Efficient Corporate Governance

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Effective corporate governance is turning into a crucial factor for successful operation of companies in a market economy. This market requirement has acquired a key importance for many companies, financial institutions, stock exchanges and the government. Without an effective structure defining relationships between the Board of Directors, executive management and shareholders, growth of Ukrainian companies and economy at large will continually be hampered by lack of capital.

Many Ukrainian companies, using the acquired positive experience, could successfully compete with their Western counterparts,. To do this, however, they need considerable financing to renew their infrastructure, update production processes, implement information technology systems, and improve their assets management.

In the future, domestic capital markets should ensure growth of the national economy. To develop a stable, liquid and potent domestic market is an essential condition for an effective use of national resources and, hence, growth of a healthy market economy. This in turn will largely depend on efficacy of corporate governance which may build up trust of domestic investors.

At present Ukrainian capital market is in the initial stage of development and is very limited. Therefore, foreign investors and lenders are to be the main source of capital. In the recent past, foreign investors used to shut their eyes to the weakness of corporate governance in Ukraine as they were strongly motivated by high profits and investment opportunities which they perceived as unlimited. Today, due to a very high risk, situation has changed. Therefore, it is essential to significantly expand the circle of potential investors by attracting attention of major capital sources. To gain access to these sources, Ukrainian companies should adopt effective procedures of corporate governance.

Foreign investors will be highly unwilling to invest in Ukrainian economy, until they feel convinced that their rights are safely protected. The risk experienced by investors today will remain very high as long as there is doubt that shareholders' rights are equitably protected.

Effective corporate governance should be developed in Ukraine. PricewaterhouseCoopers, being a consultancy firm, provides professional services to many Ukrainian companies, as well as a number of international banks, investment houses, and companies, which are ready to invest in Ukrainian economy on realistic terms. We are interested in prompt and efficient development of the Ukrainian capital market. We feel sure that protecting investors' rights and ensuring transparency of companies will, inter alia, contribute to attraction of domestic and international investments. Therefore, we have developed recommendations on implementation of fundamental principles of effective corporate governance and urge owners and leaders of companies to read them.