Meyer, Klaus

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been in aristocratic Greece or Rome. The average citizen had many reasons ...... Genov, N. (2000): Labor markets and unemployment in South-Eastern Europe,.

Gillo, Martin Grußwort zum VI. Chemnitzer Ostforum ‚The End of Transformation? – Organisational Changes in CEE Countries during the last decade’ vom 20. bis 22. März 2003

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Lang, Rainhart The End of Transformation? – An Introduction

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Transformation as Privatisation and New Governance Structure Meyer, Klaus Privatisation and Corporate Governance in Eastern Europe: The Emergence of Stakeholder Capitalism

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Gelbuda, Modestas/Starkus, Arūnas/Židonis, Žilvinas The Power of Naive Action: A Case of a Rapid Internationalisation of Company from a Transition Economy

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Steger, Thomas ‚Gute’ Corporate Governance in Ostdeutschland – Kritische Betrachtungen nach 13 Jahren Transformation

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Hartz, Ronald/Tirnitz, Tamás Perspektiven ‚guter’ Corporate Governance in Deutschland und Ungarn – eine Medienanalyse

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Manolescu, Irina/Prodan, Adriana The Impact of Corporate Governance Pattern on Performance in Romanian Companies

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Shorikova, Ludmilla Experiences of Banking Internationalization: Estonia and Russia Case

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Zschiedrich, Harald Zur Rolle ausländischer Direktinvestitionen (ADI) im Transformationsund EU-Beitrittsprozess mitteleuropäischer Wirtschaften

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Transformation as Cultural and Behavioural Change Remišová, Anna Business Ethics in Central and Eastern Europe – Convergence or Divergence?

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Edwards, Vincent Human Resource Management in Transformation: A Managerial Perspective

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Alas, Ruth Estonia and Finland: A Comparison of Attitudes

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Finlay, Jim/Neal, Mark/Catana, Alexandru/Catana, Doina The Influence of Cultural Backgrounds on Perceptions of Manager and Subordinate Relationships in Romania, Lebanon and Oman: A Preliminary Cross-cultural Investigation

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Ionescu, Gheorghe/Negruşa, Adina Letiţia/Adam, Ciprian Mihai Considerations about the Business Values Evolution and the Christian Values

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Ishikawa, Akihiro Social Transformation and Value Differentiation – The Slovak Case

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Lewicka-Strzalecka, Anna Consumer Ethics: A Comparative Study of the Polish and the European Union Consumers

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Šťastný, Zdenek Small and Medium Enterprise and the Business Ethic in Slovakia

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Olimpieva, Irina Informal Character of Organizational Changes in Post-Socialist Firms

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Vadi, Maaja The Relationships between Subtypes of Collectivism and Organizational Culture in Estonia

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Transformation as Re-Institutionalisation and Learning Clark, Ed Knowledge, learning and transformation in transnational sites: relationship asymmetry, politics and institution building 281 Brinkmann, Ulrich Die Labormaus des Westens: Ostdeutschland als Vorwegnahme des Neuen Produktionsmodells? 2

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Kaarelson, Tõnu/Alas, Ruth Comparison of Human Resource Management in Estonian and Finnish Organisations

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Kreißig, Volkmar Rahmenbedingungen für das Human Ressourcen Management im Transformationsprozess – Konvergenz oder Divergenz? – Ein Vergleich zwischen den neuen Bundesländern, Russland, Bulgarien und Belarus (Weißrussland)

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Haav, Kaarel The Role of Management Education in Transformation: The Case of Estonia

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Transformation as Changing Actors and Networks Dobák, Miklós The Role Executives Play in Transformational Processes

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Marinov, Marin A./Marinova, Svetla T. Exchange and Embeddedness in the Development of Business Relationships: Theoretical Considerations and Empirical Evidence from Central and Eastern Europe

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Boruz, Adrian Transformation in Romania: A Managerial Perspective

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Tuulik, Krista/Alas, Ruth The Impact of the Values of Top Managers upon their Subordinates

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Steffens, Marec Béla Prejudice, Expectations and Success: Intercultural Influence on Management Activity in Central and Eastern Europe. Reported from Experience

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Transformation as Evolutionary Change Balaton, Károly Where and when is the End of Transformation? – A Multilevel Coevolutionary Approach

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Buchner-Jeziorska, Anna Polish Way to Capitalism – 13 years later – Mythology of Transformation

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Brussig, Martin The Problem of Embeddedness Revisited – Theoretical Implications of Empirical Findings in the East German Labour Market 1990-1999

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Pučko, Danijel Contribution to the Assessment of the Current State of Transformation: A Case of Slovenia

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Pearson, Gordon Organisational Transformation from ‘Planned’ to ‘Market’

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Index

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Autorenverzeichnis

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Gillo, Martin STAATSMINISTER FÜR WIRTSCHAFT UND ARBEIT

Grußwort zum VI. Chemnitzer Ostforum „Grußwort zum VI. Chemnitzer Ostforum ‚The End of Transformation? – Organisational Changes in CEE Countries during the last decade“ vom 20. bis 22. März 2003 Die Osterweiterung der europäischen Union stellt zweifellos die seit langem größte politische und auch wirtschaftliche Herausforderung für die europäischen Länder dar. Die Europäische Union wird durch die Erweiterung um zehn Länder zu einem der größten Binnenmärkte der Welt. Dies hat seine Folgen für die Länder der Union und für uns alle. Die neuen Länder und insbesondere der Freistaat Sachsen werden von der EUErweiterung in besonderem Maße betroffen. Die räumliche Nähe, insbesondere zu Polen und Tschechien, bietet eine Chance für intensivere Beziehungen zu den Nachbarländern, vor allem im Bereich des Handels und des Dienstleistungssektors. Die EU-Erweiterung birgt allerdings auch Risiken und zwar für beide Seiten. In Deutschland denken wir hierbei in erster Linie an die Auswirkungen für den Arbeitsmarkt. Die Beitrittsländer sehen sich dem scharfen Wettbewerb auf dem Binnenmarkt ausgesetzt. Die mit der EU-Erweiterung verbundenen Herausforderungen zwingen alle Beteiligten, sich entsprechend vorzubereiten. Eine gute Vorbereitung setzt natürlich einen guten Informationsstand voraus. Hier leistet die Technische Universität Chemnitz einen hervorragenden Beitrag. Das VI. Chemnitzer Ostforum bietet eine einmalige Möglichkeit, unsere Nachbarn besser kennen zu lernen und neue Kontakte zu knüpfen. Diese internationale Tagung, die diesmal unter dem Thema „Frage nach dem Ende der Transformation“ steht, schafft einen intensiven Wissens- und Erfahrungsaustausch zwischen Ost- und Westeuropäern, Fachleute aus Wissenschaft und Praxis werden zur gemeinsamen Diskussion zusammengeführt und Handlungshilfen für die Praxis im Osteuropageschäft gegeben. In besonders hierfür eingerichteten Arbeitskreisen sollen vor allem kleine und mittelständige Unternehmen die Gelegenheit zu einem Erfahrungsaustausch bezüglich des osteuropäischen Marktes erhalten.

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Grußwort zum VI. Chemnitzer Ostforum

Europa der Zukunft, das kann nur heißen, Grenzen zu überwinden – auch Grenzen in unseren Köpfen – und das gemeinsame in den Vordergrund zu stellen, ohne unsere Identität zu verleugnen! Ich bin sicher, dass von dem VI. Chemnitzer Ostforum wichtige Impulse für die Kooperation mit unseren Nachbarländern ausgehen und wünsche allen Teilnehmern auf diesem Wege eine gelungene und erfolgreiche Veranstaltung. Gillo, Martin

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Lang, Rainhart HERAUSGEBER

The End of Transformation? – An Introduction The VIth Chemnitz Eastforum of the year 2003 has been devoted to an assessment of more than 10 years of transformation research and 10 years of Chemnitz Eastforum. The Eastforum was founded in the light of the necessity of a common research effort to describe and explain the dramatic organisational and management change in CEE countries. “The End of Transformation?” seems us an appropriate title for resuming the results of the research within an open East-West-Dialogue. Both, the multidisciplinary co-operative research and the open and fair dialogue and exchange of views between insiders and outsiders belonged to the core principles of the Chemnitz Eastforum from its beginning. Later on, we tried to develop the Eastforum to a platform for networking and further research between the participants and to integrate especially young scholars and researchers from CEE countries into our common project. Moreover, a special part of the forum has been organized to offer advice for German enterprises interested into Business with CEE countries. Starting with a discussion on the “Reforms in Higher Economic Education and Training in CEE Countries” in 1993, the Chemnitz Eastforum dealt with “Changes in Corporate Cultures in East Germany and Eastern Europe” in 1995, with “Manager in the East European Transformation Process” in 1997 and with “Business Ethics in Central and Eastern Europe”in 1999. In 2001, “Human Resource Management in Transition” has been chosen as the main focus of the Forum. The development of the Eastforum could also be described by the number of participants as well as the number of countries of the participants and contributors (see picture 1 and 2).

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The End of Transformation? – An Introduction

Picture 1: Number of participants of the Chemnitz Eastforum (scientific conference only)

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Picture 2: Countries of participants of the Chemnitz Eastforum (scientific conference only) 30 25 20

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The Forum 2003 asked for an assessment of the developments in CEE countries in the last 13 years. We tried to evaluate the processes of organizational change and its various aspects in transforming countries, their conditions at the macro level of the societies as well as their consequences and pre-conditions at the individual level of owners, managers and employees. In addition, we were looking for adequate theoretically based explanations and frameworks of research, and possible contributions of the transformation research for organization theory. We also wanted to discuss appropriate methodologies and methods of research in transforming societies and to exchange experiences from the different countries, disciplines, and positions. The book represents these intentions by covering a lot of countries, authors, topics and scientific positions.

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According to the overall frame of transformation, developed in the early East Forum sessions (Lang 1996), transformation is seen as a social process of fundamental political, economic, technological, and cultural changes in structures and values, including all areas and levels of the society, and their various relations (see picture 3). Transformation is both, managed and evolutionary or self organized. Taking into consideration this broad view of transformational changes, transformation might be a seen as an ongoing process also in those countries, which are now entering the EU. They are still facing processes of adoption, adaptation and changes at the various levels including the societal institutions and values. Consequently and in a first attempt, the “never ending transformation” may be a result of our broad approach to transformation. But when looking at the organizational level, change could be viewed as a permanent phenomenon, but literature on organizational transformation suggests an ending of transformation, which is seen as a period of a radical second order change (see Levy/Merry 1986) followed by some more evolutionary phases. In this view transformation may come to an end, when the fundamental, paradigmatic shifts in values and cultures are over. This may be at a different point in time, for the different countries, the levels and the aspects of transformation; with a time lag especially for the social and cultural aspects, the individual and the behavioural level. Picture 3: Levels of Transformation

Society Value system - Institutions Institutionalisation in other roles, e.g. family

Construction

Organization

in other fields

Cultures - Structures Social influence

Social action

Individual Values - Abilities

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The End of Transformation? – An Introduction

On the other hand, even this broader approach to transformation and change allows us to see the various links and relations coming from radical changes in turbulent environments (for the specific influences, see for example the empirical contributions in Clark/Lang/Balaton 2001 and the methodological aspects for researchers in Clark/Michailova 2004). Despite of our main interest in the processes of organisational change, an analyses of change in transformational settings calls for an inclusion of the various processes, and their relations with the macro and micro level of transformation as well as the various aspects of transformations, e.g. economic, technological, social, cultural, or political. Nearly all contributions in the book try to link their special subject at the organizational or individual level to other aspects or layers of transformation. Moreover, the collected articles support the assumption of a few leading perspectives in the scientific analysis of organizational changes in transformational settings (with respect to theoretical frames of transformation research at the organizational level see Lang 2002). More traditional views tends to see the changes as • a necessary privatization process and/or • a technological restructuring and modernization and/or • a economically based strategic decision process. But in addition, a lot of approaches, also in the frame of former East Forum contributions, have underlined the perspectives of transformation as • • • • •

a process of cultural change and/or a process of (re-) institutionalization and/or a learning process, individual, organizational and intra-organizational, and/or a process of changes in power and structures of organizational control and/or a process of co-evolution between the various levels, especially the level of the society and the organization.

The articles in the book are organized around five selected and partly combined perspectives. The first one is devoted to the influence of privatisation on governance structures and the changing roles of stakeholder and shareholder in transformation processes. The topic starts with a programmatic contribution of Klaus Meyer (Denmark) “Privatisation and Corporate Governance in Eastern Europe: The Emergence of Stakeholder Capitalism”. Moreover, contributions from Lithuania, East Germany and Hungary, Estonia and Russia are highlighting special aspects of governance structures and special groups of actors as well as the influence of foreign direct investments in the CEE countries.

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In the second part cultural and behavioural aspects of transformations are in the centre of the contributions. It starts with Anna Remišová’s (Slovakia) article on “Business Ethics in Central and Eastern Europe – Convergence or Divergence?”, added by Vince Edwards (UK) contribution on “Human Resource Management in Transformation: A Managerial Perspective”. Both perspectives are dealing with special aspects of cultural changes, and the various attempts of management to handle the emergent corporate cultures and behavioural problems of transitional economies. A broad range of contributions on different aspects of these changes in Estonia, Romania, Slovakia, Poland and Russia, including comparisons with other emerging or developed economies is included in this part of the book. The third perspective focuses on the processes of re-institutionalisation and learning. Ed Clark (UK) tries to combine the various discussions in this field in his article on “Knowledge, learning and transformation in transnational sites: relationship asymmetry, politics and institution building”. Aspects of learning and institution building in the contextual settings of East Germany, Estonia, Russia, Bulgaria and Belarus are part of this chapter too. The authors present a wide range of topics including comparative aspects of changes in HRM systems of the countries as well as changes and problems as a result of transferred production systems or patterns and contents of Western management education. In the fourth part the special role of important actors, especially managers, and their networks as medium and results of transformation is underlined. The introductionary contribution from Miklós Dobák (Hungary) looks at the role of management executive in the transformation process with respect to the Hungarian experiences. Other articles focus on the development of business relationships in CEE countries or top manager’s values, leadership styles or strategies in Romania, Estonia and Poland. And finally, in the fifth and last part, a more general view on transformation links the development at the level of organisations with changes in the societies. Organisational transformations as a part of an evolutionary process in the whole transforming society are common for the approaches in this chapter. Károly Balaton (Hungary) refers to the conference topic and tries to answer the question with a “multilevel co-evolutionary approach” to transformation. Other contributions discusses the last years of transformation in the light of several aspects as mythology, embedded ness, or even with a more practical insider or outsider view. All in all, a wide range of interesting contributions is presented which may not answer the overall question for an end of transformation but give some challenging new ideas and concepts for further investigations in the development of the new “East European capitalism” . 7

The End of Transformation? – An Introduction

Chemnitz Eastforum has got again a lot of support by several institutions and firms. We want to thank the Friedrich Ebert Foundation, the German Research Community (DFG), the Ministry of Science and Art in Saxony (SMWK), the Bosch Foundation, the Daimler and Benz Foundation, the Marga and Kurt Möllgard Foundation, the Business Development Agency Chemnitz (CWE) as well as the TEQ GmbH, Sparkasse Chemnitz and the Volkswagen AG at Chemnitz. Certainly, the Eastforum has been also supported by Chemnitz University of Technology, and the Faculty of Economics and Business Administration.

References Clark, E./Michailova, S. (eds.) (2004): Fieldwork in Transforming Societies, Palgrave, Houndsmill/New York. Clark, E./Lang, R./Balaton, K. (eds) (2001): Organizational change in transforming societies, Special Issue of International Studies of Management and Organization. Summer 2001/Volume 31, Number 2. Lang, R. (Hrsg.) (1996): Wandel von Unternehmenskulturen in Ostdeutschland und Osteuropa, Rainer Hampp Verlag, Mering. Lang, R. (2002): Organisatorischer Wandel in Transformationsgesellschaften. Organisationstheoretische Implikationen und ihre empirische Relevanz, in: Bieszcz-Kaiser, A./ Lungwitz, R.-E./Preusche, E./Schreiber, E. (Hrsg.): Zurück nach Europa oder vorwärts zur Peripherie? Hampp Verlag, München und Mering, S.15-28. Levy, A./Merry, U. (1986): Organizational transformation, New York.

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Transformation as Privatisation and New Governance Structure

Meyer, Klaus DENMARK

Privatisation and Corporate Governance in Eastern Europe: The Emergence of Stakeholder Capitalism Abstract An unintended outcome of transition is the emergence of new forms of governance. Stakeholders other than shareholders influence corporate management to a higher degree than in mature market economies. Employees gained influence through ownership stakes or work councils, while elsewhere investment funds or governmental authorities retain influence via equity stakes or otherwise. This paper reviews privatisation and the newly created forms of private ownership to document the evolution of stakeholder capitalism and to discuss the opportunities and dangers that it may create for businesses in the region.

1 Introduction In the transformation from central plan to market economy, privatisation had a central place in policy agenda, as private property is a central element of the market economy. All countries in the region have transferred ownership to private individuals and entities, yet the transfer of ownership alone does not suffice to create appropriate incentives for managers. Managers left unchecked may use their insider position in to serve their own personal interests rather than those of the corporation. Hence, a system of corporate governance is required. Corporate governance is concerned with the means by which dominant decision makers (typically managers) are controlled by other interested parties (Monks/ Minow 1995: 1). The OECD defines corporate governance as “the system by which business corporations are directed and controlled”. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance (OECD 1999).

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Privatisation and Corporate Governance in Eastern Europe: The Emergence of Stakeholder Capitalism

Effective corporate governance is particularly important during times of crisis when major corporate restructuring is to be initiated and implemented, as in the early years of transition. The management has to decide upon a strategy for the enterprise in the market environment, including major changes in product mix and organisational structures. This restructuring has, due to path-dependency, long-term implications for the structure of the industry and its competitiveness. However, systems of corporate governance have become a major obstacle to enterprise restructuring in CEE before and after privatisation. Privatisation other than by sales to outside investors often failed to create powerful incentives to guide managers in transforming firms. Therefore corporate governance has become the most debated issue in the transition economics literature (e.g. Frydman et al. 1999, La Porta/Lopez-de-Silanes/Shleifer 1999, Estrin 2002), and more recently in the management literature (Filatochev et al. 2000). The theory of property rights, primarily the principal agent model, has been the ideological foundation of the privatisation policy. However, many firms did not, as presumed by the model, end up in outside control but under the governance of a variety of stakeholders, including managers, employees and the state. This chapter first outlines the objectives underlying the privatisation drive in CEE in the early 1990's, and then reviews the alternative methods of privatisation with their respective strength and weaknesses. I then discuss corporate governance under the different forms of ownership, noting the diversity of stakeholders with influence on management. While these patterns suggest a new form of stakeholder capitalism, firms generally do not appear to have created organizational structures that make stakeholder firms viable.

