1999 Highlights
The major thematic priorities that dominated the
work of the Economic Program in 1999 were:
• Continuation of CSD’s efforts for the
implementation of a long-term program to promote the core
principles of corporate governance in Bulgaria. The program has
evolved through the last couple of years and the Corporate
Governance Initiative was officially launched in the beginning of
1999. Its main component was a project on “Establishing Corporate
Governance in an Emerging Market: Bulgaria”, supported by the
Center for International Private Enterprise (CIPE), Washington
D.C.
• Exploring the effects on social policy of the
implementation of the Currency Board in Bulgaria. This effort was
based on the “Social Implications of the Introduction of the
Currency Board in Bulgaria” Project, implemented with the financial
support of SOCO program of the Vienna Institute for Human
Sciences.
The major aspects of the work of the
Economic Program in 1999 could be summarized in the following
categories:
I. Facilitating the
implementation of modern corporate governance principles: Corporate
Governance Initiative for Bulgaria
The Corporate Governance Initiative
(CGI) was officially launched in April 1999. CGI is a coalition of
Bulgarian NGOs aimed at facilitating the adoption of relevant
corporate governance standards and procedures that would ensure
transparency and accountability in the economy. The coalition was
established by the Association of Industrial Capital, Association
of Voluntary Pension Funds, Center for Economic Development,
Investors’ Union, Securities Holders Association and CSD
(www.csd.bg/cgi). The activities of the CGI in the second half of
1999 were supported by CIPE and were focused on the development and
the public endorsement of a Policy Recommendation Paper on
corporate governance.
Shortly after the official launch of
the CGI, a Task Force of ten experts from state institutions and
NGOs was formed to draft the Policy Recommendation Paper.
The main objective of this document was to outline a consistent set
of policy and legislative measures (an action agenda) that would
help develop the institutional and market infrastructure of
corporate governance in Bulgaria.
The next step in the CGI process was
a Policy Workshop. Conducted on July 13 at CSD, it brought
together approximately 50 participants at expert level (members of
the CGI Steering Committee, the CGI Task Force, Bulgarian and
foreign experts, and representatives of state and international
institutions). The main function of the Policy Workshop was to
solicit expert comments and suggestions on the corporate governance
development agenda and consider the specific viewpoints of the
major stakeholders. The draft Policy Paper was presented by
Professor Bistra Boeva, Member of the Bulgarian National Securities
Commission and Head of the CGI Task Force. Workshop participants
made a lot of suggestions focused on the issue of guaranteeing
equal treatment to all shareholders, the responsibilities and
motivation of boards, corporate governance problems of holding
companies (former privatization funds), and on the management of
the residual share of state ownership.
Action Line 8.
Non-regulatory Mechanisms for
Improving Corporate Governance
Background
The problems of corporate governance
cannot be solved by only improving the regulatory framework. Even
in countries with highly developed corporate governance and
developed capital markets supported by good legislation and
long-time practice, some corporate governance problems are not
solved by law. This is done by means of social rules -
professional, moral, ethical, etc., which, along with the
regulatory framework, create common rules for conduct of
shareholders, creditors and managers of a company and other
interested parties.
Objectives
Improve corporate governance through
energetic action of nongovernmental organizations and professional
associations of shareholders and managers.
Recommendations
Organizations supporting the present
initiative (among them the Union of Investors, the Association of
Securities Holders, the Association of Industrial Capital, the
Bulgarian Economic Chamber, the Bulgarian Stock Exchange-Sofia, the
Bulgarian National Securities Commission, etc.) should,
either
jointly or separately, carry out
proper campaigns among their members to explain the problems of
corporate governance and methods for their solution. Such campaigns
might include publication and dissemination of proper
materials, organization of a series
of seminars.
Elaboration and adoption by business
associations of “codes of conduct”, rules and procedures related to
corporate governance.
Dissemination of information on
successful practical initiatives at joint-stock company
level.
Corporate
Governance Initiative for Bulgaria:
Policy Recommendation Paper
The CGI
Policy Forum was conducted on November 30, 1999. More than
60 representatives of public and private institutions,
international organizations, businessmen, academics, and
pournalists attended the Forum. The final version of the Policy
Recommendation Paper on corporate governance was presented and
publicly adopted at the Forum, which reflected the consensus
reached among the principal institutions and
stakeholders.
Many of
the recommendations, outlined in the Policy Paper, were later
incorporated in the Law on Securities adopted by the National
Assembly in December. Representatives of the international
investment community showed considerable interest in the corporate
governance problems in Bulgaria. Foreign participants voiced their
support for the Corporate Governance Initiative and made valuable
suggestions concerning the forthcoming implementation of the Policy
Paper.
At the
First Investment Forum for Southeastern Europe, October 19-20, 1999
in Sofia, CGI was invited to participate in the plenary session on
“State and Corporate Governance. Cooperation between Public and
Private Sector.” CGI members presented the paper “Corporate
Governance and Control in Joint-Stock Companies in Bulgaria” and
distributed it in 500 copies among the Investment Forum
participants.
