Corporate Governance: Investing Inside Often the Emerging Marketplace of Often the Czech Republic

In the securities market of the Czech Republic corporate governance performs a essential function in instilling trader self confidence and ensuring an successful market place. Publish the tumble of Communism, the economy was transitioned from point out owned to capitalist in a quite limited time. Considering that then, the Czech Republic has arrive a lengthy way to rapidly get to expectations of other capitalist marketplaces and productively acquire accession into the European Union. As the marketplace proceeds its progression, the require for transparency of information and alignment among board members and administrators in companies greatens.

From the Czech Republic’s voucher privatization software in 1992 to the late 1990’s, company governance was considered negatively and/or non-existent for publicly traded Czech businesses. A route began with a lack of regulation, continued with a deficiency of enforcement, and last but not least turned directions beginning in 1998 with the Securities Fee Act. Even now, as Czech companies try to turn into more aggressive on a global scale in the market, the realization among firms of the require for structured company governance and a lot more transparency in their reporting of info normally takes maintain as a continued energy essential to report and align business objectives with these of other stakeholders.

By means of an evaluation of the leading ten publicly traded firms, in conditions of market capitalization, on the Prague Stock Exchange, I will evaluate the availability of info with regards to corporate governance in order to discern the existing state of compliance with the Company Governance Code. This info will serve as a benchmark and will enable investors to relate the positions of the greatest companies on the PSE to other firms inside the Czech Republic, and use the understanding normally to the Czech securities market. The benefits allow buyers and other stakeholders to get an idea of company governance procedures and the transparency of info in the firms running in the Czech Republic right now.

Recent State of Corporate Governance

I flip now to the analysis of the corporate governance disclosure in today’s Czech market. Utilizing the ten premier publicly traded firms (see Desk 1) detailed on the Prague Inventory Exchange in conditions of market capitalization, I will establish the diploma of their stated company governance policy disclosure as located in their most latest annual reports. This is the 2004 yearly report for all of the companies. Furthermore, I will briefly evaluate the availability of data on the companies’ web sites.

Desk one
Leading 10 Detailed Companies on the PSE

Rank Company Industry Cap. (Mil. CZK)Industry Cap. (Mil. USD)

1 ČEZ 402,881 16,293

2 Erste Lender 317,598 12,844

three Český Telecom 160,014 6,471

4 Komerční Banka 128,397 5,193

five Unipetrol forty two,922 1,736

six Zentiva 41,683 one,686

seven CETV 39,718 one,606

8 Philip Morris ČR 32,816 one,327

nine Severočeské Doly 14,434 584

ten Prazská Energetika 11,492 465

Resource: Prague Stock Exchange, Novermber 2005


ČEZ, a joint inventory business, is the largest energy conglomerate in Central and Eastern Europe. The company’s internet site has an investor section with data on shares, bonds, and economic data, and lists the date of the yearly basic meeting, but does not offer info especially related to company governance procedures and framework in standard. Shareholder composition, relations, and dividends are introduced on the internet site. Inside the annual report, ČEZ follows the German corporate governance model, and has important users of the board also part of administration. Board framework and board associates are discussed thoroughly. The board of administrators satisfies weekly as a matter of follow, exactly where the requirement is regular monthly. The organization complies with the Industrial Code relating to safety of shareholder legal rights, and bases its company governance on the Company Governance Code. The ČEZ Group truly participated in the 2004 drafting of the Company Governance Code. General, the organization studies on most of the essential company governance regions, but does not have 1 part devoted to their policy, making it needed to scan the complete report for pertinent information.

Erste Bank

Erste Lender, dependent in Austria, is the major fiscal providers provider in Central Europe. Its internet site consists of an investor relations area in which detailed details is offered, and also a corporate governance section in which the organization discloses it follows the Austrian Code of Corporate Governance in exercise. In the annual report, the company discloses it follows all of the statutory guidelines of the Code, and adheres to most of the tips. It directs men and women to the internet site for the genuine provisions of corporate governance, producing the information available, but not thorough within the annual report alone. In addition, guidelines concerning shareholder rights had been not effortless to discern.

Český Telecom

Český Telecom is a telecommunications team that operates largely in the Czech Republic. The firm has a website with shareholder details like board structure and notification of the yearly general meeting. In addition, access to the company’s annual report leads to extensive corporate governance discussion. The firm acknowledges enhanced reporting in this area commencing with the 2004 yearly report as in comparison to prior annual stories, and as said in the 2002 once-a-year report, the business will be in full compliance of the Corporate Governance Code by 2005. 1 be aware made in the report includes a checklist of the customers of the supervisory board that qualify as independent, an essential provision as advisable by the 2004 Code.

Komerční Banka

Komerční Banka is among the most essential financial institutions in the Czech Republic and the Central and Jap European area, and supplies comprehensive solutions for clientele in retail, company, and investment decision banking. The company’s website supplies access to important shareholder info, and has an investor relations area. Nonetheless, there is not a particular company governance section. Accessing the once-a-year report enables a single to see most of the requirements of corporate governance, but there is neither particular mention of their common coverage in the direction of company governance nor mention of their adherence or absence there of to the Corporate Governance Code.