2 Theoretical Issues 2.1 Objectives of Privatisation Given the wealth of arguments for privatisation, if may be useful to recall why state-ownership exists in the first place, not just in the former socialist economies (Ramamurti 1992). In mature market economies like Western Europe many large firms have been, and some still are, in state-ownership. They were originally set up to combine social with economic objectives, for instance in the health and education sectors or to overcome the market failure associated with natural monopolies for utilities and (traditional) telecommunication services. Elsewhere, the state pushed industrialization by funding capital-intensive investment projects, such as the steel industry. Comparing public and private ownership of firms, both forms have their merits. In economic terms, the basic trade-off can be stated as follows:

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• Under public ownership, the firm is run by a government bureaucrat who maximises a social utility function, which may for instance include redistribution to the poor, moderated by personal objectives of those holding effective power in the administration. • Under private ownership, the firm is run such as to maximise profits. Profits are a component of social welfare, but not identical with it, for instance in the case of a monopoly. Thus, neither system is perfect. The relative performance depends on the efficiency of the market (controlling private enterprises) and the efficiency of the political system (controlling state-owned enterprises). The first welfare theorem, a basic element of neoclassical economics, states that competitive equilibrium obtained by free markets generate (Pareto-) efficient outcomes, independent of the form of ownership (Vickers/Yarrow 1991, Estrin 1994). The only assumption necessary to arrive at this theorem is that economic actors are utility maximizing. Even so, most economists argue that private ownership improves enterprise efficiency. This is attributed to different effects: • Capital markets provide information on privately held firms, which facilitates monitoring of managers’ performance, and creation of incentive contracts using for instance share options. • Private ownership is the basis for creating opportunities for entrepreneurs to create innovations and reap the benefits, as emphasizes especially by the Austrian School of economists like Schumpeter and Hayek. • Private ownership clearly separates the accounts of the firm from the government budget. In consequence, subsidies paid to the firm become observable, and can be scrutinized by political decision makers. This moreover leads to a tightening of the budget constraint because private firms would not expect extra funds in case of poor performance. • Private shareholders pursue their individual utility function, which for most firms is reasonably well approximated by “profit” maximization. The government as owner on behalf of society has to focus on “social welfare”. This however is a vague concept that is interpreted differently by different interest groups, leaving considerable ambiguity for managers’ performance criteria. • Private ownership ensures that enterprise-level decisions are removed from the potential influence of interest group politics. A different line of argument in the political discourse is that privatisation generates revenues for the public sector, and should therefore be promoted. This is however a faulty logic. In principle, privatisation only changes a future income stream to a one-off payment to the amount of the net present value of this future income. It does not change the net-worth of state assets. Even so, this may be off interest to the government if

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Privatisation and Corporate Governance in Eastern Europe: The Emergence of Stakeholder Capitalism

• A country is highly indebted and lacks access to capital markets to finance its budget deficit. This situation may apply highly indebted emerging economies such Hungary in the early 1990's • A government is committed to reduce the “public sector borrowing requirement”, irrespective of the use of the funds. In some countries, like the UK during Margaret Thatcher’s reign, official statistics and the political discourse do not distinguish between public sector expenditures for consumption and for investment. Yet using privatisation revenues to pay for current expenditures may leave the country with depleted public wealth and a structural budget deficit Only if the government revenues argument is combined with an efficiency argument, i.e. privatisation raises efficiency and therefore the net present value under private ownership is larger than that under public ownership, then the arguments becomes valid. Then, the sales price (which is based on expected future revenues under private ownership) will exceed the present value of the stateowned firm. In this view, the evidence that countries with high budget deficits and high foreign debt are more prone to privatise (Ramamurti 1992) allows two interpretations. It may be that countries did under financial constraints what they ought to do anyway, but could not implement, say for political reasons. Yet it may also indicate that some countries have tried to use privatisation revenues to fill gaps in their public sector budgets, thus postponing other necessary structural changes in public sector expenditures or revenue collection. The extent of government revenues however depends on the methods of privatisation. There are important trade-offs between cash receipts and guarantees for investment and/or employment (extensively used by the East German Treuhand). Moreover, certain methods of privatisation, such as voucher privatisation or free transfer to employees and management do not generate revenues. In the East European context, further political arguments supported the drive for privatisation. It was expected to accelerate enterprise restructuring, and thus have a particular strong effect on productivity and efficiency of allocation. The authorities in transition economies may have neither the interest nor the power to impose effective governance on managers, or to create incentives to promote radical change (Estrin 1994). This may be due to the politically unpopular shortterm effects of radical restructuring, the lack of entrepreneurial vision and managerial know-how of bureaucrats, or insiders-power in state-owned firms. Moreover, immediately after 1989, policy advisors were concerned about creating a momentum for reform, and ensuring the irreversibility of the reform process (Estrin 1994). In 1990, the return to a socialist regime was after all not yet impossible. Although this concern quickly faded, it had major implications for the path of reform chosen. 14

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A different concern arose with the collapse of the old control mechanism, the central plan, and the de facto control of stakeholders within the firm over enterprises. The new units of government supposed to supervise and monitor the state-owned firms had neither the experience nor the instruments to fulfil this task effectively. Hence, there has been considerable concern – supported by anecdotal evidence – that the effective insider control during the transition period would allow managers to engage in ‘asset stripping’ or ‘tunnelling’, i.e. removing assets of the firm for their own private benefit. This could be accomplished for instance by selling products or assets to other firms in which the top manager or his/her relations have an equity stake. To prevent such abuse of insider power, speed of privatisation was considered important. The de facto control by insiders has also implications for the timing and the design of privatisation programs. Since insiders have more information about the firms than supervising government authorities, they need to be motivated to support the privatisation. In the case of Poland, they even had formal veto rights arising from the strong position of work councils (an outcome of the Solidarnocz-trade union led political change). In consequence, insiders in Poland and several former Soviet Union countries were often given preferential access to share ownership. Thus powerful stakeholders in the pre-privatisation period could retain their influence in the post-privatisation period (Mygind 2000). In view of these multiple objectives, it is reasonable to ask if privatisation can actually live up to the expectations. The World Bank (1996) summarizes the extensive empirical research on privatisation and efficiency as follows: “Extensive empirical evidence from CEE and elsewhere indicates that most firms, whether state owned or private – or in between, as in the case of China’s ‘non-state’ enterprises – make efforts to restructure if their avenues for rescue close and competition increases. Shrinking subsidies combined with more open markets have universally resulted in labour shedding or falling real wages, or some combination of the two. ... Enterprises subjected to financial discipline show more aggressive collection of receivables, a closer link between profitability and investment, and a reorientation of goals from output targets to profits. Transition forces managers, for the first time, to focus on marketing and product quality” (World Bank 1996: 45, emphasis added).

This citation illustrates that privatisation is only one element of a reform package to improve enterprise efficiency, and the success depends on the entire package of institutional reforms. Research shows that competition is at least as important as privatisation for enterprises to improve their efficiency – a result consistent with empirical research on privatisation in the West (e.g. Vickers/ Yarrow 1988). Therefore, the creation of competition through deregulation and liberalization occurred often simultaneously with privatisation. A competitive environment improves monitoring possibilities by performance comparisons, and it creates incentives for continuous improvement of the firm’s resources and 15

Privatisation and Corporate Governance in Eastern Europe: The Emergence of Stakeholder Capitalism

strategies. However, building the institutional framework for competition is distinct from ownership change as such. In many cases, this institution building has been partial. Hence, Bevan et al. (1999: 14) observe that after privatisation, the key difference is “not how competition affects firm performance, but in the degree to which market forces in transition are either softened or distorted. Firms in transition face ‘soft budget constraints’ more frequently ... and also often obtain protected market positions of various sorts from their governments”. The process of designing and implementing competition policy has been far more complex although liberalization has been swift and comprehensive (Hare et al. 1999). Governments in the less reformed countries continue to protect markets of their local firms, in Russia even at sub-national level1, and even if regulatory laws are introduced, they are not necessarily enforced. Hence, privatisation is part of a broad program of institutional reforms, which also includes opening markets to competition, or regulatory frameworks creating quasi-competitive conditions, hard budget constraints, and effective systems of corporate governance. While privatisation advances many objectives, it is only one step in the process of restructuring the economy. 2.2 Corporate Governance Throughout the capitalist world, governance systems are evolving towards the Anglo-American model, separating the shareholder function from that of other stakeholders, and monitoring firms through equity markets. Managers have to serve shareholders’ interests, who monitor them through the stock market, while other stakeholders normally have comparatively little influence. Shareholders’ lack of direct influence is compensated for by efficient stock markets. In particular, stock options provide powerful incentives for managers to act in shareholders’ interest. Moreover, takeovers provide a mechanism by which widespread equity ownership may rapidly become concentrated (Shleifer/ Vishny 1997). Managers act in anticipation of potential hostile takeover and thus aim at keeping the share price high, which is in the interest of shareholders. In continental Europe, corporate governance systems assign stakeholders such as banks and non-managerial employees a formal role in governance. In Germany, banks play an important role in the monitoring of firms, as most individual 1

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Empirical evidence is mixed, as some studies find evidence for effects of import competition. Russian domestic concentration had a slightly negative effect on productivity in Earle and Estrin (1997), while Jones et. al. (1998) find market share to be associated with higher efficiency in Bulgaria. The small impact of domestic competition may be a result of static established patterns of interaction between incumbents and regional separation of markets. In Russia, a particular problem appears to be the lack of domestic entry, and thus contestable markets, in part due to protective intervention by regional authorities (Broadman 1998). In other countries new entrepreneurial firms are a major source of competition (Estrin 2002).

Meyer, Klaus

shareholders delegate their voting rights to a bank, which then votes in shareholder meetings on behalf of its clients. Moreover, firms often entertain close relationships with their bank, which also may hold some equity. Banks thus have access to inside information, which permits detailed monitoring and gives them a central role in the monitoring process. Japan has a similar bank-based system of governance such that this model is known as the German-Japanese model of governance. However, a global trend over the past two decades has led to more legal protection of shareholders, and reduced role of bank governance. For instance, German banks are divesting their equity stakes in non-bank businesses. Yet, not only shareholders matter. Researchers taking a stakeholder perspective focus on the existence of multiple stakeholders other than owners of equity. A stakeholder is “any group or individual who can affect or is affected by the achievement of the firm’s objectives” (Freeman 1984). The stakeholder literature questions the predominance of one stakeholder group – that is, shareholders – and assumes that the interests of all stakeholder groups have intrinsic value (Jones/Wicks 1999). Stakeholders can use both ‘voice’ and ‘exit’ strategies to influence the firm. The ability to exit strengthens effectiveness of the stakeholder’s voice within the firm, as does a financial stake. Three traditions of stakeholder research have evolved: instrumental, normative and descriptive approaches (Donaldson/Preston 1995). The instrumental view argues that if managers view the interest of stakeholders as having intrinsic value worth, and pursue the interests of multiple stakeholders; this would aid the performance of the firm as viewed from owners’ perspective (e.g. Jones 1995). The normative shareholder perspective intersects with business ethics literature. It starts from the presumption that managers have a moral duty to consider stakeholders other than shareholders (e.g. Freeman/Evan 1990, Donaldson/ Preston 1995, Kochran/Rubinstein 2000). This paper fits in the tradition of descriptive stakeholder research, which starts out from the fact that stakeholders exist, and that they factually have influence on management. This literature analyses theoretically and/or empirically which stakeholders matter, and why (e.g. Brenner/Cochran 1991, Mitchell et al. 1997), or how these stakeholders influence managerial action (e.g. Frooman 1999). As a consequence of diverse forms of ownership, and diffuse control structures, theories considering stakeholders received considerable interest by analysts of corporate governance in transition economies (Buck et al. 1998, Berglöf/von Thadden 1999, Mygind 2001). Enterprises are complex social organizations that bring together individuals with very diverse and potentially conflicting interests. This holds especially true in enterprises undergoing the transformation from plan to market as not only internal but also external stakeholders aim to influence its restructuring strategy. The success or failure of enterprise transformation depends on the combined effort of inter alia, 17

Privatisation and Corporate Governance in Eastern Europe: The Emergence of Stakeholder Capitalism

• Managers, • Employees, • Outside shareholders (after privatisation), who may be dispersed or concentrated • Providers of non-equity capital, • Providers of technology and managerial knowledge, • Suppliers and customers, some related by a long-term cooperation, • Former employees who may still have claims, for instance for a pension, and • Government bureaucrats and politicians, whose support is necessary not only in firms in state-ownership, but also for private firms with a restructuring plan that depends on the regulatory environment, or direct or indirect financial support. In transition economies owners are often comparatively weak relative to other stakeholders, and some of these stakeholders may have ownership rights too. Stakeholder theorists have described managers as the centre of a ‘hub and spoke’ stakeholder system (Jones 1995), which is a particular appropriate description of Russian reality (Buck et al. 1998). Mygind (2001) provides some theoretical foundations for the strength of various stakeholders. He argues that stakeholders’ desire to hold ownership rights is related to specific features of their relationship, including firm-specific resources, outside opportunities, their access to capital and their capability to monitor governance, as well as the homogeneity of the shareholder group. As the market efficiency assumptions of the agency model do not hold in the transition context of Eastern Europe, different types of ownership are necessary to protect the interests of for instance employees. With the progress of transition, market imperfections were remedied and the extent of insider ownership declined. The same is suggested by Buck et al. (1998: 100) who hypothesised that, in the long run, dysfunctional managerial behaviour would lead to failure of firms, and ownership patters would move towards outside shareholders with ‘core shareholdings’. Kochran and Rubinstein (2000) suggest that stakeholder firms can be successful if a) stakeholders add value to ongoing operations, b) organizational processes and governance systems are adapted to complement the contributions of the stakeholders, and c) stakeholder interests are aggregated and conflicts managed effectively. Especially the third criterion creates considerable challenges for leadership in transition economies (Meyer 2001). To make stakeholder firms sustainable, Kochran and Rubinstein (2000) add two more conditions:

18

Meyer, Klaus

d) Stakeholders must have a voice in leadership succession and the incentives under which leaders are employed must motivate them to be responsive to the interests of all the stakeholders. e) The firms needs to overcome resistance to the legitimacy of stakeholders other than shareholders, which may arise from political circles motivated by the Anglo-Saxon models, and informed by economists thinking in terms of agency-theory. Table 1: Alternative Methods of Privatisation - How, and to whom, to privatise? To the To current To previous To outside investors, such as general managers owners foreign or domestic private population and/or workers firms By sale

Stock market flotation; from mid 1990's only

MBO, MEBO; e.g. Poland, Romania

Voucher By free privatisation; distrimost countries bution Source: inspired by Estrin (1994: 21)

-

Restitution; e.g. Bulgaria, East Germany

Auction Negotiated sale, everywhere for tender; e.g. small business Hungary, Estonia -

-

3 Methods of Privatisation When devising privatisation schemes for CEE, policy advisors could draw on the experience of Western countries, notably the UK and some developing countries. Yet, there were important differences. Firstly, while many major Western privatisations are in industries with natural monopolies that require complex regulation to create competition, most firms privatised in Eastern Europe enjoy monopoly powers courtesy of past or present government policy. Hence, the first wave of privatisation was related to liberalization of markets for capital, goods and services, but did not require the establishment of the complex regulation seen for instance in electricity or railway industry. Only in the second half of the 1990's, CEE countries started privatising their utilities. Secondly, some of the standard methods employed before were not usable in the transition context because capital markets were underdeveloped and private wealth was insufficient for private citizens to buy large firms. Therefore a range of innovative methods of privatisation have been developed and employed in the region. Figure 1 provides an overview of the methods of privatisation, distinguishing recipients of the ownership titles, and weather or not they receive the ownership title for free. Before reviewing in detail the methods of privatisation and their advantages and disadvantages, we need to establish the evaluation criteria that policy maker may consider. Based on the objectives of privatisation discussed above the following criteria have been considered (World Bank 1996):

19

Privatisation and Corporate Governance in Eastern Europe: The Emergence of Stakeholder Capitalism

1) Speed and economic feasibility: some methods are fast if a single project is considered but slow if a large portfolio of firms is to be privatised. Political arguments and the concern of insider abuse during the ‘transition’ period favour a speedy privatisation.2 2) Access to fresh resources, both financial and human capital has been a major concern in view of the need to invest in marketing and new technologies, and to develop and implement new strategies. 3) Government revenues, as discussed above. 4) Fairness, as perceived by the local population, which in turn determines the political feasibility. 5) Corporate governance: the means by which dominant decision makers (typically managers) are controlled by other interested parties. 6) Transparency of the process. Nothing has been more damaging to the public credibility of the privatisation program, and in consequence the new market systems, than politicians or managers perceived to be enriching themselves. Table 2: Trade-offs among Objectives for Different Privatisation Methods Effective Speed and Access to Government Fairness corporate feasibility outside capital revenues governance and skills Stock market flotation

--

+

++

+

+

Equal access voucher privatisation

+

-

--

++

-

Management buy-out

--

depends on managers

+

-

++

MEBO with ‘free’ element

+

--

--

-

Sale to outside investors

-

++

++

depends on perspective

++

--

depends on perspective

+

Restitution

+

depends on owner

controversial

Notation: ++: positive effects are highly likely, +: positive effects are likely, -: negative effects are likely, --: negative effects are highly likely.

Source: inspired by World Bank (1996).

Table 2 summarizes the advantages and disadvantages of the different methods. The criterion of transparency depends more on the actual implementation than

2

20

However, Spicer et. al. (2000: 630) argue, “Entrepreneurship is better fostered through gradualist policies permitting negotiated solutions to restructuring”. They are concerned that speedy privatisation may disrupt valuable business ties, and thus favour a more evolutionary approach.