Speakers at the Forum (left to right): Mr.
Douglas Dryden, Executive Director and Member of the Board of
Directors, United Bulgarian Bank; Dr. George Prohaski, Chairman,
Bulgarian Stock Exchange, and Director of the Center for Economic
Development; Mr. Jean-Marc Peterschmitt, Director, Bulgaria,
European Bank for Reconstruction and Development; Mr. Alexander
Bozhkov, Deputy Prime Minister and Minister of Industry; CSD
President Dr. Ognian Shentov; Prof. Bistra Boeva, Member of the
Bulgarian National Securities Commission, and Mr. Stoyo Nedin,
President, Securities Holders
Association.
In
order to widely disseminate the CGI findings and recommendations
CSD drafted a Glossary of Terms on Corporate Governance and Capital
Markets. It contains approximately 300 entries and was reviewed by
leading Bulgarian experts in the field. CGI members also prepared a
set of training materials to be used during lectures and
specialized seminars on corporate governance at the University of
National and World Economy (Sofia), the Sofia University Economic
Department and the Varna Economic University. The main topics to be
discussed at the seminars with students included equal treatment of
shareholders; protection of shareholders’ rights; disclosure of
information; board responsibilities; capital market
and
corporate governance; regulations on residual state
ownership.
II. Social Consequences of the Implementation of the
Currency Board in Bulgaria
The
major goal of this one-year project implemented jointly with the
Sociological Program of CSD (Vitosha Research) was to develop a
system of indicators to assess the impact of the Currency Board on
the social protection of the population. The research approach
included several components: 1) identifying the specific
implications of the Currency Board on the social protection system
by analyzing the existing statistical and regulatory information
for the past ten years; 2) testing the findings and working
hypotheses of the preliminary analysis by submitting them for
discussion at public events and workshops dedicated to this topic,
and 3) exploring expert opinions using focus groups as an analytic
tool; 4) using a national representative survey in order to
quantitatively estimate the specific impacts of the currency
board.
The
findings of the project helped identify the most vulnerable social
groups for whom rigid financial discipline and government spending
reduction had meant declined personal incomes and lower living
standards (long-term unemployed, low-income pensioners, single
parent and extended families). Under a currency board, the ways for
improving of the social status of the population should be found
only within the available, limited financial resources. There is a
need for more effective distribution of the available funds, strict
adherence to the principles of social solidarity and balance
between the social security contributions and the benefits
received. The introduction of the currency board in Bulgaria has
only speeded up the delayed reform of the social sector and helped
adjust it to the modern standards.
The
final report prepared under the project was presented at the
conference “Social Consequences of the Currency Board” (June 24,
1999). The conference initiated a broad public discussion focused
on the research finding and conclusions. Conference participants
recognized the practical value of the study for the adjustment of
social reforms to the new economic realities in
Bulgaria.
III. International Business Club
Meetings
Since
its establishment in 1993, the International Business Club (IBC)
has provided opportunities for high-ranking public officials and
policy makers to meet senior foreign diplomats, trade envoys and
representatives of the international business community. Exchange
of views and comments on topical political and economic issues took
place during the four meetings IBC organized in
1999:
• March
16, 1999. Guest speakers were Mr. Stefan Sofianski, Mayor of Sofia
and Mr. Antonio Vigilante, Resident Coordinator, United Nations, on
Priority Investment Projects of Sofia
Municipality.
• May
27, 1999. Guest speakers were Mr. Martin Zaimov, Deputy Governor of
the Bulgarian National Bank and Mr. Stoyan Alexandrov, Chairman,
Association of Commercial Banks, on the Denomination of the
Bulgarian Lev and its Impact on the Economic Development of the
Country.
• July
9, 1999. Guest speakers were Mr. Ventsislav Varbanov, Minister of
Agriculture, Forests and Land Reform and Mr. John Grant, Mission
Director USAID on the Main Priorities of Land Reform and
Agricultural Development in Bulgaria.
• November 30, 1999. Guest speakers were Mr. Mario Tagarinski,
Minister of Public Administration and Mr. Richard Stagg, Ambassador
of the UK, on the Reform in the Public Administration in
Bulgaria.
From left: Mr. Ventsislav Varbanov, Minister
of Agriculture, Forests and Land Reform at the International
Business Club
IV. Publication of the CSD
Monitor
In 1999
two issues of the CSD Monitor were published in English and
Bulgarian. The Monitor covered all major CSD activities and events:
research and advocacy in the field of corporate governance,
establishment of the Legal Reform Initiative, drafting legislation
on e-commerce and digital signature, accession to European Union,
book donation, etc. The publication was widely distributed to
Members of Parliament, government officials, media, municipalities,
and international donors.
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