capital market workshops

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CAPITAL MARKET WORKSHOPS 1st Workshop – April 15th “Overview of the Financial System”, Almir Mirica, executive director SASE “The Role of Privatization in the development of the capital market”, Dr. Matej Živković, Securities Commission FBiH 2nd Workshop – May 13th “Sarajevo Stock Exchange – An Overview”, Dr. Tarik Kurbegović, CEO SASE “Trading on the Sarajevo Stock Exchange”, Almir Mirica, executive director SASE “Introduction to Valuation”, Feđa Krivošević, SASE 3rd Workshop – May 27th “Regulation of the Financial System”, Dr. Matej Živković, Securities Commission of FBiH “Corporate Governance, Reporting & Disclosure”, Almir Mirica, executive director SASE “Municipal Bonds”, Feđa Krivošević, SASE

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CAPITAL MARKET WORKSHOPS. 1st Workshop – April 15th “Overview of the Financial System”, Almir Mirica, executive director SASE “The Role of Privatization in the development of the capital market”, Dr. Matej Živković, Securities Commission FBiH 2nd Workshop – May 13th - PowerPoint PPT Presentation

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Page 1: CAPITAL MARKET WORKSHOPS

CAPITAL MARKET WORKSHOPS

1st Workshop – April 15th “Overview of the Financial System”, Almir Mirica, executive director SASE “The Role of Privatization in the development of the capital market”, Dr. Matej

Živković, Securities Commission FBiH

2nd Workshop – May 13th “Sarajevo Stock Exchange – An Overview”, Dr. Tarik Kurbegović, CEO SASE “Trading on the Sarajevo Stock Exchange”, Almir Mirica, executive director SASE “Introduction to Valuation”, Feđa Krivošević, SASE

3rd Workshop – May 27th “Regulation of the Financial System”, Dr. Matej Živković, Securities Commission

of FBiH “Corporate Governance, Reporting & Disclosure”, Almir Mirica, executive director

SASE “Municipal Bonds”, Feđa Krivošević, SASE

Page 2: CAPITAL MARKET WORKSHOPS

LOGO

Corporate Governance, Reporting & Disclosure

Almir MiricaExecutive director

SASE

Page 3: CAPITAL MARKET WORKSHOPS

Contents

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

The Big Corporate Scandals What is Corporate Governance? Differences in Corporate Governance Regimes OECD Principles of Corporate Governance What is Disclosure? Importance of Disclosure for investors, issuers and the

economy Documents of Disclosure Importance of non-financial information Corporate Governance, Transparency and Disclosure in

the Federation of Bosnia-Herzegovina

Page 4: CAPITAL MARKET WORKSHOPS

Enron Corp., 2001.

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

American energy company, founded in 1985 in Houston, Texas, by Keneth Lay. 7th largets company in the US ranked by revenue.

Filed for bankruptcy after severe malpractices in accounting procedures went public; biggest bankruptcy (until then) in US-history and biggest audit failure Share price went down from 90$ in mid-2000 to under 1$ in

November 2001 Brought down Arthur Andersen, the 5th largest audit and

accounting partnership in the world, who were their auditor By using accounting loopholes, special purpose entitites

and poor financial reporting Enron managed to hide billions of $ of debt from failed deals and projects

Primary motivation for Enron’s accounting and financial transactions was to keep reported income and cash-flow up, asset values inflated, and liabilities of the book (through SPV’s) Special Purpose Entity/Vehicle: limited partnership or company

created to fulfil a temporary or specific purpose. Enron’s SPV’s were called JEDI, Chewco, Whitewing, Raptors...Primary use: keep debt of Enron’s balance sheet

Why? Focus on short-term earnings to maximize management bonuses

Page 5: CAPITAL MARKET WORKSHOPS

WorldCom, 2002 (now: MCI)

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

Telecommunications giant; 2nd largest long-distance telephone company in US (after AT&T)

Problem: Slowing-down of the main telecom-business and need to finance their other business endeavors (yachting, timber) threatened the share price (and management bonuses)