Meyer, Klaus

on the selected method, though arguable direct negotiations with potential buyers is less transparent than an auction or a voucher privatisation. 3.1 Stock Market Flotation The most common method of privatising large firms worldwide is stock market flotation, i.e. the general population would be invited to buy shares in an ‘initial public offering’ (IPO). Theoretically, this method has many advantages: it generates revenues for government budgets, it is generally transparent and thus perceived as fair, and it tends to create a dynamic process of change, which also eases the access to new resources. In practice, however, IPO were not feasible in the transition context because they require developed stock markets, where the capital for the IPO can be raised. Yet stock markets were not in place Eastern Europe, savings that can be invested in corporate assets were small, stock market regulatory institutions had not been established, and detailed financial information on the firms that potential investors would require was not available. A well-organized IPO can be similar to the theoretical model of an auction, and thus raise considerable amounts of money. Yet this requires complex institutions to prepare the firm for the IPO, to provide a prospectus to potential investors, as well as to supervise of the actual bidding process. Privatisation agencies, arguably with the exception of East German Treuhandanstalt, did not have the administrative resources to accomplish these tasks within the time frame envisaged for privatisation. Hence, privatisation agencies used IPOs only from the mid 1990s onward for floating firms on the stock exchange, starting with Poland. These were mostly large firms such as telecommunication or electricity companies, and the initial IPO covered only a minority stake in the firms. 3.2 Voucher Schemes To overcome the shortage of investable private funds, an innovative approach was developed, the ‘voucher privatisation’. The basic idea of this approach is that all citizens receive a voucher, which they then can use to acquire shares in firms. Hence the basic idea of a public bidding process underlying an IPO was created artificially without requiring domestic savings. Voucher privatisation has been implemented in different ways across the region. Most transition countries with the notable exception of Hungary, have implemented a voucher scheme as a main pillar of their mass privatisation (World Bank 1996, Estrin 2002). A major advantage of this method is its high appeal to the voting public. In the political discussions, it was often considered the fairest method of privatisation, because of its egalitarian nature, giving each citizen equal access. In fact, it might be closest to the abstract socialist ideal of making the people at large 21

Privatisation and Corporate Governance in Eastern Europe: The Emergence of Stakeholder Capitalism

owners of capital. The expected political support for the government did however not materialize except in the case of the Czech Republic. A related advantage was the high speed of implementation as no individual negotiations and evaluations were required. And with broad shareholding, the foundations for capital markets were being established, as shareholder would want to trade their shares. However, the people were buying ‘the cat in the sack’ in that they often had limited information about the economic viability of the firms they were bidding for. In this way, the bidding process could in some cases, like Romania, more likened to a lottery than to an auction. The main problems of the voucher schemes were the ownership structures that emerged after the privatisation. In most cases, especially in the Czech Republic, ownership was widely disbursed, while elsewhere insiders acquired substantive shares, for example in Russia. The problems for corporate governance arising from these constellations are discussed below. Voucher schemes did however not generate any revenues to the government budget, nor did it provide new resources to the firm. However, it was expected that after the clarification of ownership, the firms would find it easier to access capital markets and recruit skilled people. 3.3 Management Buy-Outand Management Employee Buy-Out Insiders can buy equity shares through management-buy-out (MBO) or management-employee-buy-out (MEBO) schemes. The latter often draws upon special financial incentives provided by governments, for instance access to loans under favourable conditions. In Russia, MEBO has been mixed with voucher privatisation as employees could use their vouchers to acquire shares in the firm they work for. MEBO and MBO are often strongly supported by those working in the firm. They may be able to convert their stakeholder position into shareholdings, and thus formalize their informal influence over the firm. Insider support overcomes resistance to privatisation, and substantially facilitates the negotiation process. However, the valuation of the assets of the firm is as tricky as when selling to an outside investor and the information asymmetries between insiders (managers) and outsiders (privatisation agency) are even starker. A major challenge with buy-outs is the privatised firm’s ability to access fresh capital and other complementary resources. The privatisation itself brings no new resources. The acquisition of resources thus depends on the new ownermanagers’ ability to attract them. Often MBO/MEBO firms start out with considerable debt, i.e. the loans taken out by the new owners to acquire their equity shares. Moreover, banks tend to be reluctant to lend to insider owned firms, as they may favour employees over debtors’ interests. Hence raising additional capital can be a major challenge. 22

Meyer, Klaus

The revenues that a government can obtain from an MBO/MEBO privatisation depend on its modalities. A traditional MBO generates revenues equivalent to the firms’ value for the old owners. However in many MEBO cases, preferential loans have been given to new owners to finance the MEBO, such that there are no immediate revenues. In fact the incentive scheme may contain a considerable subsidy. Outsiders may question the fairness of MBO/MEBO’s because it favours those working in ‘good’ enterprises, while those employed in poorly performing firms or in the public sector obtain no benefits. Moreover, the transparency of MBO negotiations is often low, leaving room for rumours about insiders getting unfair advantages. The corporate governance implications of these forms of privatisation depend on the actual new ownership structure. 3.4 Sale to Outside Investors A sale to outside investors can occur through an auction, which is a suitable method if information on the firm is readily available and the several bidders are interested in the firm. This method has been use successfully for small firms. Larger firms can be sold through a tender process, in which a round of bidding is followed with direct negotiation with the winning bidder. A pure auction is not feasible where bids may vary not only by the price but for example employment guarantees and investment commitments. Due to the complexity of tender processes, some businesses have also been sold following direct negotiations with interested buyers. The sale to outside investors was feasible in the context of the so-called ‘small privatisation’, as small business units such as shops, restaurants, hotels or repair shops were so to domestic investors, often those who managed them in the past. For medium and large size firms, the only possible outside investors were foreign investors, as local persons lacked the necessary wealth (and credit worthiness) to buy firms. A sale to foreign investors is attractive for several reasons. It generates substantial revenues for government budgets, unless – like in Eastern Germany – enterprises are given away at low prices in return for investment and employment guarantees. The new owners can generally also provide financial resources and new management skills to the firm, which enables deep restructuring. Moreover, the new owners are firmly in control and have strong incentives to restructure the firm towards a profit oriented organizations. The potential disadvantages of this form of privatisation are the feasible speed of this approach, the political acceptability of foreigner taking over local businesses, and extreme case the possible foreign dominance, and thus potentially dependence, in a particular sector. However, considerable resources and time are required to assess each individual firm, and to negotiate with potential buyers. Auctions can speed up this process, 23

Privatisation and Corporate Governance in Eastern Europe: The Emergence of Stakeholder Capitalism

but these too have to be prepared, and may require individual negotiations with the winning bidder to stipulate the details of the deal. By the fairness criterion, a sale to foreign investors is no better or worse than other methods, if markets are efficient. Citizens do not get direct ownership in firms, but – theoretically – the government revenues from the sale of state assets translate into lower taxes. In practice, there may be obstacles for governments to realize the true value of a firm, especially if privatisation is implemented very fast. Firstly, information asymmetries favour firm insiders and their business partners over outsiders. Secondly, the organization of auctions that meet the requirements set out by economic theory, notably full information, is difficult and costly. Thirdly, the under-valuation of currency during transition weakens the sellers bargaining position. These concerns of local agents contrast with foreign investors who claim to have overpaid, or discovered the true costs of restructuring and other liabilities only after having taken over a firm. In the political process surrounding privatisation it is also seen as a disadvantage that the population at large receives nothing tangible. A related but equally important political concern is the low transparency of negotiations with potential individual investors. Especially in the context of mass privatisation and thus radical change of the ownership structure of an on national level, such concerns are politically important. Solid economic analysis of costs and benefits would alleviate some but not all of such concerns. 3.5 Restitution to Former Owners In many countries where property had been expropriated after World War II, previous owners and their descendants received the ownership titles or were otherwise compensated. One might expect such re-assertion of old ownership titles to be the fastest way to establish clear ownership. However, in practice the clarification of ownership titles after 40 or 50 years has in many cases been lengthy and cumbersome. Legal documents may have been destroyed; inheritance claims need to be settled and firms may have to be separated from larger units in which they have been integrated. In particular East Germany saw many assets left in libido while ownership conflicts were being settled. This period of inaction contributed to the output fall and gave newcomers opportunities to establish themselves on local markets. From a legal perspective, restitution of the original property appears to be the most natural approach. However, the original property rarely exits still in the same form, a building has been renovated, a firm has been restructured, and agricultural land may have become a suburb. The anecdotal West German asking an East German homeowner to leave his house because it is standing on his grandfather’s land illustrates the conflicts arising with restitution. Several East Europeans saw it as a massive transfer from those who worked to build 24

Meyer, Klaus

factories and houses over 40 years to those who left the country to grow rich, and thus question the ethics of such restitution. Many countries thus opted compensating former owners in cash, tax benefits or vouchers rather than returning the original property. The governance implications of restitution to former owners vary. There are cases where a Western returné took over the company, and contributed entrepreneurial energy and complementary resources to build a flourishing enterprise. Equally, there are cases where the new owner in the next generation has no interest or competence to run the firm, and in the best case would sell the firm to an interested third party. Most difficult where those cases where a business unit had to be separated from a larger business for restitution, thus disrupting the production process. 3.6 Privatisation Processes Across the transition economies in Europe and Central Asia, a mix of different privatisation methods has been used, and the specific programs vary in many details. A broad overview is given in Table 3, which outlines which methods have been most important in each of the countries covered by the EBRD. The table also reports the EBRD’s assessment of progress in privatisation and corporate governance. The advanced countries relied to a larger extend on direct sales, while MEBO has been very important in some of the slow privatising countries. However, the choice of privatisation method, and the selection of potential investors, is not a straightforward process that is implemented on a master plan. Political institutions, mostly the parliament, take basic decisions; and privatisation agencies or other governmental authorities take administrative decisions. Many stakeholders in the firm, or individuals and organizations that wish to take a stake in the firm aim to influence these decisions in their favour. This makes the decision processes complex, and subjects to political interference. Stakeholders may gain influence based on legal rights, including equity stakes, or by using their control over resources needed by the organization as bargaining lever (Mygind 2001). They may participate in formal negotiations and decision making processes, or seek influence by informal means, including politicking. This may involve appeals to public opinion and the media to support ones cause, or through internal tactics such as manipulation of interests, manipulation of information, or manipulation of time (Antal-Mokos 1998). In the short run, intense politics divert managers’ attention from running the business. Instead of developing products, pleasing customers, trying to gain market share etc., managers will be preoccupied with “doing the deal” (Antal-Mokos 1998). This eventually hurts corporate health: market positions may erode, and the financial situation may weaken. In the long run, some 25

Privatisation and Corporate Governance in Eastern Europe: The Emergence of Stakeholder Capitalism

otherwise viable firms may go under, and some stakeholder are able to formalize and retain their influence, for instance by ’converting’ their stake to equity. Foreign investors have to take these complex negotiation processes into account when considering a bid, which may lower their interest to become involved. The more the local firm is drifting before a foreign investor can take over control, and the more agents are involved in the process, the more difficult it becomes to turn the firm around to become a profitable affiliate of the investor (Meyer 2001b, Meyer 2002). What is the empirical evidence on privatisation; does it generate the expected improvements in enterprise efficiency? A major research effort has been devoted over the past decade to the empirical analysis of post-privatisation performance (reviewed by Havrylyshyn/McGettignan 2000, Djankov/Murrel 2002, Estrin 2002). Early studies did, contrary to expectations, not find significant improvements in performance clearly attributable to privatisation. However, the overwhelming evidence across CEE is today, that privatisation has increased productivity. For example, Claessens and Djankov (1998) estimate that privatised firms increase their total factor productivity by on average 5% per year across seven CEE countries. The effect of privatisation on performance is however much smaller in Russia and Ukraine, where the relevant coefficients were small (Barberis et al. 1996, Earle/Estrin 1997) or insignificant (Estrin/ Rosevear 1998). More differences are observed between SOEs and privatised firms if measures of strategic restructuring are applied (Earle/Estrin 1997, Estrin/Rosevear 1999). However, the effects are not as large as many policy makers expected such that the many observers find the overall performance of the corporate sector rather disappointing (e.g. Nellis 1999, Spicer et al. 2000). As the long-term benefits of private ownership are rarely disputed, empirical researchers have focussed their main attention to differences of performance between firms in different forms of ownership. The results do not show consistent results concerning the relative efficiency of different ownership types in privatised firms, except to note that newly established firms outperform old ones. Djankov and Murrel (2002) based on a review of 23 empirical studies infer that the most efficient forms of ownership are foreign ownership, concentrated outsider ownership, and managerial ownership. In the middle category are bank ownership, commercialised state-ownership and insider-ownership. The weakest firms are in state-ownership or with dispersed outside ownership. Overall, few performance differences can be explained by the differences in ownership and governance structure, especially in the former Soviet Union (Estrin and Wright 1999). Possibly more important are the institutional framework and the means available to shareholders to actually monitor and influence managers, in other words the mechanisms of corporate governance.

26

Meyer, Klaus

Table 3: Method and Progress of Privatisation Method of Privatisation Country

EBRD Index

Private sector share, mid 2001

Large Privatisa tion

Small Privatisa tion

Corporate Governance

Primary

Secondary

Czech Republic

Voucher

Direct Sale

80%

4

4+

3+

Hungary

Direct Sale

MEBO

80%

4

4+

3+

Estonia

Direct Sale

Voucher

80%

4

4+

3+

Slovakia

Direct Sale

Voucher

80%

4

4+

3

Lithuania

Voucher

Direct Sale

75%

4-

4+

3

Poland

Direct Sale

MEBO

75%

3+

4+

3+

Albania

MEBO

Voucher

75%

2+

4

2

Bulgaria

Direct Sale

Voucher

70%

4-

4-

2+

Latvia

MEBO

Voucher

70%

3+

4+

3-

Russia

Voucher

Direct Sale

70%

3+

4

2+

Armenia

Voucher

MEBO

70%

3+

4-

2+

Georgia

Voucher

Direct Sale

65%

3+

4

2

Romania

MEBO

Voucher

65%

3+

4-

2

Slovenia

MEBO

Voucher

65%

3

4+

3

Kazakhstan

Voucher

MEBO

65%

3

4

2

Ukraine

MEBO

Direct Sale

65%

3

4-

2

Croatia

MEBO

Voucher

60%

3

4+

3-

Macedonia, FYR

MEBO

Direct Sale

60%

3

4

2+

Kyrgyz Republic

Voucher

MEBO

60%

3

4

2

Azerbaijan

MEBO

Voucher

60%

2

4-

2

Moldova

Voucher

Direct Sale

50%

3

3+

2

Tajikistan

Direct Sale

Voucher

50%

2+

4-

2-

Uzbekistan

MEBO

Direct Sale

45%

3-

3

2-

Bosnia & H.

Voucher

Direct Sale

45%

2+

3

2-

Serbia & M.

n.a.

n.a.

40%

2

3

2

Turkmenistan

MEBO

Direct Sale

25%

1

2

1

Belarus

MEBO

Voucher

20%

1

2

1

Note: EBRD indices are assessments a the scale: 4 + standards and performance typical for advanced industrial countries, 1 = little reform progress

Source: EBRD (1999, 2002)

27

Privatisation and Corporate Governance in Eastern Europe: The Emergence of Stakeholder Capitalism

Why did privatisation not induce the expected deep restructuring? Two lines of argument have been advanced in the literature. Economists have primarily focussed on ownership and corporate governance structures that may or may not create suitable incentives for managers to fulfil the owner’s objectives. However, the unsatisfactory enterprise performance led to a sense of dissatisfaction with agency-based perspective as main avenue for analysing enterprise transformation, and the search for alternative theoretical approaches (e.g. Spicer, et al. 2000, Uhlenbruck et al. 2003). Management scholars have additionally analysed the process of change in the firms, which is more complex than what can be depicted in formal economic models (e.g. Newmann 2000).

4 Governance under different Forms of Ownership The problems of governance in the transition economies vary with the ownership. The privatisation processes led to a variety of ownership patterns within each country of the region, as illustrated in Figure 1 adapted from Earle and Estrin (1997). This includes dispersed shareholders, investment funds as dominant owners, management and employee owned firms, firms with residual state ownership as well as firms with partial or full foreign ownership. These alternative forms of private ownership create very different mechanisms of control over management. Figure 1: Firms by Type and Ownership

Firms by Type of Ownership New private firms

Old firms State-owned firms

Privatized firms Insider-owned firms

Outsider owned firms Dispersed ownership

100% State owned Minority privatized

Source: Earle/Estrin 1997

28

Worker owned Manager owned Mixed ownership

Dominant outside owner Banks Investment funds Foreign investors Domestic firm Individuals

Meyer, Klaus

4.1 Dispersed Ownership The voucher-based mass privatisation has led to severe but often unforeseen corporate governance problems. Policy makers and their advisors who designed these schemes generally had in mind to create Anglo-American types of governance systems. However, the practice has shown that this model depends on sophisticated institutions that were not in place at the time, and moreover are difficult to create where frameworks are unclear and the law enforcement is weak. With dispersed ownership and indirect control structures, many shareholders have the right to monitor the firm. Yet few if any may have the necessary power, incentives and capabilities. Individual shareholders with a few shares have only little leverage to influence management, as they would only get a small return on their monitoring efforts, and many may lack the basic expertise to understand corporate accounts and corporate strategy. The Anglo-American model requires credible threats of takeovers, and thus efficient and liquid markets for equity – which are rare in emerging markets. The nascent stock markets lack efficiency and transparency, and the legal requirements to involve outside shareholders and to publish relevant information are established only gradually, and even slower implemented. Even basic accounting and auditing practices have not been implemented everywhere. Hence outside shareholders face considerable information gaps. In many transition economies, investment funds have sprung up, like in the Czech Republic, or been created by the privatisation authorities, like in Poland. They became major stakeholders in voucher-privatised firms. Yet this raises the issue of who controls the controller? In other words, do the managers of these funds have appropriate incentives to act in the interest of the shareowners whose shares they administer? The Czech scheme – the first and most publicised – privatised a major share of the country’s assets in several waves of multiple-auction bidding processes. Investment funds attained considerable power through the accumulation of vouchers and bidding on behalf of individuals. They control major Czech businesses, but in turn are often owned by banks, that largely are still stateowned even ten years after the onset of transition. This creates interdependent institutions without clear monitoring and control structures, but with multiple agents that have hold-up power (Hayri/McDermott 1998). The concern for corporate governance under such conditions stimulated considerable research in the Czech Republic. Claessens et al. (1997b) find that firms with ownership concentrated among a small number of shareholders or investment funds tend to perform better in terms of both operating profits and market valuations. Based on the same data, Weiss and Nikitin (2002) find that the results depend on the type of owner, as firms with ownership concentrated in bank-managed funds show 29

Privatisation and Corporate Governance in Eastern Europe: The Emergence of Stakeholder Capitalism

inferior performance. They attribute this to the fact that these are typically ‘closed-end funds’ where shareholders have less leverage to control fund managers. The lack of effective corporate governance structures has frequently been blamed for the slow progress of enterprise restructuring in the Czech Republic (e.g. Nellis 1999). In Poland, mass privatisation was delayed due to political conflicts over its conditions, while policy makers tried to avoid the pitfalls of the Czech scheme. In 1996, shares of some 500 enterprises were allocated to government-sponsored investment funds, which in turn were privatised through vouchers that are now traded on the Warsaw stock exchange. Each enterprise was initially owned by a fund holding 33% of equity, plus minority shareholdings by the other funds, workers, and the government (Ławniczak 1997). Each fund had a supervisory board appointed by owners, i.e. initially the privatisation agency, who in turn recruited international financial service firms or consortia as management firm. The boards of the industrial firms participating in the program consisted of 4 representatives of the lead shareholder fund, 2 representatives of the minority shareholders, one representative of the state treasury and 2 employee representatives. The funds would manage the stakes like a closed-end investment fund, and trade shares in individual firms as they found appropriate, including sale to foreign investors (Ławniczak 1997). While overcoming defaults of corporate governance in the Czech voucher privatisation, the Polish scheme still suffers from conflicts between different control institutions, including the funds’ supervisory boards, the management firms, and the state representatives on either board. In Russia the voucher privatisation of 1993 has mixed elements of ownership transfer to insiders and to the public at large. Although the policy advisors intended to create dispersed ownership and liquid stock market along the AngloAmerican model, most firms ended up under the control of insiders (e.g. Estrin/ Wright 1998, Buck et al. 1998). Outside shareholders have experienced in particular obstacles to gaining a fair share of the economic return of the firm in the absence of legal institutions to enforce their claims. This includes investors holding substantial blocs of share. In contrast to Czech evidence, ownership concentration was not found to improve performance by Earle and Estrin (1997). Thus, the voucher schemes of CEE have been a large social experiment, with long-term implications that are yet to be revealed. Many expectations have not been met, but they may have been overly optimistic. Throughout CEE, voucherprivatised firms have been struggling with creating effective mechanisms of governance, and defining the role of diverse stakeholders. In many cases, investment funds are the dominant stakeholder, acting on behalf of shareholders, whereas elsewhere managers are effectively in control.

