Aligning with corporate governance standards
27 January, 2011
Aligning with corporate governance standards

Georgian companies can employ a guide book on corporate governance standards worked out by International Finance Corporation (IFC) within the frames of Georgia Corporate Governance project that was completed this January. The manual is a summary of recommendations and consultation the IFC project has been providing Georgian companies for four years based on the best international practice. 
IFC, a member of the World Bank Group, announced about successful completion of its Georgia Corporate Governance project and summarized the results of its

program to help Georgian companies improve their corporate governance practices. Following the principles of responsibility, accountability, and transparency enables firms to become more profitable and attract investment.
The questioned project was a follow up of the similar program launched in 2003 on purpose to introduce the corporate governance concept and principles in Georgian reality. Both aimed at establishing corporate governance principles at Georgian joint stock companies through training seminars, private consultations and pilot programs.
The IFC project helped improve the legal environment regulating corporate governance issues, and facilitated adoption of a voluntary Corporate Governance Code by the Association of Banks of Georgia (ABG). IFC delivered seminars and workshops on legal and financial aspects of corporate governance, individual consultations, and a specially designed Pilot Program for selected companies and banks. Twenty-one companies and banks improved 50 policies/procedures, and all of them reported improved performance as a result of making corporate governance improvements.
IFC recently published the Georgia Corporate Governance Manual, which provides a comprehensive overview of Georgia’s regulatory requirements related to corporate governance. The publication will help Georgian companies improve corporate governance standards and practices beyond completion of the IFC project. The project presented the manual to the key counterparts during the project closing ceremony on January 21, 2011. From 2006 to January 2011, IFC Georgia Corporate Governance Project was run in partnership with BP and its oil and gas co-venturers and the Canadian International Development Agency.
“Good corporate governance is one of the key preconditions for attracting investors, domestic as well as international,” Maia Tevzadze, Project Manager for IFC Georgia Corporate Governance Project, told Georgian Journal.  “Through the IFC project activities we helped Georgian companies become more attractive for investors. Our publications, especially Georgia Corporate Governance Manual, will serve as practical guidance for raising corporate governance standards in the future.”
According to Tevzadze, researches of companies and banks they conducted in 2004 and 2008 showed that companies progressed pretty well from the point of view of adopting corporate governance standards in practice. The practice turned out much more successful for banks that could attract more than USD 300 million thanks to improved corporate governance principles.
Companies operating in non-financial sector appear less successful from the point of view of attracting investments for they have much limited access to financial resources compared to banks. But Tevzadze believes that they will go on profit in a long-run as far as corporate governance principles are not calculated on short-term prospects.
Georgian companies showed a big interest in adoption of international standards of financial accounting [as it is key issue to attract investors] and in internal control skills. 
According to Zurab Gvasalia, President of ABG, importance of corporate governance principles became obvious after financial crisis that made clear that companies with well-developed corporate governance skills escaped the crisis with the least losses. On the other hand companies got convinced that a full package of principles must be established.
“It raises transparency of a company and thus gains the trust of society that is the key assets of all companies actually,” Gvasalia told GJ. “And the Corporate Governance Code we worked out and signed is a sample of this.  Standards we put in this code are much higher than the law and banks understood that if you want to enjoy the effect of corporate governance you have to adopt all of its principles without exception, otherwise it loses effect.”
Pursuant to this understanding Georgian banks work on adoption of the institute of corporate secretary  they lacked in practice up to day.

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