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Corporate Governance
Principles (Code)
The case of Ukraine
Anatoliy Yefymenko
Blue Ribbon Analytical Advisory Center UNDP
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Starting Point
 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
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After Privatization

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
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Fear and Resistance
 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
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The other way around
 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”
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Knowledge brings support
 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
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CGP v JSC Law

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
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CGP under financial crisis

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
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