Solution: “cook the books”: Declining financial condition was masked by falsely professing financial growth and profitability Normal operating expenses (line costs, i.e. interconnection

expenses with other telecom-companies) were treated as investments and recorded over a number of years

In total, 3,8 billion US-$ worth of expenses were “capitalized”, leading to a net profit in 2001 of 1,3 billion US-$

2003 estimation: Companie’s total assets were inflated by 11 billion US-$

July 21, 2002, WorldCom filed for Chapter 11 Bankruptcy protection

Largest bankruptcy in US-history (until Lehman Brothers in 2008)

Share price went down from 60$ to under 20 Cents. In 2005, CEO Bernard Ebbers was sentenced to 25

years in prison.

Bernard Ebbers, WorldCom CEO

Page 6: CAPITAL MARKET WORKSHOPS

Tyco International, 2002

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

Tyco Int., Swiss-based electronic-components manufacturer, health care and safety equipment.

CEO Dennis Kozlowski Business Week 2002: One of the Top 25

corporate managers in USA Kozlowski received (or took?) 170 million US-$

in low-or no interest loans from Tyco, without shareholder approval

Kozlowski arranged the selling of 7,5 million of unauthorized shares of Tyco, receiving 430 million US-$

As the news came out in early 2002, share price decreased 80% in just 6 weeks

During the (first) trial, much focus on his shower curtain (6.000 $) and wife’s 2 million US-$ birthday party on Sardinia

On second trial in 2005: convicted of grand larceny, conspiracy, and fraud, and sentenced to 8 and 1/3rd years to 25 years

Page 7: CAPITAL MARKET WORKSHOPS

What do they have in common?

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

Interests of shareholders (owners)

≠ Interests of managment

Page 8: CAPITAL MARKET WORKSHOPS

What is Corporate Governance?

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

Renewed interest regarding CG after the big corporate scandals in the beginning of 2000’s – Enron, WorldCom, Tyco, Parmalat...

Corporate Governance (CG) is often confused with the issue of ethics or ethical behaviour Although ethical behaviour is expected from all the actors in CG process, CG at its

core is about the characteristics of a governing process and not about a particular behavioral trait.

Definitions of CG: Corporate governance is the framework of laws, rules, and procedures that regulate

the interactions and relationships between the providers of capital (owners), the governing body (the board or boards in the two-tier system), seniors managers and other parties that take part to varying degrees in the decision making process and are impacted by the company’s dispositions and business activities. Corporate governance defines their respective roles and responsibilities and their influence in steering the course of the company. (Miguel A. Mendez)

“The relationship among various participants in determining the direction and performance of corporations” (California Public Employees' Retirement System – CalPERS)

Page 9: CAPITAL MARKET WORKSHOPS

Differences in CG Regimes

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

CG is needed as a result of the seperation between the ownership and managment function in modern corporations

CG does not occur in a vacuum. It reflects the economic, historical, cultural and legal characteristics of a

country, it’s business history and corporate landscape It is also shaped by the ownership structures...and by the financing options

available to businesses. Differences in these areas account for some of the notable differences

in the governance models found on either side of the Atlantic. Characteristic for the United States

High dispersion of ownership (and thus voting power) weakens the ownership/control link gives managers great power, who are tempted to use it for their sole benefit

Monitoring must focus on alligning the interest of the management with the interests of the shareholders (owners)

Characteristic for Europe (except UK) Blockholders have significant voting power over the dispersed minority owners (who

together may have the majority of ownership!) incentives for blockholders to exercise monitoring of managment, but also to extract benefits for themselves (but not for the rest of the owners)

Monitoring must focus on insuring that large voting blockholders look after the interest of all shareholders, not merely their own.

Page 10: CAPITAL MARKET WORKSHOPS

OECD Principles of Corporate Governance

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

“Organisation of Economic Co-Operation and Development” (OECD) 1999: Definition of 6 Principles on Corporate Governance 2004: Revision of Principles

Principles:

I - Ensuring the Basis for an Effective Corporate Governance Framework

The corporate governance framework should be developed with a view to its impact on overall economic performance, market integrity and the incentives it creates for market participants and the promotion of transparent and efficient markets.

