On Monday, an agreement on implementing good corporate governance principles in both state-owned and privately held companies was signed by the Latvian Government, the Baltic Institute of Corporate Governance (BICG), the Foreign Investors’ Council in Latvia, the Finance Latvia Association, and the Latvian Exporters’ Association ‘The Red Jackets’.
The purpose of the initiative is to advance corporate governance and thus improve access to financing in the companies, encouraging Latvia’s economic growth.
“The agreement is meant to create a new commitment to good corporate governance practices among policy makers and business owners, which, in turn, would promote the overall competitiveness of the Latvian economy,” says Andris Grafs, BICG Vice President Latvia.
First proposed by the BICG in February, the agreement was then developed in cooperation with the Prime Minister’s Office as well as with the representatives of the respective business organizations.
Four actionable key directions have been agreed upon in the joint statement.
- Ensuring active and responsible measures by the state as a shareholder and involving state-owned companies (SOEs) into promoting overall economic growth. It is agreed that the state, as an owner, will define and publish ambitious long-term shareholder expectations related to innovation, investment, and export. SOEs will also be encouraged to protect, preserve, and develop free, fair, and equal competition in their activities.
- Improving the selection processes of SOEs supervisory board and management board members. It is agreed to develop legislative amendments to prevent unreasonably restrictive requirements for candidates to SOEs supervisory and management boards; to promote compliance with diversity principles, including equal gender representation, attraction of foreign professionals and reduction of the participation by ministry officials on SOEs boards; and to promote the career growth of internal managers up to the level of management boards.
- Promoting the usage of appropriate financial instruments to achieve ambitious growth targets. It was agreed to support the idea that companies should use various sources to finance their growth, including profits, loans from banks, and especially currently less used capital market instruments, such as listing bonds and minority shares on the stock exchange.
- Aligning the practices in privately held companies with the principles of good corporate governance. It was agreed to promote the implementation of good corporate governance principles in private businesses, which includes all signing business organisations inviting their members (companies) to follow the principles of the Latvian Corporate Governance Code.
Full agreement (in Latvian) available HERE.
“If the state, as a shareholder, aims to achieve ambitious development for the companies it owns, including expansion into export markets, it must recognize that this will be associated with greater risk and the requirement for additional capital. None of these objectives can be attained without structured corporate governance, the attraction of talent to company management and supervisory boards, thus ensuring the essential transfer of knowledge, diversity, and independence from undue political influence,” says Daiga Auziņa-Melalksne, Board member at the BICG, who signed the agreement on behalf of the BICG.
Photos: State Chancellery