Unipetrol, a team of companies that function in the chemical industries sector of the Czech Republic, is a main organization in Central Europe. The firm’s site has direct backlinks to board users as nicely as an trader webpage with entry to its annual stories, but does not provide detailed corporate governance data. The annual report does not enhance upon the corporate governance policy of the business. There is no assertion about the firm’s plan in direction of company governance, and the info provided is mainly a record of board users. Skills are not offered, and shareholder legal rights are not disclosed or discussed.


Zentiva is a pharmaceutical team that retains top positions in the Czech and Slovak marketplaces, and amongst the biggest players in Central and Jap Europe. Zentiva’s internet site supplies comprehensive company governance information, such as the actual policies governing the boards. Investor relations also has a distinguished placement on the firm’s web site, and lists shareholder data, the date of the general meeting, and other critical info. As said in the once-a-year report, the business adheres to the Dutch Company Governance Code.


Central European Media Enterprises, or CME, is traded on the Prague Stock Trade as CETV. The company, based mostly in Bermuda, is an worldwide television broadcasting organization, and operates a group of networks and stations across Central and Eastern Europe. The firm’s website consists of the customers of the board and their skills, as properly as fiscal benefits and organization guidelines such as their Code of Ethics. Apparently, analyst reviews concerning CME are available on the firm’s site. CME is listed on NASDAQ, so once-a-year report information is available by means of their internet site below SEC filings.

Philip Morris ČR

Philip Morris ČR is an affiliate of Philip Morris Global, whose parent organization is Altria Group. The internet site for Philip Morris directs all investors inquiring about shareholder info to its mother or father firm’s site, despite the fact that some economic information, its standard conference date, and agenda is disclosed for its Kutna Hora place in the Czech Republic. Just as was the case for CETV, Altria Team has comprehensive details disclosed in its SEC filings. On the Altria Team web site, company governance is mentioned extensively, and the by-laws as effectively as board customers and governance tips are listed.

Severočeské Doly

Severočeské Doly is the biggest producer of brown coal in the Czech Republic. The organization mines, processes, and sells brown coal and its by-items. The company’s site lists the board associates and their skills and shareholder framework. There is no spot dedicated to corporate governance composition or coverage. In the annual report, the firm disclosed they do not comply with the Corporate Governance Code, but it does regard the lawful specifications and it hopes to undertake far more ideas in the foreseeable future. Crucial areas of corporate governance are easy to discover in the report, and despite the fact that the organization states it does not comply with the Code, it does an extremely excellent work of reporting necessary as well as recommended information.

Prazská Energetika

Prazská Energetika is an electricity purchasing, distribution, and product sales organization working in Prague and Roztoky, and an electrical energy trader in the wholesale marketplace in the Czech Republic. Prazská Energetika’s site lists the administration and board associates, shareholder structure, and provides access to its once-a-year stories. There is not a area especially for company governance. In the annual report, the business reviews statutory information as necessary by the Commercial Code, but does not go into wonderful detail about corporate governance specifically. Moreover, it does not point out its adherence to any part of the Company Governance Code.


Soon after examining the info provided both on the detailed companies’ site or their yearly report (see Desk 2), it was uncovered that the transparency of data has been reached. At minimum as stated, most all of the organizations comply with statutory provisions of the Professional Code and other Acts, and six of the 10 organizations comply with the tips of the Corporate Governance Code. Of the four that have not adopted the principles of the Code, some mention of the company governance coverage is produced via the disclosure of the related information.

I have identified that companies shown on the Prague Stock Exchange with a huge marketplace capitalization have enhanced on their company governance reporting in their 2004 annual stories from previous many years. Steps have been taken by these firms to adopt the tips of the Company Governance Code even prior to they have become statutory rules. Although these are mentioned actions that have been taken, it is assumed the procedures are followed as a outcome of the auditor statement concerning the reporting of info contained in the yearly stories. General, investor self confidence in the Czech securities market need to improve in light-weight of the rising transparency of information, and the potential legislation of extra corporate governance requirements will increase upon this more.

Table 2

Final results of Firm Investigation

Disclosure of Details ČEZ EB CT KB U Z CETV PMČR SD PE

Does the business disclose Y Y Y Y N Y Y Y Y Y
corporate governance framework
and plan?

Does the company use the Y Y* Y N N Y** Y*** Y*** N N
Company Governance Code
as a basis?

Is shareholder ownership Y Y Y Y N Y Y Y Y Y
disclosed and voting rights?

Board membership & Y Y Y Y Y Y Y Y Y Y
skills disclosed?

Board member remuneration Y Y Y Y Y Y Y Y Y Y

Does the web site contain a N Y N N N Y N Y N N
corporate governance spot?

*Austrian Code of Corporate Governance
**Dutch Corporate Governance Code
***United States Securities and Exchange Commission Demands
Supply: 2004 Once-a-year Studies for Respective Firms

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