The legal and regulatory requirements that affect corporate governance practices in a jurisdiction should be consistent with the rule of law, transparent and enforceable.

The division of responsibilities among different authorities in a jurisdiction should be clearly articulated and ensure that the public interest is served.

Supervisory, regulatory and enforcement authorities should have the authority, integrity and resources to fulfil their duties in a professional and objective manner. Moreover, their rulings should be timely, transparent and fully explained.

Page 11: CAPITAL MARKET WORKSHOPS

OECD Principles

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

II – The Rights of Shareholders and Key Ownership Functions

A - Basic shareholder rights should include the right to: 1) secure methods of ownership registration; 2) convey or transfer shares; 3) obtain relevant and material information on the corporation on a timely and regular basis; 4) participate and vote in general shareholder meetings; 5) elect and remove members of the board; and 6) share in the profits of the corporation.

B - Shareholders should have the right to participate in, and to be sufficiently informed on, decisions concerning fundamental corporate changes...

C - Shareholders should have the opportunity to participate effectively and vote in general shareholder meetings and should be informed of the rules, including voting procedures, that govern general shareholder meetings (date,location and agenda of meetings, full information about the agenda items; should have opportunity to ask questions to the board...)

D - Capital structures and arrangements that enable certain shareholders to obtain a degree of control disproportionate to their equity ownership should be disclosed (ie cross-shareholdings)

E - Markets for corporate control should be allowed to function in an efficient and transparent manner (i.e. take-over procedures)

F - The exercise of ownership rights by all shareholders, including institutional investors, should be facilitated.

Page 12: CAPITAL MARKET WORKSHOPS

OECD Principles

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

III – The Equitable Treatment of Shareholders A - All shareholders of the same series of a class should be treated equally. B – Insider trading and abusive self-dealing should be prohibited. C – Members of the board and key executives should be required to disclose to the board whether they, directly, indirectly or on behalf of third parties, have a material interest in any transaction or matter directly affecting the corporation.

IV - The Role of Stakeholders in CG A - The rights of stakeholders that are established by law or through mutual agreements are to be respected.B - Where stakeholder interests are protected by law, stakeholders should have the opportunity to obtain effective redress for violation of their rights.C - Performance-enhancing mechanisms for employee participation should be permitted to develop. D - Where stakeholders participate in the corporate governance process, they should have access to relevant, sufficient and reliable information on a timely and regular basis. E - Stakeholders, including individual employees and their representative bodies, should be able to freely communicate their concerns about illegal or unethical practices to the board and their rights should not be compromised for doing this. F - The corporate governance framework should be complemented by an effective, efficient insolvency framework and by effective enforcement of creditor rights.

Page 13: CAPITAL MARKET WORKSHOPS

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

OECD Principles

V – Disclosure and Transparency

VI – Responsibilities of the BoardA - Board members should act on a fully informed basis, in good faith, with due diligence and care, and in the best interest of the company and the shareholders.B - Where board decisions may affect different shareholder groups differently, the board should treat all shareholders fairly. C - The board should apply high ethical standards. It should take into account the interests of stakeholders. D - The board should fulfil certain key functions, including: 1. Reviewing and guiding corporate strategy, major plans of action, risk policy, annual budgets and business plans; setting performance objectives; monitoring implementation and corporate performance; and overseeing major capital expenditures, acquisitions and divestitures. 2. Monitoring the effectiveness of the company’s governance practices and making changes as needed. 3. Selecting, compensating, monitoring and, when necessary, replacing key executives and overseeing succession planning.4. Aligning key executive and board remuneration with the longer term interests of the company and its shareholders.5. Ensuring a formal and transparent board nomination and election process.6. Monitoring and managing potential conflicts of interest of management, board members and shareholders, including misuse of corporate assets and abuse in related party transactions.

Page 14: CAPITAL MARKET WORKSHOPS

What is Disclosure?

