1 Corporate Governance Principles (Code) The case of Ukraine Anatoliy Yefymenko Blue Ribbon Analytical Advisory Center UNDP

2  Ukraine entered mass voucher privatization in mid 90-s with the Law „On Business Associations” (1991)  It was very vague and uncertain act of extremely enabling nature  The Corporate Governance issues and protection of shareholders’ rights were almost not covered.  The law was clearly pro-management Starting Point

3  In the late 90-s the process of concentration of ownership came into conflict with existing model of management unaccountability and resulted in changes to the law “On BA” on mandatory creation of Supervisory Board  The norm was a compromise and didn’t settle the issue of accountability and superiority, but generated interest in foreign CG experience among Ukrainian players After Privatization

4  In June 2001 Ukrainian Parliament failed to pass “Joint-stock company” law hesitating between inefficiency of existing unaccountable management model and cost of granting protection to minorities  Defeat of “frontal attack” forced Ukrainian Securities Commission to change tactics and look for unusual solutions – developing Corporate Governance Code  Plan proved to be successful in the long run Fear and Resistance

5  Gaps and uncertainty of BA law turned out to be its advantage (less conflicts with CGP)  The form of CGP allowed to introduce modern corporate law concepts in a soft form and involve companies into their development and adjustment  It’s difficult to overestimate IFC efforts in developing CGP and disseminating knowledge about “what is for what” The other way around

6  On a soil fertilized by CGP finally grew up “Joint stock company” Law passed on September 17, 2008  The greatest achievement of CGP is that they managed to change general attitude to the corporate regulation, from mechanical, depersonalized to more human and private interest-oriented Knowledge brings support

7  Neither JSC Law no CGP are perfect, in some issues Law went far more than CGP (executive body appointment and dismissal, regulation of general meeting, cumulative voting, appraisal rights), in some spheres standards set by CGP are still to be reached by the legislator (corporate secretary, disclosure, internal audit, independent directors)  But the ongoing processes of replacing loyal management with professional one, demand for qualified directors with reputation, minority protection, splitting of control blocks, give us grounds for optimism CGP v JSC Law

8  CGP is a soft law developed and introduced by a government body (Securities Commission), which has its advantages and disadvantages  Now stock exchanges are changing hands, issuers are in great need of money, and companies making their choices to stay in business and improve CG compete for investments or take the money and run away  Time come for stock exchanges and issuers to be more active in developing and implementing CGP CGP under financial crisis