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4.2 Managerial Ownership If managers own a firm, the principal-agent conflict between managers and owners is eliminated. Partial managerial ownership may help to align the interests of managers and owners, but under some constellations may raise concern over the protection of minority shareholders. However, several arguments suggest that also managerial ownership in transition economies can pose potential problems for governance. This concerns firstly the entrenchment of incumbent managers, and the selection mechanisms of recruiting the bestqualified individuals into leadership positions. Incumbent managers often could hold on to their jobs throughout the privatisation process. For instance, voucher schemes do not have a build-in mechanism to replace managers that may hold their position since being appointed during socialist times – commonly known as ‘Red Directors’. If the owner-managers control a large share of equity, and their outside career opportunities are lower than their current income, then they have strong incentives to retain their share to increase their job security. If, on the other hand, managers acquired the firm through an MBO, this process is likely to act as a selection mechanism that brings only the most qualified individuals into the top management positions (Carlin/Landesmann 1997: 89). Only managers believing in their ability to improve enterprise performance would be willing to invest their own capital, and only well qualified managers would be able to raise capital externally to finance the MBO. After the privatisation, managers have often increased their holdings of equity by acquiring shares from employees or other shareholders (possibly at undervalued prices), for example in Estonia (Jones/Mygind 1999, Kalmi 2002). Both entrenchment of incumbents and entry of capable entrepreneurial managers may drive this trend. A different line of theoretical work attributes superior performance of private firms not only to incentives for agents but the ability of private firms to attract and select more qualified managers (Rosen 1992, Barberis et al. 1996). The efficiency of mechanisms of replacing managers may be crucial for restructuring performance because lack of managerial qualifications for the market economy is a major source of poor performance. MBOs, and even more Management Buy-Ins, contain a competitive element to select better qualified managerowners. These arguments suggest two propositions on the performance implications of managerial ownership. Firstly, the individual personality of the manager, in particular the qualification and the entrepreneurial talent, is crucial for performance of manager-owned firms. Secondly, firms acquired through MBO perform better than those acquired by managers in a voucher scheme. Both propositions are supported by empirical evidence. Case studies (e.g. Newman/Nollen 1998, Johnson/Loveman 1995) show that exceptional managers 31

Privatisation and Corporate Governance in Eastern Europe: The Emergence of Stakeholder Capitalism

distinguish the best performing firms. In Newman’s cases, strong leadership in terms of strategic thinking, decisiveness and initiative, and attention to operational efficiency distinguished the most successful Czech firms. Djankov (1998) also stresses the importance of qualifications as he finds that Moldavian enterprises in which managers have engaged in retraining have substantial sales increases and conduct more restructuring. The importance of bringing in new managers, rather than creating stronger incentives for incumbents is highlighted in two studies. Barberis, Boyko, Shleifer and Vishny (1996), who present one of the first major quantitative studies on the effects of privatisation in Russia, analyse 452 shops, and find that human capital change stimulates restructuring. Similarly, Claessens and Djankov (1998) find that performance in the Czech Republic is improved by changing managers, but not by providing managers with incentives in form of equity stakes. All their performance indicators are negatively correlated with the length of tenure of the general manager of the firm, but positively correlated to external recruitment of managers. Neither Barberis et al. (1996) nor Claessens and Djankov (1998) find evidence for equity ownership by managers to be related to improved performance. However, neither of them included MBOs. Other studies, e.g. Earle and Estrin (1997a) and Jones (1998), find better performance by management owned firms. Djankov (1999a) finds management ownership to have positive effects on productivity and asset sales at low levels (below 10%) and at high levels (over 30%), but negative in the intermediate category. The evidence may also be indicative of insiders taking advantage of their knowledge and control, as dispersed outside owners lack effective means to monitor managers. It may however also be due to the different avenues that led to management ownership. 4.3 Employee Ownership Employee ownership is common where the privatisation procedures gave insiders preferential access to ownership (Uvalic/McVaughan-Whitehead 1997, Jones/Mygind 1998, Buck et al. 1998)3. Especially in Russia, the rapid mass privatisation has been achieved by providing insiders opportunities to attain ownership right and thus motivate their cooperation in the privatisation process (Boyko et al. 1995, Blasi et al. 1997, Wright et al. 1998). However, many commentators see the widespread employee-ownership as an obstacle to enterprise transformation because workers may pursue motives other than profit maximization, complicate internal decision processes, and inhibit radical change in the organization (e.g. Boyko et al. 1995, Havrylyshyn/Gettigan 1999). On the 3

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Contrary to widely held perceptions, partial employee-ownership is also a common phenomenon in Western countries, including the USA as reported by for instance Demsetz (1983) and Blasi and Kruse (1991).

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other hand, employee-ownership can have positive effects on productivity through motivation and a cooperative atmosphere that increases trust and information sharing (e.g. Ben-Ner/Jones 1995). Based on principal agent models, Aghion and Blanchard (1998) explore the effects of insider ownership. They conclude that if deep restructuring requires both external finance and further labour shedding, then insider privatisation should be avoided. However, giving managers equity shares in the privatised firms would improve their incentives to behave in more profit maximizing manner. If insider ownership is preferred, then Aghion and Blanchard (1998) argue for tradable shares to avoid entrenchment of incumbent managers. However, as many employees see ownership shares primarily as a means to increase their job security, they are likely to collude to inhibit sales to outsiders (Kalmi 2000). The empirical evidence on performance implications is hotly debated as many Western advisors see it as a key obstacle to restructuring (e.g. Havrylyshyn/ Gettigan 1999)4. The results of empirical studies of the effects of insider-ownership on firm performance are highly sensitive to the selected proxy of performance. Furthermore, insider ownership has to be distinguished between manager-owned firms and employee-owned firms. Most studies find beneficial effects from employee-ownership compared to the status quo of state-ownership. However, generally foreign- and manageriallyowned firms outperform employee-owned firms (Djankov/Murrel 2002). Yet some studies also find positive effects of employee ownership compared to dispersed shareholding on production efficiency (Smith et al. 1997, Jones/Mygind 1999). However, after controlling for endogeneity of ownership, i.e. the fact that insiders are more likely to take over good firms, the positive effects disappears in Central Europe. For CIS countries, worker ownership even has a negative effect compared to status quo state-ownership, while manager-ownership and general insider-ownership has positive effects (Djankov/Murrel 2002: 762, 786). Russia presents a special case of employee-ownership, as it is widespread but often does not give effective control to employees. Following the voucher privatisation with special preferences for employees, many firms are formally employee-owned, but effectively controlled by managers. Several authors point out that Russian managers have dominating influence over major decisions, whether owners or not, also in nominally employee-owned firms (Blasi et al. 1997, Jones 1998, Mygind 2001). Buck et al. (1998) found that although firms

4

The most cited study showing the performance of employee-owned firms is indistinguishable from state-owned firms is Frydman et. al. (1999). However, Kalmi (2002) notes that their sample is somewhat problematic. It consists of 185 firms in Poland, Hungary and the Czech Republic, of which only 10 were employee-owned, all in Hungary. Kalmi notes that a random sample should normally have included employee-owned firms in Poland.

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were nominally employee-owned, managers perceived market conditions and state control as key constraints to their freedom to act. Moreover, managers in the majority of their sample firms intended to buy shares from employees, or had already done so. In most of these cases they openly admitted that these acquisitions were designed to prevent the sale to outsiders (Buck et al. 1998: 96). Employee influence appeared to have actually declines with privatisation, evidenced with fewer employee representatives on corporate boards. The governance implication is that the separation of ownership and control allows managers to pursue their personal objectives at the expense of the interests of the employees. Kalmi (2002) finds employee-ownership is generally not motivated by the goals of improving labour relations and of improving productivity, as are employee-share ownership schemes in the West. Rather they are seen as means to attain higher job security. Thus, ownership does not lead to more participation and restructuring to increase motivation and productivity. As employee-ownership arose out of specific conditions of privatisation, a key issue is weather it will be sustained in the long term, or weather it is a temporary phenomenon. The need to raise fresh capital would be expected to induce insider-controlled firms to accept new outsider equity stakes and provide acquisition opportunities. However, most early empirical studies suggest that outsiders face considerable obstacles to obtain ownership and effective control of privatised firms, among other reasons because stock market institutions such as protection of minority shareholders are not in place, especially in the former Soviet Union. Empirical studies thus report that patterns of ownership change only slowly and the share of equity held by outside investors is slowly increasing (Buck et al. 1998, Jones/Mygind 1999). Kalmi (2002) presents more recent evidence in his PhD dissertation. He shows that in a representative sample of Estonian firms, the percentage with dominant employee-owners declined from 19.8% at the time of privatisation to 15.1% in 1995 and further to 7.5% in 1999. However, including managers and former employees, the proportion of firms in insider ownership stays roughly stable. Kalmi (2002) moreover explores the dynamics of ownership changes. He finds that shares are rarely traded, and new employees are not offered the opportunity to acquire shares. Rather, ownership structures change by increased shareholdings by former employees, and via new share issues to raise fresh capital where employees do not buy new shares. If shares are traded, they tend to be acquired by managers. Since share-ownership is commonly seen as a means to increase job security, insider-owners collude to prevent sale of shares to outside investors. However, employee-ownership declines mainly due to attrition, as the institutional context does not provide mechanisms that would enable or encourage new employees to acquire shares. However, the influence of employees is not limited to their ownership of shares. One unpredicted consequence of east European privatisation is the influence that 34

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managers and/or worker councils attained, de facto or de jure, notably in Poland and many CIS countries. Workers attained considerable influence over managerial decisions pre-privatisation in Poland, while their counterparts in Hungary and the Czech Republic actually had less influence than in, say, Germany (Estrin et al. 1995a). Consequently, many cases have been reported in Poland, where work councils have blocked restructuring proposal (Carlin et al. 1995) or the take-over by a foreign investor (Bak/Kulawzuk 1997). In many cases, insiders managed to convert their de facto control into formal ownership by opting for privatisation modes that gave them preferential access to shares. This explains why many firms, particularly in Poland and the former Soviet Union, have managers and employees as minority or even majority shareholders (e.g. Åslund 1995, Blasi et al. 1995). In conclusion, through a variety of channels, inside stakeholders have been able to attain formal ownership and/or control rights. In some cases, this translates to effective influence over strategic decisions made by management; in other cases, notably in Russia, managers are effectively in control. However, few if any firms appear to have adapted an organizational culture that would promote the democratic and motivational aspects of employee ownership; and over time, the share of employee-owners is declining (Kalmi 2002). This is a gradual process, and in the medium term, companies have to live with employee owners, for better or worse.

5 A Future for Stakeholder Capitalism? The transition economies have developed corporate governance systems that differ from those in mature market economies, even taking into account the variation between for instance the USA and Continental Europe. Some of the largest firms in the region are subject to weak governance while enjoying close contacts to government and, in some ex-Soviet Union states, considerable barriers to entry. Yet other firms have gone far in shedding these legacies of the 20th century. The emerging diversity of governance mechanisms and competition patterns is likely to be a continuing feature of the region for years to come. The evidence and analysis indicates that clear governance structures as suggested by agency theorists are more the exception than the rule. The advice to create clearer governance structures and an institutional framework to support them is likely to benefit in the long term, but does not help addressing problems facing businesses in the short run. Managers in many firms have to deal with the fact that many stakeholders that take an active interest, and may have possibilities of blocking restructuring decisions (e.g. Hayri/McDermott 1998). New forms of corporate governance are emerging in CEE, which we may call stakeholder capitalism. This creates unique opportunities and challenges for managers and for stakeholders. On the one hand, some managers are in effective 35

Privatisation and Corporate Governance in Eastern Europe: The Emergence of Stakeholder Capitalism

control of the firm as shareholders and other stakeholders are too disbursed to monitor them. This creates corporate governance problems, as managers appear free to pursue their own objectives at the expense of others. On the other hand, some managers face multiple stakeholder interests with some degree of influence over their decisions, which creates unique challenges for leadership to coordinate diverse groups of people to pursue a common path of change (Meyer 2001a). Especially, when faced with a need for radical corporate change, this task can be daunting. Thus managerial power may be too large in some cases, and too small in others. The unusual circumstances of economic transition led to unusual patterns of ownership, and thus unusual governance structures. These governance systems may not be conducive to radical change due to complex coordination challenges, as too many stakeholders may inhibit change. The most frequent heard advice is to change ownership and governance structures such as to meet the assumptions of theory, in particular to create clear principal-agent-relationships, and to oblige managers to provide more information about the firm. There has been less discussion on new approaches to management that would help overcoming the inherent coordination problems of stakeholder ownership. Yet this should be worth thinking about, as changes in corporate governance systems will take time. In the meantime, firms that manage the coordination task best are likely to outperform the rest. The decision making by building consensus among stakeholders has several potential pitfalls, it may be time consuming, and not conducive to change that is radical or that involves major trade-offs between (relative) winners and losers. In contrast, decision making by principal over agents is quick and decisive, although possibly divisive, and the managers have a strong authority to implement decisions, if the person legally in charge makes decisions. Arguably, decision-making by consensus is more appreciated in the cultures of continental Europe, including Eastern Europe, and Asia, while decision making by principals over agents is more associated with Anglo-Saxon cultures.It is unclear how persistent the stakeholder influence will be. The stakeholder capitalisms will be sustainable only if firms develop appropriate organizational structures and cultures to take advantage of the motivation that employee-owners may contribute. A crucial aspect will be to develop mechanisms of coordination and conflict resolution. Thus, stakeholder interests must be aggregated, and conflict be managed effectively. This required adaptation of organizational processes and governance systems to complement the contributions of the stakeholders. If on the other hand, stakeholder firms do not demonstrate that they can perform well, they are likely to convert to conventional governance structures. This applies in particular where no mechanisms exist to give new stakeholders, such as new employees, access to equity stakes, while retiring employees leave the firm and become outside shareholders. In consequence, there are strong 36

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tendencies of convergence to West European models of governance, as banks and investment funds gain influence, while employees lose influence.

6 Conclusion The privatisation process in CEE has created various forms of stakeholder ownership, especially insider ownership. Gradually, ownership patterns are moving to outsider ownership, and more concentrated ownership. Employeeowned firms ’deteriorate’ while there is no mechanism to create new ones, while financial institutions gain in competence and influence. At the same time, gradually, financial market institutions are improving. However, the convergence to West European or Anglo-Saxon systems of governance is slow. The identity of multiple stakeholders may change, but stakeholder influence will be around for quite some time. This creates challenges for managers and in consequence for academic researchers. Future research may pay more attention to the practical consequences of stakeholder ownership. For example, how can firm take advantage of the potential benefits of stake-holder ownership, i.e. the motivational effects? What are the leadership challenges in stakeholder-owned firms, how can leaders overcome conflict, and build consensus? How does firm’s performance change as it is changing from one form of ownership to another, say from employee ownership to managerial or outsider ownership? These questions should be addressed not only by cross-sectional studies, as most of the research so far is, but by using longitudinal research designs, or panel data.

7 References Aghion, P./Blanchard, O. (1998): On Privatisation Methods in Eastern Europe and their Implications, in: Economics of Transition 6, pp.87-99. Andreff, W. (1999): Privatization and Corporate Governance in Transition Countries: Quantitative Success and Qualitative Failure, in: Management International / International Management / Gestión International 4, pp.11-30. Antal-Mokos, Z. (1998): Privatisation, Politics, and Economic Performance in Hungary, Cambridge. Åslund, A. (1995): How Russia became a Market Economy, Washington, DC. Barberis, N./Boyko M./Shleifer, A./Tsukonova, N. (1996): How does Privatisation work? Evidence from Russian Shops, in: Journal of Political Economy 104, pp.764-90. Ben-Ner, A./Jones, D.C. (1995): Employee Participation, Ownership and Productivity: A Theoretical Framework, in: Industrial Relations 34, pp.532-554. Berglöf, E./von Thadden, E.-L. (1999): The Changing Corporate Governance Paradigm: Implications for Transition and Developing Countries, mimeo, Stockholm and Lausanne.

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Bevan, A.A./Estrin, S./Schaffer, M. (1999): Determinants of Enterprise Performance during Transition, CERT Working Paper no. 99/03, Heriot-Watt University, Edinburgh. Blanchard, O./Kremer, M. (1996): Disorganization, in: Quarterly Journal of Economics 62, pp.1091-1126. Blasi, J.R./Kruse D.L. (1991): New Owners, New York. Bok, M./Kulawczuk P. (1997): Foreign Investment Withdrawals from Poland: Case Studies and Recommendations, mimeo, The Institute for Private Enterprise and Democracy, Warsaw. Bornstein, M. (1997): Non-standard Methods in the Privatization Strategies of the Czech Republic, Hungary and Poland, in: Economics of Transition 5, no. 2, pp.323-338. Boyko, M./Shleifer, A./Vishny, R.W. (1996): A Theory of Privatization, in: Economic Journal 106, pp.309-19. Brenner, S.N./Cochran, P.L. (1991): A Stakeholder Theory of the Firm: Implications for Business and Society Theory and Research, in: Mahon (ed.): International Association for Business and Society – 1991 Proceedings, pp.449-467. Broadman, H.G. (1998): Reducing Structural Dominance and Entry Barriers in Russian Industry, in: Broadman (ed.): Russian Enterprise Reform, Washington, DC: World Bank. Buck, T./Filatochev, I./Wright, M. (1998): Agents, Stakeholders and Corporate Governance in Russian Firms, in: Journal of Management Studies 35, pp.81-104. Carlin, W./Landesmann, M. (1997): From theory into practice? Restructuring and dynamism in transition economies, in: Oxford Review of Economic Policy 13, no. 2, pp.77-106. Carlin, W./van Reenen, J./Wolfe, T. (1995): Enterprise Restructuring and Dynamism in Transition Economies, in: Economics of Transition 3, pp.427-458. Claessens, S./Djankov, S. (1998): Managers, Incentives and Corporate Performance: Evidence from the Czech Republic, mimeo, The World Bank, April. Demsetz, H. (1983): The structure of ownership and the theory of the firm, in: Journal of Law and Economics 26, 2, pp.375-90. Djankov, S. (1999a): Ownership Structure and Enterprise Restructuring in Six Newly Independent States, in: Comparative Economic Studies 41, pp.75-95. Djankov, S. (1999b): The restructuring of insider-dominated firms: A Comparative Analysis, in: Economics of Transition 7, pp.467-480. Djankov, S./Murrel, P. (2002): Enterprise Restructuring in Transition: A Quantitative Survey, in: Journal of Economic Literature 60, no. 3, pp.739-792. Donaldson, T./Preston, L.E. (1995): The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications, in: Academy of Management Review 20, pp.65-91. Earle, J.S./Estrin, S. (1997): After Voucher Privatization: The Structure of Corporate Ownership in Russian Manufacturing Industry, CEPR Working Paper no. 1736, December, London. EBRD – European Bank for Reconstruction and Development (annually since 1992): Transition Report, London.

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Estrin, S. (2002): Competition and Corporate Governance in Transition, in: Journal of Economic Perspectives 16, no. 1, pp.101-124. Estrin, S. (ed.) (1994): Privatization in Eastern Europe, London. Estrin, S./Rosevear, A. (1999): Enterprise Performance and Corporate Governance in Ukraine, in: Journal of Comparative Economics 27, pp.442-458. Estrin, S./Wright, M. (1999): Corporate Governance in the Former Soviet Union: An Overview, in: Journal of Comparative Economics 27, pp.398-421. Filatochev, I./Buck, T./Zhukov, V. (2000): Downsizing in privatized firms in Russia, Ukraine, and Belarus, in: Academy of Management Journal 43, pp.286-304. Freeman, R.E. (1984): Strategic Management: A Stakeholder Approach, Boston. Freeman, R.E./Evan, W.M. (1990): Corporate Governance: A Stakeholder Interpretation, in: Journal of Behavioural Economics 19, pp.337-359. Friedman A.L./Miles, S. (2002): Developing Stakeholder Theory, in: Journal of Management Studies 39, pp.1-21. Frooman, J. (1999): Stakeholder Influence Strategies, in: Academy of Management Review 24, pp.191-202. Frydman, R./Gray, C./Hassel, M./Rapaczynski, A. (1999): When does privatisation work? The Impact of Private Ownership on Corporate Governance in Central Europe and Russia, in: Quarterly Journal of Economics 114, pp.1153-1191. Hare, P./Batt, J./Cave, M./Estrin, S. (1999): Introduction, in: Hare, P./Batt, J./Estrin, S. (eds.): Reconstituting the Market, The Political Economy of Microeconomic Transformation, Amsterdam, pp.1-30. Hawrylyshyn, O./McGettigan, D. (1999): Privatization in Transition Countries: A Sampling of the Literature, Working Paper of the International Monetary Fund, no 99/6. Hayri, A./McDermott, G. (1998): The Network Properties of Corporate Governance and Industrial Restructuring: A Post-Socialist Lesson, Industrial and Corporate Change 7, pp.153-194. Hill, C.W.L./Jones, T.M. (1992): Stakeholder-agency Theory, in: Journal of Management Studies 29, pp.131-54. Johnson, S./Loveman, G.W. (1995): Starting Over in Eastern Europe: Entrepreneurship and Economic Revival, Cambridge, MA: Harvard Business School Press. Jones, D.C./Klinedienst, M./Rock, C. (1998): Productive Efficiency during Transition: Evidence from Bulgarian Panel Data, in: Journal of Comparative Economics 26, pp.446-464. Jones, D.C./Mygind, N. (1999): The Nature and Determinants of Ownership Changes after Privatization: Evidence from Estonia, in: Journal of Comparative Economics 27, pp.422-441. Jones, T.M. (1995): Instrumental Stakeholder Theory: A Synthesis of Ethics and Economics, in: Academy of Management Review 20, pp.404-437. Jones, T.M./Wicks, A.C. (1999): Convergent Stakeholder Theory, in: Academy of Management Review 24, pp.206-221.

