that the Tesla plant near Berlin will become the world’s largest battery manufacturer

    Tesla CEO Elon Musk wants to turn the Tesla plant near Berlin into the world’s largest factory for the production of batteries for electric vehicles. The businessman stated this on Tuesday, November 24, speaking via video link at the European Conference of Battery Manufacturers. The plant near Berlin will be one of a kind as […]

  • Tesla’s value rose above $ 500 billion
    News

    Tesla’s value rose above $ 500 billion

    Shares of US electric car manufacturer Tesla continue to rise sharply amid news of the company’s future accession to the S&P index. On Tuesday, November 24, the market value of Elon Musk’s company crossed the $ 500 billion mark for the first time. Tesla shares are said to have risen nearly 550 percent this year, […]

  • The Dow Jones index exceeded 30,000 points for the first time in history
    News

    The Dow Jones index exceeded 30,000 points for the first time in history

    The Dow Jones and S&P 500 stocks hit record highs on Tuesday, November 24 amid official news of the transfer of power in the United States and progress in the development of coronavirus vaccines. In particular, the Dow Jones industrial index rose by 1.5% and for the first time in history exceeded 30,000 points. According […]

  • The largest coffee manufacturer Strauss Group has opened a distribution center in Kyiv
    News

    The largest coffee manufacturer Strauss Group has opened a distribution center in Kyiv

    The international company Strauss Group is one of the largest coffee manufacturers in the world. They put into operation a warehouse and distribution center on the street in the third quarter of 2020. It’s located on Novopyrohivska str, 56a in the Holosiivskyi district of Kyiv. “An innovative distribution center opened in Ukraine in the third […]

  • WHO has announced a new record weekly increase in COVID-19 cases
    News

    WHO has announced a new record weekly increase in COVID-19 cases

    Last week, from November 16 to 22, more than 4 million people in the world became infected with the new type of coronavirus, which is a record number since the beginning of the pandemic. This was announced on Tuesday, November 24, the press service of the World Health Organization. According to the WHO, in these […]

  • The second power unit was connected at Zaporizhzhya NPP
    News

    The second power unit was connected at Zaporizhzhya NPP

    Zaporizhzhya NPP connected Unit №2 to the power system of Ukraine. This was reported by the press service of NNEGC Energoatom. “On November 22 at 9:07 pm, after the completion of the average planned and preventive repairs, Unit №2 of Zaporizhzhya NPP is connected to the power system. Power is being set. There are no […]

  • IBM makes two cloud acquisitions a week: TruQua and Instana
    News

    IBM makes two cloud acquisitions a week: TruQua and Instana

    This week, IBM announced two acquisitions in the field of cloud computing: financial and analytical IT company TruQua Enterprises and software company Instana. The financial terms of the two agreements were not disclosed. On Monday, IBM announced the acquisition of TruQua, which provides SAP solutions to Fortune 500 companies. SAP is one of the world’s […]

Read also

Formation of corporate governance in Ukraine
News

Ukrainian IT-company GOS Systems enters the world market

In 2015, the Ukrainian IT – industry has proved to be one of the most profitable invested by the West. Despite the difficult economic and political processes in the country, the domestic business is developing and coming out to the world market. Recently, the domestic company GOS Systems reported that it launches the project in […]

Next
Formation of corporate governance in Ukraine
News

PwC provides the USEP Ukrposhta audit

According to Interfax-Ukraine, PricewaterhouseCoopers (PwC) has won the tender for carrying out USEP Ukrposhta financial and economic activities audit for 2015-2016 in the amount of 5, 79 million UAH. The press-service of USEP Ukrposhta admitted: “Within corporatisation process in USEP Ukrposhta, it is necessary evaluating a property and own property rights for forming of the […]

Next
Formation of corporate governance in Ukraine
News

Ministry of Economic Development of Ukraine said about the attempt of the forcible takeover of the “Electrotyazhmash” Kharkov plant

Ministry of Economic Development of Ukraine considers as  unacceptable any use of force in the enterprise and expresses its intention to be protected within the framework of the law. Ministry of Economic Development has announced an attempt to raider seizure of state enterprise “Electrotyazhmash” plant”(Kharkiv). This was reported by the press service of the Office. […]

Next
Formation of corporate governance in Ukraine
News

USA company invests $ 100 million in the Yuzhnyi sea port

The American company Cargill invests $ 100 million in the construction of a grain terminal in the Ukrainian Yuzhnyi sea port (Odessa region). This was announced by the Prime Minister, Arseniy Yatsenyuk at the signing ceremony of the investment agreement, which took place on Wednesday in the Cabinet of Ministers. “It’s been 7 months, and […]

