Corporate governance continues to be a subject of significant market interest in both transition and developed economies alike, including in Georgia. The global importance of good corporate governance has been further brought under the spotlight due to some of the more dramatic financial events of recent years – it is widely considered that failures in corporate governance at various levels were among the key reasons both for the recent collapse of a number of leading financial institutions, but also for the financial and economic crises themselves. For this reason, the importance of corporate governance worldwide will only continue to grow, in the minds of not only governments and regulators, but, in particular, of investors and the wider business community.
But what is corporate governance? One of the most well-known (and simplest) definitions is that it is a system by which “companies are directed and controlled”. Good corporate governance not only significantly improves the sustainability and growth potential of a company but it has also been shown to notably assist companies in attracting investment and improving its operations, functions and performance. Corporate governance helps companies to meet some of the challenges of the modern business environment.
Corporate governance is about far more than simply compliance – it brings real benefits to companies while outlining clear structures, processes and frameworks for achieving corporate objectives. Good corporate governance practices, when properly integrated into a company’s objectives and strategy, thus allow companies to progress towards achievement of their goals.
In brief, good corporate governance practices help companies to:
- enhance performance, operations, competitiveness, profitability and long-term value
- establish clear roles, responsibilities and accountabilities
- improve decision-making processes and the quality of decisions
- define and implement corporate strategy and direction
- expand in a sustainable manner
- identify and manage risks
- enhance the substance and structures of internal control
- create appropriate incentives in line with business strategy
- attract capital, investment and business partners
- build reputation and trust, through strengthening of stakeholder relationships
- prepare for following generations
Corporate governance is a gradually emerging, and highly relevant, business concept in Georgia. Indeed, a recent survey indicates that awareness of corporate governance concepts, and their importance, has significantly grown among the Georgian private sector, and that more and more Georgian companies and banks now recognize the value of corporate governance for their long-term development and sustainability.The principal provisions related to corporate governance in Georgia can be found in The Law of Georgia “On Entrepreneurs” (which mainly addresses a company’s governing bodies and the rights of shareholders); The Law of Georgia “On the Securities Market” (which sets out reporting and conflict of interest provisions regarding public companies); and The Law of Georgia “On Activities of Commercial Banks”, which deals with particular aspects of corporate governance in banks (such as the role and composition of the audit committee, the “fit and proper” criteria for banks’ board members and significant shareholders). Further, the Corporate Governance Code for Commercial Banks, which operates on the “comply-or-explain” principle, aims to provide bank-related corporate governance solutions to the activities and remuneration of the governing bodies, internal control and risk management, conflicts of interests, etc.
Georgian Institute of Directors, working together with International Finance Corporation (IFC), a member of the World Bank Group, offers services to companies, financial institutions and the wider market, through one-to-one consultations, training events, workshops and other activities in the area of corporate governance. For further details on this work, please see
For more information on IFC’s Corporate Governance Program in the countries of Europe & Central Asia, please see:
GIOD facilitates implementation of the following OECD Corporate Governance Principles in Georgia.
I. Ensuring the Basis for an Effective Corporate Governance Framework
II. The Rights of Shareholders and Key Ownership Functions
III. The Equitable Treatment of Shareholders
IV. The Role of Stakeholders in Corporate Governance
V. Disclosure and Transparency
VI. The Responsibilities of the Board