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Kalmi, P. (2002): On the (In)stability of Employee-ownership: Estonian Evidence and Lessons for Transition Economies, PhD Dissertation, CEES; Copenhagen Business School, May. Kalmi, P. (2000): Employment and Share Trade under Employee Share Ownership: An Application to Transition Economies, Economics Analysis, in: Journal of Enterprise and Participation 3, pp.5-22. Kochran, T.A./Rubinstein, S.A. (2000): Toward a Stakeholder Theory of the Firm: The Saturn Partnership, Organization Science 11, no. 4, pp.367-386. Kogut, B. (1996): Direct Investment, Experimentation, and Corporate Governance in Transition Economies, in: R. Frydman, C. W. Gray and A. Rapazynski (eds.): Corporate Governance in Central Europe and Russia, vol. 1, London and Budapest: Central European University Press, pp.293-332. LaPorta, R./Lopez-de-Silanes, F./Shleifer, A. (1999): Corporate Ownership around the World, in: Journal of Finance 54, pp.471-517. Ławniczak, R. (1997): A Polish Experiment in Corporate Governance – the National Investment Funds (NIFs), in: Corporate Governance 5, no. 2, pp.67-76. Meyer, K.E. (2002): Management challenges n privatization acquisitions in transition economies, in: Journal of World Business 37, pp.266-276. Meyer, K. E. (2001a): Enterprise Transformation as Coordination Game: The Leadership Challenge, in: Journal of East European Management Studies 6 (2001), no. 2, pp.152164. Meyer, K. E. (2001b): International business research on transition economies, in Rugman, A./Brewer, T. (eds.): Oxford handbook of international business, Oxford, pp.716-759. Meyer, K. E. (1998): Enterprise Restructuring and Direct Foreign Investment, in: Journal of East-West Business 4, pp.7-28. Mitchell, R.K./Agle, B.R./Wood, B.R. (1997): Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What really counts, in: Academy of Management Review 22, pp.853-886. Monks, R.A.G./Minow, N. (1995): Corporate Governance, Oxford. Murphy, K. (1998): Executive Compensation, in O. Ashenfelter and D. Card: Handbook of Labour Economics, North-Holland. Mygind, N. (2001): Enterprise Governance in Transition – A Stakeholder Perspective, in: Acta Oeconomica 51, pp.315-342. Nellis, J. (2002): The World Bank, Privatisation, and Enterprise Reform in Transition Economies, in: Transition Newsletter (World Bank), vol. 13, no. 1, pp.17-21. Nellis, J. (1999): Time to Rethink Privatisation in Transition Economies? Washington, DC: World Bank/IFC Working Paper no. 38. Newman, K. (2000): Organizational transformation during institutional upheaval, in: Academy of Management Review 25, no. 3, pp.602-619. OECD (1999): www.oecd.org/daf/governance/Q&A.htm, April 1999. Ramamurti, R. (1992): Why are Developing Countries Privatizing?, in: Journal of International Business Studies 23, no. 2, pp.225-249.

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Shleifer, A./Vishny,R.W. (1997): A Survey of Corporate Governance, in: Journal of Finance 52, no.2, pp.737-783. Spicer, A./McDermott, G./Kogut, B. (2000): Entrepreneurship and Privatisation in Central Europe: The Tenuous Balance between Destruction and Creation, in: Academy of Management Review, 25, no. 3: pp.630-649. Treviño, L.K./Weaver, G.R. (1999): The Stakeholder Research Tradition: Converging Theorists – Not Converging Theory, in: Academy of Management Review 24, pp.222227. Uhlenbruck, K./Meyer, K.E./Hitt, M. (2003): Organizational Transformation in Transition Economies: Resource-based and Organizational Learning Perspectives, in: Journal of Management Studies, forthcoming. Uvalic, M./Vaughan-Whitehead, D. (eds.) (1997): Privatization Surprises in Transition Economies: Employee-Ownership in Central and Eastern Europe, Cheltenham. Vickers, J./Yarrow, G. (1991): Economic Perspectives on Privatization, in: Journal of Economic Perspectives 5, no. 2, pp.111-132. Vickers, J./Yarrow, G. (1988): Privatization: An Economic Analysis, Boston, MA. Weiss, A.M./Nikitin, G. (2002): Effects of Ownership by Investment Funds on the Performance of Czech Firms, in: Meyendorff, A./Thakor, A.V. (eds.): Designing Financial Systems in Transition Economies: Strategies for Reform in Central and Eastern Europe. World Bank (1996): World Development Report: From Plan to Market, Washington, DC. Wright, M./Hoskisson, R./Filatochev, I./Buck, T. (1998): Revitalizing Privatized Russian Enterprises, in: Academy of Management Executive 12, no. 2, pp.74-85.

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Gelbuda, Modestas/Starkus, Arūnas/Židonis, Žilvinas LITHUANIA/DENMARK

The Power of Naive Action: A Case of a Rapid Internationalisation of Company from a Transition Economy Introduction The paper presents a brief exploratory historical account of how a de novo company emerged and internationalised rapidly during an early stage of building a market economy in Lithuania. The case study focuses on the main actions of the key individuals, which subsequently positioned them in new contexts and exposed them to new opportunities. The study reveals how 5 undergraduate students, who had no prior business experience, resources and networks, gradually established a large and very fast growing network of companies through engaging in several international partnerships. Based on the case analysis, we interpret this success story as an outcome of a continuous stream of naive actions. These actions, particularly in the establishment and early growth phase, are defined as naive because of two reasons. First, these actions had an idealist motivation and, in the eyes of the many, had unrealistic ambitions behind them, which were not supported by available resources, competencies or networks. Secondly, they are seen as naive (to some extent blind) in a sense that the key actors had very little idea as to where their actions will bring them. In sense, they were acting in the dark in a very turbulent environment. In the final section, paper concludes with some theoretical implications, particularly, providing an alternative and a dynamic explanation to as to how weak ties are created and how they transformed into viable long-term businesses in an international context. In the next sections, we discuss the methodology, present a historical account, particularly focusing on the early stages of company’s emergence, growth and internationalisation. Finally, we put forward some reflections on possible theoretical interpretations and contributions.

Methodology In this paper, we utilise only a small part of data collected in a larger research project, which focuses on the emergence, growth and network organisation of a de novo entrepreneurial firm in an early transition context (Gelbuda/Starkus/ 43

The Power of Naive Action: A Case of a Rapid Internationalisation

Zidonis/Casas 2001). The study is based on a case history analysis (Yin 1994). As an entry into the field, we relied on a detailed history (approx. 25p.) prepared by a founder, who has been with the company throughout all its existence. The company history contained many detail events combined with the contextual characteristics. Based on the history, a research team prepared an interview guide. During a month period, seven interviews with the main actors, mainly owners, were conducted in order to reconstruct the main historical events and logic of actors as it was at the moment these events took place. When faced with contradicting explanations, the research team re-examined the data, and asked key respondents additional questions. To increase reliability, we interviewed an industry expert, who knew the case company very well. The case company is considered an extreme case of success, although only 9 businesses have survived of 25 initiatives. Therefore, the case may provide a special insight into what may be the most important success recipes for a rapid internationalisation in a transition context. Since, our major ambition was to understand the main factors and context characteristics explaining a rapid international expansion of a newly born company. In particular, our study focused on the nature of actions and building as well as utilisation of relations to international partners. The next section presents a simplified history of the firm, allowing readers, at least to a limited extent, to draw their own conclusions and to evaluate our interpretation of the data.

The Case Company today In 2001, Libra Group (holding) controlled 9 successful and fast growing companies operating within the woodworking and furniture industries (Table 1). It employed over 800 people and had 31 Mill. USD of annual revenue (Table 2). All the companies have ownership relations to Libra Holding, which, as holding entity, was created in 1998. For the period 1991 through 1998, we will use term Libra which describes group of private persons (later shareholders of Libra Holding) who built, owned and managed companies with no formalised ownership.

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Table 1: Ownership Structure of Libra Group, 2001 Company Libra Holding

Other shareholders

Dailinta - glued birch panels

90%

10% Boen Bruk A\S, Norway

AMG - birch dowels

60%

40% Baltic American Concorde Ltd., Lit.

Dirvonu Lentpjuve -birch strips

100%

Venta - chairs

74%

Medzio Apdaila - construction timber retail

100%

Singlis - woodworking machinery and tools trade

74.7%

Domingos Prekyba - forestry and wood- working machinery trade

100%

Dominga Mill- oak strips

10%

90% Boen Bruk A\S, Norway

-

100% Boen Bruk A\S, Norway

Dominga Hardwood - parquet finish layer production

26% belong to 620 private shareholders (mostly employees)

25.3% private shareholders (including 8,3 owned by managing director)

Over the last 10 years, the Libra Group has established 25 companies, but only 9 have been a success. The other 16 companies, which did not survived, served more as experiments, which did not last long and in most cases were closed without making any serious losses or sold others (often business partners and coowners of the businesses). In the period 1991 through 2000, the Libra Group sales have grown from 0.5 to 31.4 million of USD, while profits (and losses) have been going up and down mainly because of continuous investment and building new ventures (Table 2). Table 2: Libra Group total sales and profits, 1991-2000 (in USD) Period

Sales per period

1991-1992

Profit for period 163 951

1993

~ 1.0 Mill.

258 922

1994

~ 0.75 Mill.

172 608

1995

~ 1.0 Mill.

107 174

1996

~ 3.0 Mill.

- 141 135

1997

3.1 Mill.

- 162 735

1998

5.5 Mill.

332 140

1999

8.9 Mill.

~ 0.5 Mill.

2000

16.4 Mill.

~ 0.8 Mill.

2001

31.4 Mill.

2.8 Mill.

45

The Power of Naive Action: A Case of a Rapid Internationalisation

Table 3: Libra Group totals assets, liabilities and shareholders equity 1991-2001 (in USD) Date Total assets Liabilities Shareholder’s equity 01.02.1993

255 451

91 500

163 951

01.01.1994

443 188

20 315

422 873

01.01.1995

472 151

123 330

595 481

01.01.1996

930 655

228 000

702 655

01.01.1997

1 308 684

747 164

561 520

01.01.1998

1 165 723

824 164

398 785

01.01.1999

1 052 353

345 659

730 925

01.01.2002

25 346 942

16 670 315

8 673 027

It is worth mentioning that more than 95% of total production, Libra Group is exported to West Europe and such distant markets as USA and Japan. In a similar way, about 90% of woodworking machinery, which Libra sells in Lithuania, is imported from more than 10 different countries. Now, let us look us at how Libra group emerged out of small group of university undergraduate students and what factors were responsible for the rapid growth and internationalisation that the company has experience, especially, focusing on the early years of transition and company’s existence. The early stage of company’s development is summarised as a set of naive actions. Naive Action I: From University to Free Market Institute In the Fall of 1990, the heroes of our case story were a second year students (2022 years old) of management at Vilnius University. They had no money, business experience and contacts, except for their families mainly based in the countryside and student mates. Having studied less than 3 semesters at the university, they did not have much knowledge either, as the only relevant course, as they noted in the interviews, was that of orthodox neo-classical economics. All but one “to be” owners of Libra Group came to Vilnius from various provincial towns of Lithuania, therefore they did not have any connections to a real business world or state institutions and state enterprises in a capital city, which could have been a potential source of resources to start a new business. The first years of Independence and building a democratic state with a free market economy was very emotional experience and full of expectations. These fundamental changes also affected students, many of whom were eager to participate and to contribute to them. Lithuanian Free Market Institute was established by a group of advance thinking scholars with support of the national Bank of Lithuania. The intention was to have an institution, which could work fast and effectively on building new institutions necessary for a market economy such as commercial banks, com46

Gelbuda, Modestas/Starkus, Arūnas/Židonis, Žilvinas

modity and stock exchanges, etc. The university students were invited to join expert groups working on these projects as at the time there were no enough experienced professionals in Lithuania with an adequate knowledge. In total, 7-8 students joined the Commodity Exchange group. Their assignment was to write letters to foreign commodity exchanges and collect information on their work and regulations. Although, none of them had prior experience in writing letters in English, to a great satisfaction, many responses from foreign turned out to be positive. Naive Action II: From FMI to Brokerage Company When the assignment was finished, the group of students heard that FMI, as a founder of the NCE, was granted rights to trade on the commodity exchange. However, the institute was an academic institution and it showed no interest in exercising this right. Willing to try, the students approached the FMI management, which subsequently transferred the rights to trade on the NCE to the students. In the beginning, they were five, two more joined latter. In 1991, they registered a limited partnership “Libra”. The shares in company were divided equally among the members. The nominal capital was 500 roubles (about 100 USD). Libra founders were very young, still second year students. Moreover, most of them came from the countryside and were new in the capital city. However, enthusiasm, willingness to try and faith in success were abundant. In their eyes, the only investment was time and work. After Lithuania had declared independence, a number of economic problems emerged. Former business ties established during the central planning era were broken and new ones were yet to be established. Although to a different extent, most of the countries in the region followed the same script: restored the rights of private ownership, gradually liberalised prices and foreign trade and started to privatise public property. This paved the way for the emergence of de-novo entrepreneurial firms, which could engage in business relations with others economic agents such as government, state enterprises, other new ventures, foreign firms and consumers directly. In the early 1990s, commodity exchanges emerged throughout the whole region as a short-term co-ordination mechanism helping companies both to sell and buy products and materials. The economy of Soviet Union has had a specific feature what was inherited by new post soviet markets- deficit of goods. Therefore, main problem was not to sell, but to buy. Through many personal visits and telephone conversations, Libra founders made great efforts trying to persuade the Lithuanian manufacturing companies to sell products through Libra. Unfortunately, a very young age of Libra partners, new and unknown trade system through commodity

47

The Power of Naive Action: A Case of a Rapid Internationalisation

exchange and already existing sales channels prevented these companies from engaging in a Cupertino with Libra. Naive Action III: Going Internationally Early As Lithuanian producers were not interested in a Cupertino with Libra, it decided to focus on finding foreign suppliers interested in the Lithuanian market. It was established contacts with commodity exchanges in other towns of former Soviet Union (Kaliningrad, Minsk, Jekaterinburg, Riga). The purchases were organised through other brokerage companies (like PSG ltd. in Jekaterinburg) or personally participating in trade sessions (in Kaliningrad CE). Parallel to visiting hundreds letters to western companies was sent in order to establish international trading relations. In the end of 1991 the effort spent on letters, phone calls and faxes started to pay back. Gradually, the business began growing. Very soon Libra became one of the most active brokerage companies on the NCE (1st position on sales and 5th position on purchase contracts’ value in 1992). While trade in the Lithuanian market constantly produced stable but not limited revenues, international activity offered opportunities for relatively high profits. In 1992, one of the Ukrainian steel manufacturers visited the Minsk (Byelorussia) exchange and heard about Libra. Soon after, they have offered Libra a big parcel of building steel. Having no contacts with steel buyers, Libra asked its foreign partners for help to find a reliable company to offer steel. Through three links (glass producer in Germany, his friend retailer of construction steel in Austria and finally his acquaintance in Switzerland), Ukrainian steel was sold to China (Figure 1 for illustration of transaction). From brokerage activity and, particularly, several transactions, which sent Ukrainian steel to China, Libra generated approximately 400 000 USD, which was later used to start new companies new companies. It is worth noting that twice, in similar high risk trade activities, Libra lost substantial amounts of money, which had nearly jeopardized it very existence. Naive Action IV: From Trading to Manufacturing in a New Industry In 1992 Libra received an inquiry and subsequently an order from an Italian company, which worked closely with a Turkish partner of Libra. The Italians were interested in buying oak strips. Despite dedicated efforts, Libra was not able to find a good quality producer for oak strips in Lithuania (Figure 1 for illustration of transaction). Later, based on simple cost calculations, Libra decided to start production of oak strips in Lithuania, although nobody in a Libra team has ever had production experience in woodworking industry. At that time, labour was cheap and raw materials were in abundance. At that time, no company in Lithuania was able supply the necessary machinery and Libra had to 48

Gelbuda, Modestas/Starkus, Arūnas/Židonis, Žilvinas

look for it elsewhere. Finally, an American production line was purchased from a distributor in Poland. The acquired technology provided grounds for the first Libra’s production company Dominga. Since then, Libra has grown rapidly to become one of the leading business groups in woodworking and furniture industry in Lithuania (Gelbuda et al. 2001). Figure 1: Naive Action III: transactions context Acquaintance

Contractual relations

Supplier of steel

Timber wholesaler in Italy Commodity Exchange Minsk

Libra Foreign commodity exchanges

Contacted foreign firms

Machinery factory in Turkey

Glass factory in Germany

Steel retailer in Austria

Steel wholesaler in Switzerland

Naive Action Persists In 1992 the production of oak strips was started founding Dominga ltd. and opening new sphere of activity for Libra-wood treatment. In 1993 based on experience of machinery and tools purchase for Dominga ltd., Medzio masinos ltd.-machinery trading company was established. In 1994 in order to secure oak supply was found Lidos ltd. in Russia. All newly established companies were based on export or import from (to) West Europe countries. Encouraged with the relative success of the Dominga factory Libra started to expand by setting up new factories. Dominga was the knowledge incubator and people from Dominga participated in establishing new companies. At the same 49

The Power of Naive Action: A Case of a Rapid Internationalisation

time, Libra was constantly looking for new contacts in the West. In 1994 Libra together with a German partner established the company Oblinta ltd. (Oblinta) manufacturing glued panels from conifers and birch. About the same time, Libra succeeded to attract Norwegian (1996), American (1996), and German investors (1996). Parallel to profitable projects there were quite a few companies what was closed or sold because of loses or inability to manage them. Totally there were 25 companies, ever founded by Libra alone or with partners. Today only 9 of them exist as members of Libra group (Figure 2). After remarkable expansion, 1996 was the first year of decline conditioned by a rapid growth and over-stretching of the internal resources. The decline continued through 1996 and 1997. To restore financial health, the group had to sell 90% of shares of the first Libra factory to a Norwegian partner, who acquired shares to help its old counterpart. Naturally, financial problems lead to a fundamental re-organisation. First, Libra introduced a transparent accounting system, formed a holding company and decentralised management of individual companies – they all became independent profit centres. In 1998, after a period of stagnation, total profit of the group began to grow again (Table 1). Recent growth (Table 2) enabled Libra Holding to make first acquisition-Venta ltd.

