Corporate Governance

1
Corporate Governance

• ROLE AND FUNCTION OF
• SUPERVISORY BOARDS IN
• BOSNIA AND HERZEGOVINA (FEDERATION)

Created by Faris Njemcevic, Fund Management
Company PROF-IN, Sarajevo
2
Introduction

• Single-layer model (Supervisory board only)
• Deals with firms that are subject to
  privatization
• Supervisory board is a link between management
  and shreholders, where
• It has wider rights towars management, and
• By laws regulate rights and responsibilities in
  more details

3
Introduction

• Role of Management continously becomes stronger,
  because
• Amount of information is rapidly increasing,
• Business becomes more and more complex,
• Supervisory board members are external and do not
  come from the same branch managers lead the
  game
• Supervisory board functions
• As a body
• In the best interest of all shareholders
• With limited and united responsibility towards
  all shareholders

4
Rights and role of Supervisory board (legal
framework)

• Most important duties of Supervisory bord
• Chooses Management based on presented business
  plan
• Tracks results
• Adopts all companys acts prescribed by law
• Makes particular decisions set by law
• Adopts financial reports (annual and semiannual)
  and business plan for the following year

5
Rights and role of Supervisory board (legal
framework)

• Most important duties of Supervisory board
• Proposes to the shareholders the way of profit
  sharing and loss cover
• Approves offering of new shares up to 1/3 of
  nominal value of existing shares
• Carries out decisions made by shareholders.
• Structure of the board
• Supervisory board consists of at least 3 members
• Number must be odd
• Decision valid with majority votes.

6
Supervisory boards in practice

• Participants in privatization
• Citizens,
• Local powerfull persons,
• Privatization Investment Funds.
• Detected problems
• No established labour market for Supervisory bord
  members
• No clear corporate ownership structure with clear
  companys goals
• Many of privatized companies (with valuable real
  estate) were target for local powerfull persons

7
Supervisory bords in practice

• Detected problems
• No developed labour market for managers,
  therefore Supervisory boards cannot easily find a
  director most of firms need new Management
• Supervisory boards not aware of their
  responsibility and they think they are only
  delegates of some shareholders
• HRM in corporate governance is poor with no room
  for bonuses, benefits and stimulation
• Members of Supervisory bords are working full
  time elsewhere and can not devote much time to
  the firm.

8
Recommendations

• Main goal to stop further sinking of the
  company
• Every firm can do better with good Manager who
  will get full support and motivation by its
  Supervisory board
• Privatization Investment Funds cannot have active
  approach (as strategic partner) but can
  contribute to restructure of companies by
  electing their best people into Supervisory
  boards and Management
• Supervisory board as a profession gather and
  educate Supervisory board members

9
Conclusion

• WE NEED
• A COMPREHENSIVE CONCEPT OF CORPORATE GOVERNANCE
  DEVELOPMENT
• AT THE MACRO LEVEL!

10
THE END

• THANK YOU FOR YOUR ATTENTION!!!

Name Faris Njemcevic Company Fund Management
Company PROF-IN Sarajevo Address Radiceva 8,
Sarajevo Bosnia and Herzegovina Phone 387 33
26 33 00 Fax [phone]