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

Transparency: “letting the information be available”

Information disclosure: publication of information regarding the business operations of a company; “disclosure”; “reporting” Process through which companies inform the market about their business operations

Materiality of information (OECD): “Material information can be defined as information whose omission or

misstatement could influence the economic decisions taken by users of information.

Classification of disclosure Financial vs. Non-financial information One-time (prospect) vs continuous disclosure (periodic financial reports)

National legislation prescribes the minimum disclosure level CG Codes and other “soft laws” advance the disclosure level

International standards which define disclosure requirements OECD i IOSCO

Page 15: CAPITAL MARKET WORKSHOPS

OECD Principle V

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

OECD CG Principles - Principle V (2004): “Disclosure and Transparency”

A – Disclosure should include, but not be limited to material information on:1. Financial and operating result of the company2. Company objectives3. Major share ownership and voting rights4. Renumeration policy of board members and key executives5. Related party transactions6. Foreseeable risk factors7. Issues regarding employees and other stakeholders 8. Governance structures and policies

B – Information should be prepared and disclosed in accordance with high quality standards of accounting and financial and non-financial disclosure

Page 16: CAPITAL MARKET WORKSHOPS

OECD Principle V

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

C - An annual audit should be conducted by an independent, competent and qualified, auditor in order to provide an external and objective assurance to the board and shareholders that the financial statements fairly represent the financial position and performance of the company in all material respects.

D - External auditors should be accountable to the shareholders and owe a duty to the company to exercise due professional care in the conduct of the audit.

E - Channels for disseminating information should provide for equal, timely and cost-efficient access to relevant information by users.

F - The corporate governance framework should be complemented by an effective approach that addresses and promotes the provision of analysis or advice by analysts, brokers, rating agencies and others, that is relevant to decisions by investors, free from material conflicts of interest that might compromise the integrity of their analysis or advice.

Page 17: CAPITAL MARKET WORKSHOPS

Efficient Market Hypothesis

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

Theoretical foundation for importance of disclosure Developed by prof. Eugene Fama (University of Chicago) as an

academic concept in 1965; refined in 70’s Theory about how securities are priced and about the question if

anyone can (in the long run) outperform the market Three forms of efficiency:

Weak form: examines whether securities prices fully reflect past information. If they do technical analysis cannot be used to outperform the market

Semi-strong form: deals with publicly available information (financial statements and economic forecasts) and whether security prices fully reflect this information. If true, superior security returns cannot be achieved through fundamental analysis.

Strong form: security prices reflect all information. If true, even inside information (insider trading) won’t work for superior returns.

Until the beginning of the 90’s, EMH was the fundament of the theory of financial markets.

Today still influental, although heavily critized: EMH says the “market is always right”: Really? EMH assumes a majority of rational players on the market: Are humans really rational?

Whether EMH is right or not, the basis for any form of efficency is the availability of information about the issuers

Page 18: CAPITAL MARKET WORKSHOPS

Warren Buffet on market efficiency...

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

“I’d be a bum on the street with a tin cup if the markets were efficient ...Investing in a market where people believe in efficiency is like playing bridge with someone who has been told it doesn’t do any good to look at the cards.”

Warren Buffett

Page 19: CAPITAL MARKET WORKSHOPS

Importance of Disclosure

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

INVESTORS ECONOMY IN GENERAL ISSUERS

DISCLOSURE IS IMPORTANT FOR:

Page 20: CAPITAL MARKET WORKSHOPS

Importance for investors

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

During the investment decision: Financial information: basis for all valuation models (fundamental valuation, ratio

analysis etc) Non-financial information: assesment of the overall business risks of the

company (e.g. higher risk higher required rate of return) Special importance for company analysts and rating agencies “Investing without research is like playing poker without looking at the cards.” (Peter Lynch)

Importance for shareholders Without timely and accurate information about the business operations no

control of the management is possible How to exercise voting rights on the Shareholder’s Assembly without proper

information?

Decreasing information assymetry between investors Decreased risk for investors for trading with better-informed (inside) investors

information and transaction costs are reduced Higher liquidity (and value) of company shares, which is important for the

shareholders.

