1. General Shareholders Meeting and Romanian Corporate Governance Graciela Iordache Romanian Shareholders Association OECD Conference on S-E Corporate Governance

2. AGENDA n General Shareholders Meeting in Romanian Companies--Shortcomings n Possible remedies n Conclusions

3. General Shareholders Meetings in Romanian Companies--Shortcomings n The GSM convocation is done using obscure news papers and the shareholders are not able to find out about it n The access of the shareholders at GSM is denied n The GSM are held at the locations others than the headquarters and only the majority shareholder is able to participate n The documents are not delivered prior GSM data n The directors and censors reports are not disclosing relevant information n The lack of independence of the directors and censors elected din GSM by the majority shareholder, makes the GSM documents unreliable n The reports are not containing information about transactions with related parties or major transactions

4. General Shareholders Meeting in Romanian Companies--Shortcomings n Major GSM’s competencies are delegated to Board of Directors, restraining the shareholders right to be informed and vote n The access of the minority shareholders to documents is highly restrained by the constitutive act that is voted by the majority shareholder n The shareholders do not have the opportunity to debate all the issues included in the GSM agenda n The directors are not properly answering to the questions raised by minority shareholders n Even though the GSM is deciding the dividends’ payment, this is note done any at all or it is done very late or not in cash n The unjustified dilution of the minority shareholders as a result of the capital increases without a prior revaluation of the assets, is changing artificially the shareholders’ structure

5. Possible remedies n Change the legislative framework – Include the directors’ obligation to report at the GSM upon special request of the shareholders owning at least 10% reports on special operations – Include the directors’ obligation to convoke the GSM with an agenda containing at least the issues asked by shareholders owning at least 10% – Include explicitly in the a law the right of the shareholders to participate at the GSM, upon the sanction of annulling that GSM decisions – the shareholders access to GSM should be simplified – the law should provide that any GSM decision that infringes the shareholders rights, to be null – the independence of the censors should be ensured

6. Possible remedies – any related parties transaction over EURO 50,OOO should be reported not only as a material event but also in a special chapter of the periodical reports to GSM; a special censor appointed by the minority shareholders should check the opportunity of these transactions – all the major transactions that exceed 10% from the registered share capital should be prior approved by the GSM – the directors should be appointed and revoked using cumulative voting method – all the capital increases should be preceded by the assets revaluation when the inflation rate is exceeding 10% annually; the capital increase should be done exclusively in cash – if the GSM decides to pay dividends. those should be paid in at most 60 days and only in cash – the shareholders should have copies and access to all board of Directors minutes concerning GSM delegated competencies

7. Conclusions n In Romania the GSM are not yet an effective tool of corporate governance n The main causes are: – vague legislative framework – majority shareholders’ conduct – the mentality regarding the ownership – the lack of experience of the judges n The most facile, efficient and easy to implement solution is to accordingly amend the legislative framework