Reflections Our study contributes to the literature of economic sociology, as the concept of naive action goes one step backwards/deeper and provides an alternative explanation for how weak ties emerge rather than seeing them more as a happenstance. In contrast to Granovetter (1973), the concept of naive action presents a dynamic interpretation of how distant social worlds are connected, which is both a result of naive action and, once the relations are established, of a dedicated and extraordinary effort. The power of naive action lies in that it allows an individual to probe uncertain realities and, as a result of it, in some cases to participate in them. In Granovetter’s view, the strength of a weak tie ends when it is utilised in a concrete single case such as a graduate getting a job. On the other hand, this paper offers an explanation how weak ties generated in a business context and how they are transformed into viable long-term business relations. Thus, a weak tie is only but one stop – neither first nor the last – in a long journey of a company’s international growth. Our arguments also differ both from social network analysis (Burt 1992) and Network theory (Uppsala tradition) as both streams of literature, although significantly different, tend to accept networks as given and capable of being restructured, but not as created from scratch.

50

Gelbuda, Modestas/Starkus, Arūnas/Židonis, Žilvinas

Figure 2: Companies of Libra group in period from 1991 to 2001 Bro kerage

Libra ltd partnership

Dominga division A

Dirvonų lentpjūvė

Dominga division B

Sawmilling

Dominga M ill

Dominga Hardwoodl

M aurukas

Lidos Žvorūnė Singlis

M edžio mašinos M achinery trade

Domingos prekyba

Udine

Timber export

Swissco Baltic

Staluva

Glued panels

Oblinta

Dailinta

Pasvetas

Birch dowels

AM G

UWP

Staircases

Printing Wood trade

Libra Group's member 2001

Sinkaus laiptai

Brucher ir partneriai

Liquidated Libra Group's member

Sold out Libra Group's member

M etalo ženklai

M edžio apdaila Venta

Chairs

1991

1995

2000

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The Power of Naive Action: A Case of a Rapid Internationalisation

References Burt R.S. (1997): The Contingent Value of Knowledge, in: Administrative Science Quarterly 42/2, pp. 339-365. Burt R.S. (1992): Structural Holes, Harvard University Press, Cambridge MA. Gelbuda M./Starkus A./Zidonis Z./Casas, R. (2001): The Emergence and Growth of a newentrepreneurial ownership – based network in a Transition Economy, in: Liuhto, K. (ed.): Ten Years of Economic Transformation, Volume 3, Societies and Institutions in Transition, Studies in Industrial Engineering and Management, No.16. Lappeeranta University of Technology, Finland. Granovetter M. (2001): A Theoretical Agenda for Economic Sociology, in: Guillen M.F./ Collins R./England, P./Meyer, M. (eds.): Economic Sociology at the Millenium, Russell Sage Foundation, New York. Granovetter M. (1985): Economic Action and Social Structure: The Problem of Embeddedness, in: American Journal of Sociology, 91/3, pp. 481-510. Granovetter M. (1973): The Strength of Weak Ties, in: American Journal of Sociology 78/6, pp. 1360-1380. Hakansson H./Snehota I. (1989): No Business is an Island: The Network Concept of Business Strategy, in: Scandinavian Journal of Management, 5/3, pp.187-200. Kogut B./Zander U. (1992): Knowledge of a Firm, Combinative Capabilities, and Replication of Technology, in: Organisation science, 3/3, pp. 383-397. Penrose E.T. (1959): The Theory of the Growth of the Firm. John Wiley & Sons, New York. Stark D. (1996): Recombinant Property in East European Capitalism, in: American Journal of Sociology, 101/ 4, pp. 993-1027. White H. (1981): Where Do Markets Come From?, in: American Journal of Sociology, 87/3, pp. 517-547. Wrong D. (1961): The Over Socialized Conception of Man in Modern Sociology, in: American Sociological Review, 26/2, pp. 183-193. Yin R.K. (1994): Case Study Research: Design and Methods, Thousand Oaks, CA: Sage. Zukin S./DiMaggio P. (1990): Structures of Capital: The Social Organisation of Economic Life, Cambridge University Press, New York.

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Steger, Thomas DEUTSCHLAND

„Gute“ Corporate Governance in Ostdeutschland – Kritische Betrachtungen nach 13 Jahren Transformation 1 Einleitung Die Thematik der Corporate Governance genießt zur Zeit ein breites Interesse, sowohl seitens der Wissenschaft wie auch der Praxis (vgl. Keasey et al. 1999, Lazzari et al. 2001). In diesem Kontext wird auch die Frage nach „guter“ Corporate Governance breit diskutiert – nicht zuletzt angesichts verschiedener spektakulärer Problemfälle (z. B. Enron, Swissair) in jüngster Zeit. Diese Diskussion findet entsprechend auch in Deutschland statt, wobei einerseits über tiefgreifende Veränderungen im deutschen Corporate Governance System gestritten wird (vgl. Heinze 2001, Höpner/Jackson 2001), andererseits aber auch deutlich moralische Aspekte zunehmend breiteren Raum bekommen (vgl. Hartz/ Tirnitz in diesem Band). Allerdings muss gleichzeitig konstatiert werden, dass in dieser Diskussion Ostdeutschland kaum eine Rolle spielt. Es gibt es nur wenige wissenschaftliche Arbeiten dazu (u. a. Windolf/Schief 1999, Müller 2001) und auch in den deutschen Medien – dies gilt auch für diejenigen ostdeutscher Provenienz – findet das Thema nur sehr geringe Beachtung (vgl. Hartz/Steger 2003). Weder wird Corporate Governance in Ostdeutschland grundsätzlich thematisiert, noch wird die Ausgestaltung und Bedeutung von „guter“ Corporate Governance in Frage gestellt. An dieser Stelle möchte der vorliegende Beitrag anknüpfen: Zunächst wird versucht, die Frage nach den Gründen für diese offensichtliche Vernachlässigung des Themas und inwieweit diese berechtigt sind zu beantworten. In einem zweiten Teil soll dann die Anwendbarkeit vorhandener Ansätze für „gute“ Corporate Governance auf die Situation in Ostdeutschland kritisch erörtert werden. Abschließend werden einige mögliche Entwicklungspfade für die zukünftige Bearbeitung des Themas skizziert.

2 „Gute“ Corporate Governance in Ostdeutschland – kein Thema? Dass „gute“ Corporate Governance in Ostdeutschland kaum thematisiert wird, kommt nicht von ungefähr: Bei einer näheren Betrachtung der Thematik zeigen 53

„Gute“ Corporate Governance in Ostdeutschland – Kritische Betrachtungen nach 13 Jahren Transformation

sich durchaus verschiedene Gründe, die deren Bearbeitung als wenig opportun erscheinen lassen. Zu nennen wären einerseits die besonderen Eigenschaften des Gegenstandes (d.h. Ostdeutschlands) und andererseits die spezifische Ausrichtung der Beobachter (d.h. der Wissenschaft). 2.1 Die vielfältigen Abhängigkeiten Ostdeutschlands Seit der deutschen Wiedervereinigung basiert Ostdeutschland grundsätzlich auf denselben rechtlichen und institutionellen Grundlagen wie Westdeutschland. Dieser vieldiskutierte Prozess des „Überstülpens“ (Dümcke/Vilmar 1995, Wollmann 1996, Reissig 1997) umfasste sowohl den gesamten Gesetzesapparat als auch den größten Teil des staatlichen und halbstaatlichen Institutionengefüges (z. B. Verbände, Gewerkschaften). Diese bilden zusammen die grundlegenden Rahmenbedingungen für die Entwicklung und Ausgestaltung der Corporate Governance. Diese Abhängigkeiten setzen sich auch auf der personellen Ebene fort: So sind die gesellschaftlichen Eliten Deutschlands klar dominiert von Personen, die in Westdeutschland sozialisiert worden sind. Dies betrifft nicht nur generell die nationalen Eliten (Bürklin et al. 1997), sondern berührt auch die regionalen Eliten in verschiedenen Sektoren (z. B. Justiz, Verwaltung – Derlien 1997). Deutlich „westlastig“ ist schließlich auch die öffentliche politische Diskussion. Dies zeigt sich nicht zuletzt am Sitz der diversen Sendeanstalten oder der Herkunft der wichtigsten meinungsbildenden Print-Medien. Das mediale „agenda setting“ findet demnach eindeutig in Westdeutschland statt. Dass sich dabei Ostdeutschland 13 Jahre nach der Wende im Allgemeinen sowie die Problematik der Corporate Governance in Ostdeutschland im Speziellen als wenig medientauglich erweisen, kann da eigentlich nicht überraschen (Hartz/Steger 2003). Vor diesem Hintergrund erscheint eine differenziertere Betrachtung Ostdeutschlands per se kaum notwendig. Besonders augenfällig sind auch die traditionellen und fortbestehenden Abhängigkeiten auf wirtschaftlicher Ebene. So spielte die Treuhandanstalt in den ersten Jahren des ostdeutschen Transformationsprozesses eine dominierende Rolle bei der Gestaltung (betriebs-) wirtschaftlicher Strukturen in den neuen Bundesländern (Howard 2001). Davon blieben auch die Corporate Governance Strukturen nicht unberührt – es muss vielmehr von einer deutlichen Prägung anhand (neoklassischer) westdeutscher Konzepte und Vorstellungen ausgegangen werden (Müller 2001, MacLean et al. 2003). Die wohl bedeutendste und bis heute ungebrochene Art der Abhängigkeit besteht auf der Ebene der einzelnen Unternehmen. Die ostdeutsche Wirtschaft wird klar dominiert durch westdeutsche Unternehmen (Windolf 1996, Roesler 1999, Windolf/Schief 1999). So sind die meisten großen ostdeutschen Unternehmen Tochtergesellschaften westdeutscher (oder aber westeuropäischer oder 54

Steger, Thomas

amerikanischer) Konzerne (Die Welt 2002). In all diesen Unternehmen stellt sich demnach die Frage nach der eigenen Corporate Governance kaum. Überspitzt kann über Ostdeutschland gesagt werden: „Es ist ein Markt ohne die ökonomischen, institutionellen und kulturellen Voraussetzungen einer Marktgesellschaft“ (Windolf/Schief 1999: 279). Schließlich ist auch im wirtschaftlichen Bereich auf den gewichtigen Einfluss westdeutscher Eliten hinzuweisen. Auch wenn dieser zahlenmäßig rückläufig (Gergs/Schmidt 2002) und auf mittlerer Management-Ebene eher marginal ausgeprägt ist (Schreiber et al. 2002), so sitzen – auch bedingt durch die oben geschilderten Eigentumsverhältnisse – in vielen Schlüsselpositionen weiterhin Führungskräfte westdeutscher Herkunft. 2.2 Die fokussierten Interessen der Wissenschaft Gleichsam als logische Konsequenz zeigt sich auch die Wissenschaft dem Thema gegenüber sehr reserviert. Die gängige Corporate Governance-Literatur konzentriert sich – insbesondere in Deutschland –auf große, börsennotierte Unternehmen, von denen es in Ostdeutschland nur sehr wenige gibt. Das Heer der kleinen und mittelständischen Betriebe dagegen, das für Ost- mehr noch als für Westdeutschland charakteristisch ist, wird demgegenüber von der Corporate Governance-Disksussion meist ganz bewusst ausgegrenzt. Die Gründe hierfür sind vielfältig (Steger 2004): Zum einen wird darauf verwiesen, dass im Mittelstand die Gesellschaftsformen der GmbH und der KG vorherrschen, die sich deutlich von den Aktiengesellschaften unterscheiden. Zum anderen wird mit Blick auf die Principal-Agenten-Theorie argumentiert, dass in den KMUs diese Probleme meist nicht oder nur in abgeschwächter Form bestehen würden. Auch die Stakeholder-Problematik stelle sich dank der überschaubareren Verhältnisse nicht im selben Ausmaß. Schließlich scheuen sich auch viele Experten davor zurück, den Mittelstand (gegen seinen erklärten Willen) in diese oft stark emotionelle und moralisierende Diskussion hineinzuziehen.

3 Und trotzdem… Vor dem geschilderten Hintergrund ist die Frage also tatsächlich berechtigt, ob eine spezifische Betrachtung von Corporate Governance in Ostdeutschland überhaupt Sinn macht oder ob sich nicht vielmehr auch hier der Untersuchungsgegenstand „Deutschland“ durchaus auf beide Landesteile beziehen lässt. Allerdings gibt es durchaus einige Aspekte, die trotz der oben angeführten Argumente eine separate Behandlung als angebracht und lohnenswert erscheinen lassen:

55

„Gute“ Corporate Governance in Ostdeutschland – Kritische Betrachtungen nach 13 Jahren Transformation

• Die Wirtschaftslandschaft der Alten und der neuen Bundesländer unterscheiden sich nach wie vor deutlich. Zu nennen wären etwa die noch immer stark divergierenden Prosperitäts-Indikatoren (z. B. Arbeitslosigkeit, Unternehmensgewinne) oder die Produktionsbedingungen (z. B. Arbeitszeit, Lohnniveau) (Busch/Schneider 2000). Auch die Unternehmenslandschaft ist trotz wesentlicher Anstrengungen auch von staatlicher Seite (Stichwort Leuchtturm-Industriepolitik) weiterhin stark verschieden von der in den alten Bundesländern (z. B. weitgehende De-Industrialisierung). Wie lange die staatlichen Transferleistungen noch aufrechterhalten werden (können) ist eine gleichermaßen offene, wie brennende Frage. Schließlich lässt auch die anhaltende Abwanderung vor allem junger, hochqualifizierter Arbeitskräfte viele ostdeutsche Regionen pessimistisch in die Zukunft blicken. • Trotz des vorhandenen Macht-Ungleichgewichts zwischen den Alten und neuen Bundesländern spielt Ostdeutschland in verschiedenen wichtigen Bereichen eine gewisse Trendsetter-Rolle: So wird gegenwärtig einmal mehr über wirtschafts- und arbeitsrechtliche Sonderregelungen für bestimmte ostdeutsche Regionen diskutiert. Weiterhin sind bei den industriellen Beziehungen in Ostdeutschland Entwicklungen im Gange (z. B. Trend zu Betriebsvereinbarungen, Flucht aus Tariforganisationen – Schmidt et al. 2003), die mittel- bis längerfristig für ganz Deutschland relevant werden könnten (Bispinck/Schulten 2003, Müller-Jentsch/Weitbrecht 2003). Ähnliche Entwicklungen sind schließlich auch bezüglich der Corporate Governance denkbar, zieht man etwa die unter dem Einfluss der Treuhandanstalt tendenziell neoklassisch gestalteten Eigentums- und Kontrollstrukturen vieler ostdeutscher Unternehmen in Betracht (MacLean et al. 2003). • Die bevorstehende EU-Erweiterung stellt die ostdeutschen Unternehmen vor verschiedene neue Herausforderungen: Einerseits dürfte ihnen die Grenzlage eine verstärkte wirtschaftliche Konkurrenzsituation bescheren, wobei dies gerade in den Grenzregionen durchaus auch eine verstärkte grenzüberschreitende Struktur- (und Corporate Governance-)Diskussion mit sich bringen dürfte. Weiterhin wird sich zweifellos auch die Förderpolitik der Union in absehbarer Zeit (zu Ungunsten der ostdeutschen Unternehmen) verändern. Das wird einige von ihnen erneut auf den Prüfstand stellen und allgemein die Frage nach alternativen Finanzierungsmöglichkeiten aufwerfen. Der Druck, den die Basel II-Richtlinien dabei insbesondere auf die Corporate Governance der betreffenden Unternehmen ausüben werden, ist bereits verschiedentlich erörtert worden (Strenger 2002, Steger 2004). • Schließlich ist nicht zu übersehen, dass die oben bereits angesprochene Diskussion über Corporate Governance in KMUs beträchtlichen Aufholbedarf hat. Die Haltung nämlich, diese sei unnötig, wird international überhaupt nicht geteilt (Steger 2004). Will die deutsche Wissenschaft also hier nicht (einmal mehr) den Anschluss verlieren, so ist sie gefordert, sich dieser Thematik zu stellen. Damit dürfte auch Ostdeutschland, als überwiegend 56

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mittelständisch geprägter Wirtschaftsraum, wieder vermehrt ins Interesse der Experten rücken. Alles in allem gibt es also Gründe genug, die Frage nach „guter“ Corporate Governance in Ostdeutschland (auch gegen den Trend) gesondert zu erörtern.

4 Konzeptionelle Ansätze für „gute“ Corporate Governance – anwendbar auf Ostdeutschland? Ein Blick auf bisherige Arbeiten zum Thema „gute“ Corporate Governance zeigt, dass verschiedene grundlegende Ansätze unterschieden werden können, die auf je eigene Weise die Frage nach dem „was?“ und „wie?“ zu beantworten suchen (Steger 2002). Im Folgenden sollen weniger die einzelnen Ansätze vertieft, als vielmehr hinterfragt werden, inwieweit diese auf die spezifische Situation in Ostdeutschland übertragen und angewendet werden können bzw. ob und in welchem Ausmaß sie den spezifischen Gegebenheiten der neuen Bundesländer gerecht werden. 4.1 Der Performanz-Ansatz Dieses klassische Konzept, das sich auf prominente Vordenker berufen kann (Friedman 1962, Sternberg 1994) geht davon aus, dass „gute“ Corporate Governance sich quasi zwangsläufig im Unternehmensergebnis niederschlagen muss bzw. dass ein nachhaltig hoher Unternehmensgewinn auf eine „gute“ Corporate Governance hinweist. Entsprechend eng ist die Verbindung dieses Ansatzes mit dem Shareholder-Value-Gedanken. Die Anwendung des Performanz-Ansatzes auf ostdeutsche Unternehmen erscheint aus verschiedenen Gründen problematisch: Das wirtschaftliche Umfeld in Ostdeutschland gestaltet sich – wie oben bereits geschildert – nach wie vor äußerst schwierig, der Aufholprozess der neuen Bundesländer ist noch längst nicht abgeschlossen. Entsprechend sind wenig florierende Unternehmen zu finden bzw. die Erfolgsstorys sind noch sehr speziell und schwer zu verallgemeinern. Ein Hinweis darauf ist auch die noch immer sehr spärliche Verbreitung von Venture-Capital-Gesellschaften in dieser Region (Vitols 2001). Der Erfolg als zentrales Kriterium für „gute“ Corporate Governance ist somit schwierig anzuwenden. Zudem ist die ostdeutsche Wirtschaft noch immer stark extern gesteuert bzw. von Unternehmensstrategien abhängig, die nicht in der Region festgelegt werden (z. B. die sog. „verlängerten Werkbänke“ – Roesler 1999). Erfolgs- oder Misserfolgsausweise werden dadurch stark relativiert. 4.2 Der institutionelle Ansatz Dieser am weitesten verbreitete Ansatz geht davon aus, dass „gute“ Corporate Governance durch bestimmte klassische Konfigurationen der Spitzenorganisa57

„Gute“ Corporate Governance in Ostdeutschland – Kritische Betrachtungen nach 13 Jahren Transformation

tion von Unternehmen zum Ausdruck kommt (Hart 1995). Dabei werden Transaktionskosten oft als alternatives Effizienzkriterium verwendet (Argyres/Liebeskind 1999). Bezogen auf die Anwendung des Konzepts auf Ostdeutschland ergeben sich auch hier gravierende Probleme: So sind die klassischen Unternehmens-Konfigurationen des institutionellen Ansatzes weiterhin nicht sehr weit verbreitet. Es dominieren vielmehr Klein- und mittelständische Betriebe, die in der Corporate Governance-Literatur traditionsgemäß eher vernachlässigt werden (Cravens/ Wallace 2001). Viele Unternehmen sind auch Tochterunternehmen, wodurch die klassischen Corporate Governance-Organe entsprechend fehlen. Stattdessen existieren verschiedene institutionelle Sonderformen (z. B. Mitarbeiterbeteiligungs-Unternehmen), mit denen sich dieser Ansatz eher schwer tut (Earle/Estrin 1996). Schließlich fehlen in Ostdeutschland auch gewisse grundlegende Rahmenbedingungen (z. B. eigene Börse). Insgesamt erweist sich also die obige kritische Diagnose von Windolf und Schief (1999) als durchaus zutreffend, wonach die (klassischen) institutionellen Grundvoraussetzungen in Ostdeutschland noch unterentwickelt sind, weshalb eine Verwendung des institutionellen Ansatzes für „gute“ Corporate Governance kaum weiterhelfen kann. 4.3 Der Kultur-Ansatz Der kulturelle Ansatz sucht die gewisse Enge der beiden vorangegangenen Ansätze zu überwinden und geht von bestimmten kulturell bedingten, paradigmatischen Grundvorstellungen über „gute“ Corporate Governance aus (Weimer/ Pape 1999). Im Zentrum des Interesses liegen entsprechend nationale und regionale Besonderheiten ebenso wie historische Entwicklungsprozesse (Gregory/ Simmelkjaer 2002). Obwohl dies auf den ersten Blick seine Anwendung auf Ostdeutschland erleichtern könnte, liegt darin – paradoxerweise – auch eine wesentliche Schwierigkeit: Die kulturelle Entwicklung der neuen Bundesländer seit der Wende muss nämlich als durchaus hybrid charakterisiert werden. Auf der einen Seite stehen die Normen, Wertvorstellungen und Traditionen der DDR-Zeit, die zwar vielfach in Frage gestellt bzw. diskreditiert sind, sich aber in manchen Fällen auch als robust und überlebensfähig erwiesen haben (Fiedler/Steger 1996, Kotthoff/ Matthäi 1999). Auf der anderen Seite besteht ein spürbarer Einfluss und Druck der alten Bundesländer zur Übernahme von bzw. Angleichung an westliche Kulturmuster, dem auch oftmals Widerstand entgegen gebracht wird (Brinkmann/Seifert 1998, Alt 2003). Die Kultur Ostdeutschland ist somit zumindest noch als sehr ambivalent und dynamisch einzuschätzen. Welche Charakteristika sich herausbilden bzw. durchsetzen werden, ist im Moment noch schwer abzuschätzen. Dies erschwert denn auch die Anwendung des Kultur-Ansatzes zur Entwicklung eines tragfähigen Konzeptes „guter“ Corporate Governance.