Page 21: CAPITAL MARKET WORKSHOPS

Importance for the Economy

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

Information: “Lifeblood” of the capital markets Lack of information Lack of investors Smaller liquidity, higher volatility higher

market risk higher risk premium required by investors higher financing costs for issuers

If the market functions, the economy’s scarce resources are efficiently allocated

Strong transparent disclosure regime is pivotal for market-based monitoring of companies

Weak disclosure can contribute to unethical behaviour and loss of market integrity, costing not only company but economy as a whole.

Connection between the quality of the corporate governance regime and the economical development of the country Robert M. Bushman i Abbi J. Smith : “Transparency, Financial Accounting

Information and Corporate Governance” (2003)

Page 22: CAPITAL MARKET WORKSHOPS

Importance for issuers

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

Disclosure and reporting requirements are generally seen as an additional burden for the company

However, a transparent and pro-active approach to disclosure is in the interest of the company. “Closed” company:

• Difficult to gather capital through issuance of securities• Investors avoid investing in “black box” companies

Transparent, open company:• Ensures the critical mass of trust between the company and (potential) investors• Decreased costs of adverse selection increases the interest of investors higher

liquidity of the issuers securities• Higher liquidity decreases the costs of external financing• Price of security can be a control mechanism for the managment of the company• McKinsey’s Emerging Markets Investors Opinion Survey 2001: investors would pay a

premium of up to 30% for a well governed, transparent company.

In B&H, most financing needs of companies are met by bank loans Issuer still do not see the need for a more transparent approach vis-a-vis the investors

Page 23: CAPITAL MARKET WORKSHOPS

Documents of Disclosure

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

Annual Report “Glossy Annual Report”, contains CEO message to shareholders; financial report with auditor’s

opinion (internal and external auditor); information about the Supervisory Board and Managment Board members; overview of the operations of the company in the last year.

Periodic financial reports (annual, semi-annual and quarter-reports) Balance sheet Income statement Cash-Flow Statement Auditor’s Report Managment Discussion and Analysis of financial condition and results of operations(MD&A)

Prosepectus Required before issuing securities Fundament for the investment decision Contents defined by regulator and stock exchange

Price sensitive information (Ad Hoc Disclosure) All information which can affect the price of the security (information which relates to the financial

and legal position of the issuer, affects the capital structure etc.) Disclosure in a way which treats all shareholders / investors equally

Page 24: CAPITAL MARKET WORKSHOPS

Importance of non-financial information

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

Company Book Value ≠ Company Market Value Especially pronounced with “knowledge companies” Baruch Lev (1996): Market value of average Wall Street company is 40%

higher than its book value; high tech companies: more than 50% higher market valuation

Proof that the market values intangible assets

Traditional accounting cannot adequately quantify intangible assets Double negative effect on the balance sheet

Intangible assets: rare verbal defintions; mainly defined through classifications

1. Leonard N. Stern School of Business: classification according to GAAP: - Narrow definition: “nonphysical sources of probable future economic benefits to an entity that have been acquired in an exchange or developed internally from identifiable cost, have a finite life, have market value apart from the entity, and are owned or controlled by the entity”

Page 25: CAPITAL MARKET WORKSHOPS

Importance of non-financial information

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

6 classes of intangible assets General: goodwill (e.g. beneficial relations with government – Goldman Sachs) Brand equity: capacity of brands to sustain and encourage economic demand and other

market capabilities such as advertising (e.g. Coca Cola) Intellectual capital: including trade secrets, internally developed computer software,

drawings; intellectual property (patents, trade names, trademarsk, copyrhights) Structural capital: relationship with employees, leadership, organisational capacity... Customer equity: customer lists and customer based intangibles, customer loyalty Supplier relations: equity interest in suppliers, contracts...

