The role of media in building good corporate governance Chavdar Parvanov Dnevnik business daily, part of the leading business media group in Bulgaria – Economedia JSC Washington DC, July 2th 2008

Content of the presentation 1. The current status of corporate governance in Bulgaria and the other countries that made up the former Eastern Block (South East and East Europe) 2. To what extent do investors in emerging markets pay attention to corporate governance? 3. The specific role of media in building better corporate governance 4. Tricks and tactics for making companies more transparent and disclose ad hoc information

Current status The legal and regulatory framework has improved dramatically, CG codes were adopted Very concentrated ownership (average below 25% for the leading Bulgarian companies)‏ Low seperation of ownership and control Opaque ownership structures Inexperienced and often inadequate corporate bodies Poor mark to the state and municipalities as shareholders

Bulgaria in detail Importance of equity markets - increasing Harmonization with the EU legal framework on capital markets and adoption of a National Corporate Governance Code However there is still a considerable way to go

Bulgaria in detail Over 40% of the companies are trying to hide financial information One-third do not present their business goals Just 11% of all public companies have adopted the NCGC No corporate social responsibility (less than 1% have signed UN Global Agreement

To what extent do investors in emerging markets pay attention to corporate governance? A crucial indicator – a non- efficient and underperforming judicial system Foreign investors pay premium for better corporate governance Good governance practices are even more important than financial statements

The role of media Crucial role (non-efficient judicial system, new regulatory framework) Watchdog that not only barks but also bites An early source for uncovering accounting malfeasance and bringing the wrongdoing to light In about 29% of the market abuses, the press is way out there before the securities commission When the press is the first source, there's a huge market response and the opposite

Tricks and tactics Make rankings – they are always prefered by the readers and they impact the reputation of companies (the 10 th copmanies with the best corporate governance model, the most and least admired companies) Use the term corporate governance more often in articles – the more, the better Introduce the corporate governance issues in a user-friendly way to the readers (through personal finance supplements, rankings...) Control the stock exchanges and the regulator

Tricks and tactics Find whistleblowers in the companies – problem with the legislative system Make foreign investors, analysts, portfolio managers and active individual players your partners and contributors Do not let board of directors use corporate governance as a public relations exercise Check companies that make IPOs and SPOs Put top priority to the new media – websites, online journalism Check the user-generated content - forums and blogs