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4.4 Der ethische Ansatz Der vierte und letzte Ansatz knüpft daran an, dass in einem bestimmten Feld (z. B. Land, Region) bestimmte Kriterien für „gute” Corporate Governance festgelegt werden, die für bestimmte Akteure (z. B. börsennotierte Unternehmen, Analysten) Geltung besitzen. Auf diese Weise sind in den vergangenen Jahren in vielen Ländern eine unterschiedlichste Prinzipien und Kodizes mit deutlicher Orientierung an den jeweiligen Gegebenheiten entstanden (z. B. Cadbury 1992, Millstein 1998, Cromme 2002). Mit Bezug auf Ostdeutschland muss allerdings festgestellt werden, dass die Relevanz der bisher vorhandenen deutschen Codes sehr beschränkt ist – vor allem wegen der bereits angesprochenen institutionellen Rahmenbedingungen und der Konzentration dieser Regelwerke auf große, börsennotierte Unternehmen. Ein eigener ostdeutscher Code oder zumindest ein Code für KMUs ist weiterhin nicht vorhanden und die Entwicklung eines solchen noch nicht absehbar (Strenger 2002, Steger 2004). Angesichts der kontroversen öffentlichen Debatte über eine „Sonder-Wirtschaftszone Ost“ mit entsprechenden Sonderregelungen bzw. über einen (schrittweisen) Abbau der Förderung Ost erscheint es zudem sehr schwierig, für eine entsprechende Initiative wirkungsvolle Unterstützung in Politik und Wirtschaft zu finden. Schließlich muss darüber hinaus festgestellt werden, dass, wie unsere eigenen jüngsten Untersuchungen ergaben, auch die potentiellen Adressaten eines solchen Codes, nämlich die ostdeutschen Unternehmen, solchen Ideen zumindest sehr reserviert gegenüberstehen. Der ethische Ansatz wäre zwar grundsätzlich für die Entwicklung „guter“ Corporate Governance in Ostdeutschland anwendbar, eine Realisierung dürfte allerdings auf vielfältige Schwierigkeiten stoßen.

5 Zusammenfassung und Ausblick Ostdeutschland ist in der aktuellen Diskussion um „gute“ Corporate Governance bisher weitgehend unterbelichtet geblieben, obwohl es klare Gründe dafür gibt, weshalb die Beschäftigung damit Not tut. Ein näherer Blick zeigt denn auch, dass es sich hier um eine komplexe Thematik handelt. So konnte im vorliegenden Beitrag verdeutlicht werden, dass die Mehrheit konzeptioneller Ansätze für „gute“ Corporate Governance auf Ostdeutschland kaum anwendbar ist. Einzig der ethische Ansatz eröffnet gewisse Möglichkeiten, die allerdings auf politische Widerstände treffen. Dies dürfte dazu führen, dass „gute“ Corporate Governance in Ostdeutschland auch weiterhin weitgehend extern definiert bleibt bzw. wegen der spezifischen Gegebenheiten nur eine untergeordnete Rolle spielt. Die Entwicklung eigenständiger Grundsätze „guter“ Corporate Governance wäre ein interessanter Schritt zur Behebung dieses Defizits, der für die ostdeutschen Unternehmen gerade vor dem Hintergrund der zunehmenden Internationalisierung einerseits und der Komplizierung der Unternehmensfinanzierung 59

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im Zuge von Basel II andererseits Sinn machen würde (Strenger 2002, Steger 2004). Darüber hinaus könnte das weitgehend mittelständisch dominierte Ostdeutschland hierbei für Gesamtdeutschland eine positive Vorreiterrolle übernehmen. Die Realisierung dieses „Projekts“ ist allerdings von drei gewichtigen Voraussetzungen abhängig: 1. von einem breiten Verständnis von Corporate Governance entsprechend dem Stakeholder-Ansatz, das auch andere institutionelle Konfigurationen als nur börsennotierte Aktiengesellschaften in den Fokus nimmt, 2. dem erklärten Willen zur bewussten Wahrnehmung von Ostdeutschland als Wirtschaftsregion mit spezifischen von Westdeutschland abweichenden Eigenschaften, verbunden mit der Anerkennung der Notwendigkeit zumindest teilweise eigener Corporate Governance-Prinzipien, sowie 3. von einem breiten Konsens maßgeblicher Stakeholder in Ostdeutschland über Sinn und Zweck entsprechender Anstrengungen zur Entwicklung und Implementierung solcher Grundsätze.

6 Literatur Alt, R. (2003): „Es ist nicht alles Gold, was glänzt“ - Symbole im Reorganisationsprozeß ostdeutscher Unternehmen, in: Berliner Debatte Initial, 14(2), S. 41-49. Argyres, N.S./Liebeskind, J.P. (1999): Contractual commitments, bargaining power, and governance inseparability: Incorporating history into transaction cost theory, in: Academy of Management Review, 24(1), S. 49-63. Bispinck, R./Schulten, T. (2003): Decentralisation of German collective bargaining? Current trends and assessments from a works and staff council perspective, in: WSIMitteilungen, 56 (special issue), S. 24-33. Brinkmann, U./Seifert, M. (1998): Zum Stellenwert von Vertrauen und Misstrauen im ostdeutschen Transformationsprozeß, in: Lang, R. (Hrsg.): Führungskräfte im osteuropäischen Transformationsprozeß, München/Mering: Hampp, S. 355-380. Bürklin, W./Rebenstorf, H. et al. (1997): Eliten in Deutschland. Rekrutierung und Integration, Opladen: Leske+Budrich. Busch, U./Schneider, A. (2000): Zehn Jahre am Tropf – Vergebliches Warten auf einen selbsttragenden Aufschwung in Ostdeutschland, in: Berliner Debatte Initial, 11(4), S. 101-116. Cadbury, A. (Hrsg.) (1992): Report of the committee on the financial aspects of corporate governance, London. Cravens, K.S./Wallace, W.A. (2001): A framework for determining the influence of the corporate board of directors in accounting studies, in: Corporate Governance, 9(1), S. 2-24. Cromme, E. (Hrsg.) (2002): Deutscher Corporate Governance Kodex, Düsseldorf. Derlien, H.-U. (1997): Elitenzirkulation zwischen Implosion und Integration. Abgang, Rekrutierung und Zusammensetzung ostdeutscher Funktionseliten 1989-1994, in: Wollmann, H./Derlien, H.-U./König, K./Renzsch, W./Seibel, W.: Transformation der

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politisch-administrativen Strukturen in Ostdeutschland, Opladen: Leske+Budrich, S. 329-415. Die Welt (2002): Große Ostfirmen legen zu – Die größten 100 Betriebe wachsen schneller als die Gesamtwirtschaft, 6. September. Dümcke, W./Vilmar, F. (Hrsg.) (1995): Kolonialisierung der DDR – Kritische Analysen und Alternativen des Einigungsprozesses, Münster: agenda. Earle/Estrin (1996): Employee ownership in transition, in: Frydman, R./Gray, C. W./Rapaczynski, A. (Hrsg.) Corporate governance in Central Europe and Russia, Budapest: Central European University Press, S. 1-61. Fiedler, A./Steger, T. (1996): Das Verhältnis der Werktätigen zur Arbeit in ostdeutschen Industriebetrieben – Beharrung oder Neuorientierung?, in: Becker, M./Lang, R./Wagner, D. (Hrsg.): Sechs Jahre danach: Personalarbeit in den neuen Bundesländern, Zeitschrift für Personalforschung, Sonderband, München/Mering: Hampp, S. 75-96. Friedman, M. (1962): Capitalism and freedom, Chicago: University of Chicago Press. Gergs, H.-J./Schmidt, R. (2002): Generationswechsel im Management ost- und westdeutscher Unternehmen, in: Kölner Zeitschrift für Soziologie und Sozialpsychologie, 54(3), S. 553-578. Gregory, H. J./Simmelkjaer, R.T. (2002): Comparative study of corporate governance codes relevant to the European Union and its member states, Weil, Gotshal & Manges LLP. Hart, O. (1995): Corporate governance: Some theory and implications, in: Economic Journal, 105(430), S. 678-689. Hartz, R./Steger, T. (2003): „Good“ Corporate Governance in (East-)Germany and Hungary A Discourse Analysis, Vortrag an der 19. EGOS-Konferenz in Kopenhagen, 4. Juli. Heinze, M. (2001): Transformation des deutschen Unternehmenskontroll-Systems?, in: Kölner Zeitschrift für Soziologie und Sozialpsychologie, 53(4), S. 641-674. Höpner, M./Jackson, G. (2001): Entsteht ein Markt für Unternehmenskontrolle? Der Fall Mannesmann, Leviathan, 29(4), 544-563. Howard, J. (2001): The Treuhandanstalt and privatisation in the former East Germany, Aldershot: Ashgate. Keasey, K./Thompson, S./Wright, M. (eds.) (1999): Corporate Governance. 4 volumes. Cheltenham: Elgar. Kotthoff, H./Matthäi, I. (1999): Vom Kombinat zum Kleinbetrieb – Die Entstehung einer mittelständischen Industrie. Ein deutsch-tschechischer Vergleich, Berlin: sigma. Lazzari, V./Monks, R./Cadbury, A./Demattè, C./van den Berghe, L./Salzgeber, W./Theisen, M.R./Chiappetta, F./Micossi, S./Gilmour, G. (2001): Is corporate governance delivering value?, in: European Business Forum, 5, S. 5-27. Maclean, M./Howard, J./Hollinshead, G. (2003): Corporate Governance and the former East Germany: The role of the Treuhandanstalt in moulding the new German economy, in: Journal for East European Management Studies, 8(3), S. 293-318. Millstein, I. (Hrsg.) (1998): Corporate governance: Improving competitiveness and access to capital in global markets, Paris: OECD.

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Müller, J. (2001): Privatization and restructuring in East Germany: How the Treuhand dealt with privatization and corporate governance in a radically changed environment, in: Yoon, C.-H./Lau, L.J. (eds): North Korea in transition, Cheltenham: Edward Elgar, S. 142-180. Müller-Jentsch, W./Weitbrecht, H. (eds) (2003): The changing contours of German industrial relations, München/Mering: Hampp. Reissig, R. (1997): Der ostdeutsche Transformationsfall: Prämissen - Bilanzen Schlussfolgerungen, in: BISS public, 21/22, S. 41-58. Roesler, J. (1999): Chancen und Probleme von Industriebetrieben in der ostdeutschen branch plant economy, in: Berliner Debatte Initial, 10(4/5), S. 85-97. Schmidt, R./Röbenack, S./Hinke, R. (2003): Prekarisierung des kollektiven Tarifsystems am Beispiel der ostdeutschen Metallindustrie, in: Industrielle Beziehungen, 10(2), S. 220249. Schreiber, E./Meyer, M./Steger, T./Lang, R. (2002): Eliten in „Wechseljahren“, München/Mering: Hampp. Steger, T. (2004): Corporate Governance of German SMEs – A review with special regards to the situation in the 5 New Lander, Vortrag am Experten-Treffen über “Good Governance for SMEs” bei UNO in Genf, 2. April. Steger, T. (2002): Just a question of honor? "Good" corporate governance in Eastern Europe Some considerations and differentiations, Vortrag am 3. Internationalen Workshop "Transition and Enterprise Restructuring in Eastern Europe" an der Copenhagen Business School, 16. August. Sternberg, E. (1994): Just business. Business ethics in action, London: Little, Brown and Company. Strenger, C. (2002): Warum ist die „Corporate Governance“-Disskussion für den Mittelstand wichtig?, Vortrag an der Vorstandssitzung des BDI Mittelstandsausschusses, 5. Juni. Vitols, S. (2001): Frankfurt’s Neuer Markt and the IPO explosion: Is Germany on the road to Silicon Valley?, Economy and Society, 30(4), S. 553-564. Weimer, J./Pape, J. C. (1999): A taxonomy of systems of corporate governance, in: Corporate Governance, 7(2), S. 152-166. Windolf, P. (1996): Die Transformation der ostdeutschen Betriebe, in: Berliner Journal für Soziologie, 6(4), S. 467-488. Windolf, P./Schief, S. (1999): Unternehmensverflechtung in Ostdeutschland, in: Kölner Zeitschrift für Soziologie und Sozialpsychologie, 51(2), S. 260-282. Wollmann, H. (1996): Institutionenbildung in Ostdeutschland: Neubau, Umbau und „schöpferische Zerstörung“, in: Kaase, M./Eisen, A./Gabriel, O.W./Niedermayer, O./Wollmann, H.: Politisches System, Opladen: Leske+Budrich, S. 47-153.

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Perspektiven „guter“ Corporate Governance in Deutschland und Ungarn – eine Medienanalyse5 1 Einleitung Nach den krisenhaften wirtschaftlichen Ereignissen, welche in den USA mit Namen wie Enron und Worldcom, in Deutschland etwa mit EM.TV und Comroad verknüpft sind wurde und wird in wissenschaftlichen Publikationen verstärkt die Frage nach guter Corporate Governance diskutiert. Die Frage nach einer im weiten Sinne „guten“ Unternehmensführung und -kontrolle fand jedoch nicht nur in der Wissenschaft sondern auch in den Medien ein breites Echo. Die Diskussion dieses Themas in den deutschen und ungarischen Printmedien ist Gegenstand dieses Artikels. Zwei Forschungsfragen sind dabei untersuchungsleitend: Erstens stellt sich die Frage nach der inhaltlichen Diskussion um Corporate Governance in beiden Ländern. Welche Ereignisse und Themen spielen im Zusammenhang mit Corporate Governance eine Rolle? Wo liegen Gemeinsamkeiten und Unterschiede der Diskussion in beiden Ländern? Zweitens liegt der Fokus auf der Struktur der Diskussion selbst. In welchem Umfang wird das Thema in den Medien diskutiert? Lassen sich spezifische Muster erkennen, welche die Diskussion bestimmen? Aus welcher Perspektive wird das Thema aufgenommen? Die folgenden Ausführungen stellen dabei erste Teilergebnisse vor, welche aus einem gemeinsamen Forschungsprojekt der Technischen Universität Chemnitz und der Wirtschafts- und Verwaltungsuniversität Budapest zum Thema „Gute Corporate Governance in (Ost-) Deutschland und Ungarn“ gewonnen wurden.

2 Umfang und Methodik der Untersuchung Für die Analyse der Diskussion „guter“ Corporate Governance in den deutschen und ungarischen Medien musste notwendig eine Beschränkung des zu untersuchenden Materials erfolgen. In beiden Ländern wurde erstens eine Auswahl überregionaler Printmedien getroffen, welche in ihrer Gesamtheit ein repräsenta5

Besonderer Dank gilt Dr. Thomas Steger für zahlreiche Hinweise und kirtische Anmerkungen.

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tives Bild des Verständnisses von Corporate Governance in den Medien darstellen. Für Ungarn wurden folgenden Zeitungen und Zeitschriften untersucht: • • • • • •

Heti Világgazdaság (HVG) Figyelő Közgazdasági Szemle Népszabadság (NSZ) Magyar Hírlap (MH) Magyar Nemzet

In Deutschland wurde folgende Auswahl getroffen: • • • • • • • • • • • •

Die Welt (und Welt am Sonntag) Frankfurter Allgemeine Zeitung Süddeutsche Zeitung Frankfurter Rundschau Tagesspiegel Manager Magazin Handelsblatt Financial Times Deutschland Wirtschaftswoche Die Zeit Spiegel Focus

In beiden Ländern wurden die Artikel zum Thema Corporate Governance bei den Tageszeitungen mit dem Beginn des Jahres 2001, bei den Wochenzeitungen und -magazinen mit dem Beginn des Jahres 2000 bis zum heutigen Tag fortlaufend herangezogen und einer Inhalts- und Strukturanalyse unterzogen. Aus dem Erhebungszeitraum wurden aktuell 300 Artikel aus deutschen Medien und 40 Artikel aus den ungarischen Medien zum Thema Corporate Governance untersucht. Im quantitativen Vergleich zu den ungarischen Medien zeigt sich, das dem Thema in Deutschland eine erheblich höhere Aufmerksamkeit geschenkt wurde und wird.