2. Classification according to Roos et al (1997):

Overall Value

Financial Capital

Intelectual Capital

Human Capital

Structural Capital

Page 26: CAPITAL MARKET WORKSHOPS

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

Corporate Governance, Transparency & Disclosure in

the Federation of Bosnia-Herzegovina

Page 27: CAPITAL MARKET WORKSHOPS

Low adoption of CG Principles

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

The mass-privatization programm resulted very often in “insider entrenchment”, with limited or no changes in the managment practices High information asymmetry is in their interestFailure to maximise shareholders’ value

Modern principles of corporate governance are not widely adopted

Majority owners often fail to acknowledge the seperation of the ownership and the control function in the company

Independent members of Supervisory boards are rarely appointed Members of the Supervisory boards represent the interests of those

shareholderholder who appointed them Profits are often not distributed to all shareholders, but extracted

through affiliated companies; in extreme cases: asset stripping

State as an owner does not follow corporate governance principles “We are the state” vs. State as majority shareholder Dividends are first paid to majority owner (state), then to the rest?!

Page 28: CAPITAL MARKET WORKSHOPS

Ongoing battle for more transparency

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

“Socialist heritage”: Different function of financial reports in the socialist economy Financial reports are often regarded as “top secret” Fosters inside trading Repels domestic and foreign investors Low market liquidity Unfavourable conditions for company development through the market

Until 2005:

Only the most persistent investors could get financial reports from companies Legal obligation of issuers to submit their annual & semi-annual financial

reports to the AFIP’s (Sarajevo and Mostar) in PAPER FORM Ad-hoc informations has to be published in daily newspapers

2005: SASE signs commercial contract with AFIP’s in order to receive annual and

semi-annual financial reports from the issuers and publish them on its web-site SASE engages professional clipping-service and publishes ad-hoc information

on its web-site Many issuers fail to send their reports to AFIP or publish it in the newspapers

Page 29: CAPITAL MARKET WORKSHOPS

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

Ongoing battle for more transparency

2007: Securities Commission enacts Bylaw on information disclosure; requires more

disclosure by companies Low effects, as the Securites Law does not proscribe sanctions

Today Issuers must publish their annual and semi-annual financial report in two ways:

Electronic,full form: deliver it to SEC and SASE Short form: for publishing in daily newspapers, obliged to send publication proof to the

SEC Price-sensitive information must be published in daily newspapers and sent to

the SEC and SASE Result: Issuers either publish only the short form, only the electronic form, or

they do not publish anything September 2011: SASE delists 410 low-liquidity securities of non-transparent

issuers from the market and enacts strict disclosure rules Issuers who do not meet the disclosure requirements are demoted to the lower market

sub-segment and eventually delisted from the market SASE also created a disclosure manual for issuers, explaining them what is to be

published at which time and distributed it to the issuers

Page 30: CAPITAL MARKET WORKSHOPS

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

Ongoing battle for more transparency

What are the reasons for the low transparency? Lack of information: Issuer should, but do not know what their

obligations are Lack of sanctions for not disclosing information High costs for preparing and publishing information

Starting from July 1st, 2013 Last changes in Securities Market Law proscribe hefty penalties

for lack of disclosure New Disclosure Bylaw does not require publication in newspapers

• Publication on company web-site AND on SASE web-site• Significant cost reduction for issuers• Streamlined publication procedures

Page 31: CAPITAL MARKET WORKSHOPS

Final words...

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013

“Corporate Governance” is a process, not a state On paper, Enron had a model board (“Chief Executive”

magazine ranked it as one of the Top 5 Corporate Boards in the USA in 2000) “If companies focus their thinking and communications on

short-term results or short-term stock market consequenes they will, in large part, attract shareholders who focus on the same factors. And if they are cynical in their treatment of investors, eventually that cynicism is highly likely to be returned by the investment community”

(Warren Buffett, CEO Berkshire Hathaway)

There is hope: Capital has no memory, it will flow where is sees reward and understands the risks

Page 32: CAPITAL MARKET WORKSHOPS

LOGO

THANK YOU FOR YOUR ATTENTION!

Page 33: CAPITAL MARKET WORKSHOPS

“CG, Reporting & Disclosure”, Almir MiricaInternational Burch University, May 27th, 2013