Next
Formation of corporate governance in Ukraine
News

“Agroprosperis” invested about $ 50 million in the elevator business

During the past 5 years was invested about $ 10 million per year in the construction and modernization of the elevators of “Agroprosperis”. This was told by the CEO of the NCH Agribusiness Investment Fund – “Agroprosperis” Group of companies, Igor Osmachko in an interview to the Liga.Business. “For the moment, the structure of the […]

Next
Formation of corporate governance in Ukraine
News

The Milk producer “Milkiland” expands its business

The “Milkiland” dairy group with assets in Ukraine, Russia and Poland completed the registration of one Polish and two Panamanian subsidiary trading companies in the first quarter 2016. According to the report of the group on the site of the Warsaw Stock Exchange, in Poland was registered UA TRADE Sp.zo.o., in Panama – Newholm Systems […]

Next
Formation of corporate governance in Ukraine
News

The man, who founded the Kyivstar, now owns operator Giraffe

The ex-president and founder of the largest mobile operator Kyivstar Igor Litovchenko in Ukraine became the owner of the Wireless telecom provider SmartCommunications (TM Giraffe). Ukrainian edition Liga.net informed about this, referring to the State Register of natural persons-entrepreneurs and legal entities. According to official figures, Igor Lytovchenko is the owner of the Cyprus offshore Magnilda Holdings Ltd., which owns Giraffe. As said the […]

Next
Formation of corporate governance in Ukraine
News

LNZ Group invests over 20 million UAH in the social sphere

The LNZ Grour company invested more than 25 mln. UAH in the social sphere of Shpolyansky district in Cherkasy region in 2015. In this region is concentrated the main production of the enterprise. The same amount for social needs LNZ Grour plans to invest in 2016. As said Anatoly Tkachenko, the director of Lebedinsky plant  (the […]

Next
Formation of corporate governance in Ukraine
News

Prometey invests in the reconstruction of the elevators

The Prometey agribusiness holding company reconstructs the elevators and transport infrastructure around them. The Prometey company  continues to follow the strategy of renovation and modernization of material-technical base at the expense of profit’s reinvestment. It is reported by the press service of the company. According to the message, in the 3rd  quarter of this year, […]

Next
Formation of corporate governance in Ukraine
News

The court found guilty the NBU in bankruptcy of the Ukrgazprombank

The Kyiv Administrative Court of Appeal  found guilty the National Bank of Ukraine (NBU) in bankruptcy of the Ukrgazprombank. This is stated in the judgment from  April 26 in the case N826 / 26255/15, writes UBR. The NBU actions were called “illegally inactive” by the decision. Thus, was confirmed the decision of the previous court – the District […]

Next
Formation of corporate governance in Ukraine
News

Ford opens a new center

Ford official dealer representatives in Ukraine informed that Avtovinn company had developed in Vinnytsia a new Ford affiliate dealer centre. The Vinnytsia dealer centre is the third Ford centre in Ukraine . The two others have been located in Dnepr and Kyiv. It provides the  full services from selling to Ford cars maintenance. The new […]

Next
Formation of corporate governance in Ukraine
News

Investment in industrial solar power plants fell significantly in 2020

Company representatives, who engaged in the design, construction and equipment for solar power plants, note a significant decline in demand for their services. This is due to instability of the industry and growing debts for “green” electricity. “We are talking about 1260 MW of RES generation that has been launched in the first three quarters […]

Next
Formation of corporate governance in Ukraine
News

Tesla to sign the pact with Grohmann Engineering next year

The Tesla Motors will conclude the bargain with the  Grohmann Engineering GmbH complex. The representatives of the American company which are engaged in a construction of electro cars intend to redeem 100% of  the systems European developer shares  for batteries release. They are going to  close the deal until the end of 2017. The cooperation […]

Next
Formation of corporate governance in Ukraine
News

Danish agricultural company affiliated enterprise opens a pig factory farm for 12 million euros

LLC Dan-Pharm Ukraine expects to put into operation pig factory farm on feeding  of  25 thousand hogs  in Korostensky district in the Zhytomyr region. On Tuesday, Vadim Shestakov,the First Deputy CEO of the company told journalists during the AgrarianOlympus of 2016 international congress : “We began to build it in 2014 and we have been […]

Next
Formation of corporate governance in Ukraine
News

Agrotrade extended the cooperation with the EBRD

The “Agrotrade” Company Group renegotiated long-term agreements with the European Bank for Reconstruction and Development (EBRD) for the next 5 years, – said the press service of the company. According to the report, it will be key to the success of the Group companies, to improve the investment climate in the region, economic development and […]

Next
Formation of corporate governance in Ukraine
News

Credit Agricole will pay the US government $ 99 million for aiding citizens in tax evasion

Division of a major bank in Switzerland will pay to the USA government a fine of   $ 99 million to settle the case to the complicity of American citizens in tax evasion, – reports The Wall Street Journal. In its defense, the bank’s representatives said that their establishment has never been support those who […]

Next
WP2Social Auto Publish Powered By : XYZScripts.com