Enlarged EU: enlarged corporate governance? Why directives might be more appropriate for transition economies

Abstract

Purpose

This paper seeks to illustrate the development of corporate governance issues in the transition economies of Central and Eastern Europe (CEE) and to analyze if codes based on directives or standards are better for these economies.

Design/methodology/approach

A chapter about corporate governance codes and the respective (dis)advantages of directives and standards starts the paper. Then common European and specific transition economies' corporate governance problems followed by a discussion of directives versus standards for CEE countries are described.

Findings

The paper finds that historical development of the transition economies in CEE leads to specific corporate governance problems such as high court delays, corruption and immature institutional investors. The introduction of corporate governance codes for these economies seems useful but should not rely on broad standards but on legally enforced binding rules accounting for the discussion of directives versus standards.

Research limitations/implications

Research on the weaknesses of legal systems in transition economies is mainly verbally argued and needs more empirical backing. The discussion of directives versus standards is limited as we live in a world of flux – standards are becoming directives over time.

Practical implications

The paper argues against the blindfold implementation of corporate governance codes of other countries and argues for country specific solutions keeping in minds the different effects of directives and standards.

Originality/value

The paper opposes the mainstream thinking that corporate governance codes are the ultimate ratio for transition economies in countries of CEE.

Citation

Braendle, U.C. and Noll, J. (2006), "Enlarged EU: enlarged corporate governance? Why directives might be more appropriate for transition economies", Corporate Governance, Vol. 6 No. 3, pp. 296-304. https://doi.org/10.1108/14720700610671891