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Governance in Eastern Europe

By: Geoffrey Mazullo, Director, Partners for Financial Stability Program

In August 2001 the PFS Program launched its first regional survey, “Investor Relations Online:  Survey of Websites of the Ten Largest Listed Companies (by market capitalization) in Eight Central and Eastern European [CEE] Countries” in response to requests from stock exchanges in several CEE countries to organize training programs on extra-financial disclosure, financial disclosure and investor relations. In August 2003, the PFS Program launched its second regional survey, “Survey of Reporting on Corporate Social Responsibility (CSR) by the Largest Listed Companies in CEE.”  In 2004 the geographic coverage of the surveys was extended.  The surveys now cover Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia.

PFS Program surveys analyze the English-language annual reports and websites of the ten largest listed companies in each of the above-mentioned 11 CEE countries in order to document the current disclosure practices of this “blue-chip” peer group and identify best practices.  As market capitalization changes over time due to a variety of reasons, the semi-annual surveys of reporting on CSR represent a snapshot of this peer group’s CSR disclosure practices on a given day twice a year.  Furthermore, by analyzing disclosures in both annual reports and websites, the surveys track the timing of the publication of the annual report and the related yet separate issue of periodic disclosure, namely, how blue-chip companies keep their websites data-rich and up-to-date.  The surveys enable CEE companies to benchmark their disclosure practices against peers on a national, industry and regional basis.  With the addition of Brazil, Russia, India and China (BRIC) as well as Ukraine to the surveys since 2006, the surveys now also enable companies to benchmark against peers in other emerging markets worldwide.

The 17th edition of the regional survey Investor Relations Online was published on September 9, 2009.  In this edition of the survey, disclosure of detailed governance information increased in all categories surveyed, except in the local-language website category, where a slight decrease was recorded.

91% of the companies surveyed provide a list of management online.  This is the largest percentage recorded since the surveys began in 2001 and represents a slight increase vis-à-vis 84% in February 2009, 88% in August 2008 and 90% in February 2008.   68% of the companies surveyed provide additional information about management online; this is also the largest percentage recorded since the first survey, representing an increase vis-à-vis61% in February 2009, 64% in August 2008 and 63% in February 2008.  89% of the companies surveyed provide a list of board members online, compared with85% in February 2009, 91% in August 2008 and 87% in February 2008.  64% of the companies surveyed provide additional information about board members online; this also represents a record high percentage and a significant increase, compared with 56% in February 2009, 61% in August 2008 and 52% in February 2008.  

Since 2004, the survey includes recommendations on the ideal corporate website and compares CEE companies with the parameters of this ideal.  This component of the survey identifies best practice and enables CEE companies to benchmark their disclosure against peers in the region, other emerging markets and industry best practice.  Here also, the time-series data identifies online disclosure trends.

On August 17, 2009 64 of the 110 companies surveyed in CEE (58%) disclose information in all of the categories analyzed in the basic PFS Program survey: local-language website; local-language website; list of management; list of board members; additional information on management; list of board members; and additional information on board members. 

This is the largest percentage recorded and a significant increase in comparison with February 15, 2009 when 52 of the 110 companies surveyed in CEE (47%) disclosed this basic information.  In August 2008, 56 of the 110 companies surveyed in CEE (51%) disclosed this basic information, compared with 51 of the 110 companies surveyed in CEE (46%) on February 15, 2008.

On August 17, 2009 29 of the 110 companies surveyed in CEE (26%) provide all of the “ideal” recommended information:  Five companies provide information directly on their company website and 24 companies provide information indirectly through an annual report available online.

Links

The surveys may be found on the capital markets research page of the PFS Program website. 

http://www.pfsprogram.org/capitalmarkets_research.php

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