3 Methodische Anmerkungen Der erhebliche Umfang des gesamten Materials führt zur Frage eines adäquaten analytischen Zugangs. Bei der Auswertung der deutschen und der ungarischen Artikel erfolgte deshalb ein Rückgriff auf methodische Ansätze der Diskursanalyse und der Semiotik. Unter einem Diskurs verstehen wir in Anlehnung an Foucault allgemein eine regelgeleitete (Sprach-) Praxis (Foucault 1973, 1974, als Überblick Jäger 2001, Angermüller 2001, Keller 2004). Semiotik (von

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griech. semeion „Zeichen“) bezeichnet im Allgemeinen die Wissenschaft von den Zeichen (vgl. etwa Linke/Nussbaumer/Portmann 2001: 13f.). Unter Anlehnung an die strukturale Semantik der Pariser Schule um Greimas (1971: als Überblick Nöth 2000: 112ff, Martin/Ringham 2000: insb. 1-11, Viehöfer 2001, 2003) erfolgte die Analyse des Materials im Wesentlichen auf zwei Ebenen: In einem ersten Schritt wird die diskursive Ebene betrachtet. Die diskursive Ebene lässt sich als die Oberfläche des Textes begreifen, als der eigentliche Textkorpus. Die Artikel werden in ihrer Gesamtheit als ein Text, ein Diskurs betrachtet. Die uns hier interessierenden Fragestellungen sind insbesondere: Welche thematischen Felder (semantic fields) werden im spezifischen Diskurs um Corporate Governance berührt, angesprochen und einbezogen? Welche Akteure/Personen treten innerhalb des Diskurses auf? Welche Aussagen zu einer „guten“ Corporate Governance werden getroffen? Auf der diskursiven Ebene liegt somit das Augenmerk stärker auf der inhaltlichen Seite des Diskurses – das Thema Corporate Governance, die damit verbundenen semantischen Felder und die Akteure die innerhalb der Diskussion angesprochen werden. In einem zweiten Schritt wird die so genannte narrative Ebene untersucht. Diese lässt sich als Tiefenstruktur des Diskurses begreifen. Aus der Sicht einer hier gefolgten strukturalistisch orientierten Semiotik liegen, wenn auch den Urhebern/ Autoren des Diskurses nicht bewusst, kulturell tradierte semantische Muster der Textoberfläche zugrunde. Die verschiedenen Diskurse mit ihren Akteuren, Themen und Autoren stehen somit keineswegs unverbunden nebeneinander, sondern werden von diskursübergreifenden kulturell tradierten Sprach- und Bedeutungsmustern beeinflusst und geprägt. Die Kenntnis dieser Muster führt uns somit auch zu einem tieferen Verständnis der Struktur des Diskurses. Ein Ansatzpunkt innerhalb der strukturalen Semantik ist dabei der Rückgriff auf und die Untersuchung von Erzählungen, Narrationen. Narrationen (in ähnlicher Weise etwa auch Mythen) vermitteln Weltdeutungen, kulturelle Werte und Handlungsorientierungen.6 Eine Narration ist dabei „… intimately related to, if not a function of, the impulse to moralize reality.” (White 1981: 4). Greimas, dessen Ansatz hier im Wesentlichen gefolgt wird, begreift nun die Narration als „organisiertes Prinzip eines jeden Diskurses“ (Greimas/Courtes 1979: 248). Narrative Strukturen finden sich nicht nur in Erzählungen i.e.S., etwa in Märchen sondern sind in dieser Sichtweise prinzipiell in jedem Text oder Diskurs aufdeckbar. Der Ansatzpunkt der narrativen Semiotik zum strukturellen Verstehen eines Textes ist dabei die Annahme einer jeden spezifischen Narration zugrunde liegenden allgemeinen Aktantenstruktur. Unter Aktanten werden dabei die mit 6

In der Tradition des Märchenerzählens wird dabei die intergenerative und kulturelle Vermittlung und Weitergabe von z.B. moralischen Bedeutungen offensichtlich.

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unterschiedlichen und wechselnden Akteuren besetzten Rollen einer Erzählung verstanden, den auch so genannten dramatis personae (so ursprünglich Propp 1975), welche innerhalb der Narration eine bestimmte Funktion bekleiden.7 Greimas ursprüngliche Aktantenstruktur identifiziert 6 Aktanten, welche maximal in jeder Erzählung aufgezeigt werden können: Abbildung 1: Die Aktantenstruktur Sender

Objekt

Empfänger

Helfer

Held

Opponent

Quelle: Eigene Aufstellung, in Anlehnung an Greimas 1971: 165.

Die Aktanten bilden 3 Paare, welche in Opposition zueinander stehen: Held (Subjekt) / Ziel oder Begehren (Objekt), Sender / Empfänger, Opponent / Helfer. Ganz Allgemein ist das Handeln des Helden auf die Verwirklichung des Zieles bzw. Erringung des Objektes gerichtet um es dem Empfänger zukommen zu lassen. Er findet dabei Unterstützung (Helfer) als auch Widerstand (Opponenten) vor. Der Sender motiviert / verursacht die Handlungen des Helden.8 Unter Anwendung dieser Methodik sollen jene kulturell tradierten Erzählmuster aufgezeigt und aufgedeckt werden, welche grundlegend die (Erzähl-)Struktur des Diskurses bestimmen. Die folgende Abbildung zeigt zusammenfassend die zwei Untersuchungsebenen:

7

8

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Neben „realen“ Akteuren welche zu Aktanten der Erzählung werden, existieren auch mythische Aktanten welche so keine Entsprechung in der Realität haben (etwa Sagengestalten wie Baba Yaga, Drache oder die Götterwelt). Zur prinzipiellen Verdeutlichung 2 Beispiele: 1) Ein Unternehmer erzählt in einem Interview über Investitionen, die er tätigen will. Die Anwendung des obigen Schemas könnte wie folgt aussehen: Held = Unternehmer; Objekt = Heil des Unternehmens; Opponent = die Konkurrenz; Helfer = der eigene Spürsinn, Intuition, Tatkraft als auch die eingesetzten betriebswirtschaftlichen Methoden; Sender = das ökonomische System, welches die ständig verbesserte Wettbewerbsfähigkeit „fordert“; Empfänger = das Unternehmen selbst. 2) Der klassische Marxismus lässt sich (wenn auch vereinfachend) etwa wie folgt darstellen: Held = Partei; Objekt = klassenlose Gesellschaft; Sender = Geschichte; Empfänger = Menschheit; Opponent = Bürgertum; Helfer = Arbeiterklasse. (beide Beispiele in Anlehnung an Greimas 1971: 165ff.) Bei beiden Explikationen wird deutlich, dass sowohl reale als auch mythische Aktanten (etwa die Menschheit) vorkommen können, dass ein Akteur verschiedene Aktanten besetzen kann und es möglich ist, dass ein Aktant verschiedene Akteure enthält.

Hartz, Ronald/Tirnitz, Tamás

Abbildung 2: Die Untersuchungsebenen

Diskursive „Gute“ Corporate

Ebene Governance

Narrative Ebene

Oberfläche des Textes: • Akteure • semantische Felder • Grammatik, Syntax • diskursspezifisch

Tiefenstruktur des Textes: • kulturell überlieferte Erzählstruktur • Aktanten (narrative Rollen) • diskursübergreifend

4 Ergebnisse 4.1 Die deutsche Diskussion - diskursive Ebene Im Mittelpunkt soll hier die Frage stehen: Über welche Themen wird im Zusammenhang mit Corporate Governance in den untersuchten Medien gesprochen? Trotz der großen Anzahl der Artikel lassen sich acht semantische Felder bestimmen, welche erschöpfend den Diskurs abbilden: • • • • • • • •

Corporate Governance Kodizes, staatliche Regulierungen „Bilanzskandale“ und Rechnungslegung Managementvergütung Börsenbaisse Vertrauensverlust in wirtschaftliche Entscheidungsträger Deutschland AG Mitbestimmung (im Aufsichtsrat und auf der Betriebsebene) Shareholder-value Prinzip

Es fällt auf, dass die deutsche Diskussion um Corporate Governance vor allem durch die als krisenhaft konnotierten wirtschaftlichen Ereignisse bestimmt ist. Es ist zu vermuten, dass das Thema „gute“ Corporate Governance erst durch diese Prozesse an Relevanz/Brisanz gewinnt und „medientauglich“ wird. Diese enge Kopplung liefert somit auch eine erste Erklärung für den erheblichen Umfang der Diskussion in Deutschland. Dominant erscheint eine krisenhafte Darstellung der wirtschaftlichen Situation allgemein und der Situation von Corporate Governance im Besonderen. Als ursächlich für diese Entwicklung wird im Diskurs in erster Linie das Management(fehl-)verhalten (falsche Bilanzierung, „Bilanzkosmetik“, „Bereicherung“, mangelhafte Informationspolitik) ausgemacht. Zudem erscheinen Wirtschaftsprüfer, Analysten und Banken als Mitverursacher der gegenwärtigen (schlechten) Situation. Eine "schlechte" CG wird dabei einerseits für Deutschland (die Deutschland AG als Synonym für Intransparenz, die Mitbestimmung 67

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im Aufsichtsrat als Standortnachteil) andererseits jedoch auch für die Vereinigten Staaten diagnostiziert (Bilanzfälschung, shareholder-value Prinzip). Die Vorbildrolle der amerikanischen Wirtschaft gerät dabei ins Zwielicht und wird angezweifelt. Empfehlungen zur Verbesserung der Situation erfolgen allgemein in zwei Richtungen: Zum einen wird eine Verhaltensänderung insbesondere der Manager, aber auch der Wirtschaftsprüfer, Analysten und Banken gefordert. Es geht primär um eine Re-Moralisierung des Handelns der wirtschaftlichen Akteure. Explizit wird die Rückkehr des „ehrbaren Kaufmanns“ gefordert. Die Wirtschaft, so der Tenor, benötigt notwendig einen Wertekanon zum Funktionieren. Die Ausrichtung am shareholder-value wird einerseits als Prinzip der Kurzfristorientierung verstanden und aufgrund der falschen Anreizsetzung für die Manager, Analysten und Aktionäre negativ konnotiert. Shareholder-value wird jedoch andererseits als von den wirtschaftlichen Akteuren bisher falsch verstandenes Prinzip gedeutet und eine an langfristiger Wertschöpfung ausgerichtete shareholder-value Doktrin gefordert. Zum anderen werden Verbesserungen der Corporate Governance auf struktureller Ebene gefordert. Insbesondere geht es um die Verbesserung der Rahmenbedingungen durch rechtliche Regelungen und die Festschreibung von Regeln „guter“ Corporate Governance. Diese Forderungen werden jedoch in jüngerer Zeit durch die Warnung vor einer „Überregulierung“ und eines damit verbundenen Erstickens der Risikobereitschaft von Managern relativiert. Beide Lösungsansätze stehen dabei nicht unvermittelt zueinander. Der Tenor ist: Selbst die besten strukturellen Ansätze für eine „gute“ Corporate Governance nützen nichts, wenn die wirtschaftlichen Akteure, insbesondere das Management, nicht (wieder) moralisch (i.S. von ehrlich, offen, bescheiden) agiert. 4.2 Die deutsche Diskussion – narrative Ebene Untersucht man dem Textkorpus des Diskurses im Hinblick auf die narrative Aktantenstruktur ergibt sich folgendes Schema: Objekt: Als das Objekt/Ziel/Begehren des Diskurses ist in erster Linie die Wiederherstellung von Glaubwürdigkeit des wirtschaftlichen Handelns zu sehen. Es geht um die Überwindung der herrschenden Vertrauenskrise. Die Schaffung von Vertrauen ist Bedingung um (wieder) zu wirtschaftlicher Prosperität zu gelangen. Subjekt/Held: In einem Diskurs, welcher prinzipiell von einer krisenhaften Situation ausgeht, scheint es auf den ersten Blick schwierig, eine Heldenfigur auszumachen. Als Helden-Aktant kann im Diskurs jedoch die positiv konnotierte Gestalt des Managers gesehen werden, dessen Bemühen sich auf Ver68

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trauen und Glaubwürdigkeit ausrichtet. Konkret zeigt sich dies in der geforderten Rückkehr des so genannten „ehrbaren Kaufmanns“. Dessen Handeln ist auf das beschriebene Objekt ausgerichtet und eignet sich somit als der Held, welcher das angestrebte Ziel verwirklicht. Opponent: Widersacher, die den Helden an seiner Zielerreichung hindern wollen, sind sowohl realer als auch mythischer Natur. Als reale Aktanten lassen sich im Diskurs Manager identifizieren, deren als unehrenhaft konnotiertes Verhalten zur aktuellen Krisensituation beitrug. Als realer Aktant ist auch die bisherige Praxis von Analysten, Wirtschaftsprüfern und Banken zu sehen, welche dem Objekt/Ziel entgegenstehen und Manager zum Fehlverhalten bewegen. Mythisch dagegen ist die in einer Reihe von Artikeln konstatierte individuelle „Gier“, welche dem semantischen Gehalt nach stark in der Nähe instinkthaft-tierischen Verhaltens angesiedelt ist und den Manager vom ehrenvollen Weg abbringen möchte. Damit in Verwandtschaft, jedoch stärker kulturell und gesellschaftlich angebunden, finden wir den Sitten- und Werteverfall der Gesellschaft, welcher unehrenhaftes Verhalten belohnt und zum alleinigen Betrachten des eigenen Nutzens „verleitet“. Mythisch und real zugleich taucht als dritter Opponent die so genannte „Deutschland AG“ auf, deren Intransparenz und interne Verflechtung Fehlverhalten im Sinne der Nicht-Objekterreichung begünstigt. Die genannten Opponenten ließen sich weiter semantisch zerlegen und letztlich in ihrer Bedeutungsgesamtheit zu einem Gesamtbild „schlechter“ Corporate Governance zusammensetzen.9 Helfer: Unterstützung erhält der Held von schon immer als in das wirtschaftliche Geschehen und Handeln eingebettet angesehenen moralischen Grundsätzen. Diese historisch begründete moralische Rückbindung liefert die Werte auf die sich der Held bei der Zielerreichung berufen und stützen kann und soll. Des Weiteren kommt Hilfe vom so genannten „ökonomischen Sachverstand“, welcher als auf den langfristigen unternehmerischen Erfolg ausgerichtet (und damit Vertrauen/Glaubwürdigkeit befördernd) in direkter Opposition zur „Gier“ und zum Eigennutz gesetzt ist. Als realer Akteur welcher als Helfer-Aktant agiert ist drittens das Handeln der Corporate Governance-Kommissionen zu nennen, welche etwa mit ihren Forderungen nach mehr Transparenz gegen die Opponenten auf eine Zielerreichung mit hinwirken. Last but not least sind die Medien selbst implizit als Helfer anzusehen – sie betrachten ihr eigenes Wirken im Sinne einer Aufdeckung „schlechter“ Corporate Governance, vertreten aus ihrer Sicht den ökonomischen Sachverstand und propagieren neue Werte, welche zukünftig das Managementhandeln bestimmen sollen. Wiederum würde sich aus den Helfer-Aktanten bei einer weitergehenden Analyse das Bild einer „guten“ Corporate Governance entwickeln lassen. 9

Dies soll hier nicht weiter verfolgt werden. Zu dem hiermit angesprochenen Ansatz der Komponentialoder Merkmalssemantik vgl. Linke/Nussbaumer/Portmann 2001: 145ff.

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Sender: Der Sender in diesem Diskurs lässt sich ebenso als mythischer Aktant begreifen. Als Motivator des Helden und der Zielerreichung tritt hier ganz prinzipiell die Vorstellung der moralischen Qualität der Marktwirtschaft auf. Ein nach diesem System funktionierendes, d.h. hier auch nach gewissen moralischen Vorstellungen ablaufendes Wirtschaftssystem ist als erstrebenswert und „gut“ einzustufen. Ein Verstoßen dagegen muss jedoch zu Handlungen (etwa die Rückkehr des „ehrbaren Kaufmanns“) führen, um das Ziel/Objekt zu erreichen bzw. wieder herbeizuführen. Empfänger: Als Empfänger innerhalb der narrativen Struktur sind zum einen die Manager selbst zu sehen. Sie empfangen die Botschaft des Senders, und Ziel wäre hier ein Wechsel von der Empfänger- zur Helden-Rolle, um an der Zielerreichung, Vertrauen und Glaubwürdigkeit, mitzuwirken. Diese durch den Diskurs vermittelte Botschaft des Senders hat Forderungscharakter und entspricht somit dem weiter oben angesprochenen Merkmal der Handlungsorientierung der Narration, welches sich auf der diskursiven Ebene wieder findet. Zweiter Empfänger ist die Politik, an welche ebenso die Aufforderung zum Handeln, etwa im Sinne von gesetzgeberischen Reformen, ergeht. Dritter Empfänger der Narration ist die Wirtschaft, welcher es innerhalb der Erzählung wieder gut gehen würde, wenn das Objekt/Ziel erreicht würde. Es zeigt sich, dass der deutsche Mediendiskurs um die Frage einer „guten“ Corporate Governance als Narration, geprägt von elementaren, kulturell tradierten Erzählstrukturen verstanden and analysiert werden kann. Dies liefert einen ersten Zugang zur Ordnung dieses Diskurses. 4.3 Die ungarische Diskussion Wie unter Punkt 2 aufgezeigt, hat die Diskussion der Thematik „guter“ Corporate Governance in den ungarischen Medien einen erheblich anderen Zuschnitt als in Deutschland. Im gleichen Untersuchungszeitraum konnten 40 Artikel gefunden werden, welche relevant für die Problematik der Corporate Governance sind. In Analogie zur deutschen Diskussion soll in den nächsten Abschnitten die diskursive Ebene der ungarischen Diskussion betrachtet werden und mit der deutschen Diskussion verglichen werden. Eine narrative Ebene ist dagegen in der ungarischen Diskussion nicht zu identifizieren. Hierfür sollen im Vergleich der strukturellen Differenzen des deutschen und ungarischen Diskurses mögliche Erklärungen angerissen werden. 4.3.1 Fokus auf die Mitbestimmung und Fragen der Arbeitswelt Bereits im Vorfeld ist zu erwähnen, dass die Zeitung Népszabadság – woraus die meisten aufbereiteten Artikel stammen – den ungarischen Gewerkschaften und ihren Bündnissen nahe steht, so dass die Beiträge (bis auf eine Ausnahme) in der Nähe der Positionen der Gewerkschaften und deren Gremien stehen. So 70

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werden vom breiten Feld der Corporate Governance lediglich die Mitbestimmung und die Arbeitsbedingungen im weiten Sinne angesprochen. Weiterhin nehmen die meisten Beiträge den Regierungswechsel im Frühjahr 2002 zum Anlass und beziehen sich auf die diesbezüglichen Veränderungen. Über die bestehende Praxis der ungarischen Corporate Governance wird dabei im geringen Umfang berichtet. Herausgehoben wird die Rolle der Gewerkschaften als die Institution des Arbeitskampfes, während dem Betriebsrat als Institution des Arbeitsfriedens angesehen wird. Angesprochen wird auch dass der nach der Wahl wiedererrichtete OÉT (tripartites Gremium – „Rat“ – des landesweiten Interessenausgleichs bestehend aus Vertretern von Arbeitgebern, Arbeitnehmern und des Staates), welches für alle arbeitsrelevanten Fragen zuständig ist; sowie die Mindestlohnerhöhung (in zwei Schritten insgesamt um 100%) im Jahre 2001 durch die Regierung. Im stärkeren Umfang werden die in der Zukunft notwendigen Änderungen diskutiert. Die wichtigsten Punkte dabei sind: • der Interessenausgleich soll nach Branchen getrennt, allerdings zunächst in die Arbeit des OÉT integriert, erfolgen; • es soll ein sog. Wirtschafts- und Sozialrat errichtet werden, wo außer den drei traditionellen Gesprächspartnern auch die Investoren, die Kammern und Nonprofit-Organisationen vertreten sein sollen; • die Rolle der Gewerkschaften am Arbeitsplatz soll zu Lasten der Betriebsräte gestärkt werden – nicht zuletzt, weil die Betriebsräte keine Verhandlungen über den Interessenausgleich zu führen berechtigt sind, wobei auch das in Ungarn übernommene sog. deutsche Modell kritisiert wird; • Artikel 4 und 12 der Europäischen Sozialcharta sollen ratifiziert werden; • jene Arbeitgeber, die mit der Gewerkschaft über einen betrieblichen Kollektivvertrag zu verhandeln bereit sind, sollten finanzielle Unterstützung durch den Staat erhalten. Diese Fragen werden auch in den anderen untersuchten Medien reflektiert, so vor allem in Heti Világgazdaság und Magyar Hírlap. Die Mehrzahl der Beiträge aus Magyar Hírlap behandelt dabei behandelt ebenfalls das gleiche, begrenzte Segment von Corporate Governance. 4.3.2 Die Modelldiskussion Außer den oben bereits erwähnten kritischen Stimmen gegenüber dem deutschen CG-Modell werden in einem weiteren Beitrag die Differenzen zwischen dem amerikanischen und dem europäischen Modell herausgestellt und dabei der EU-Kommissar Frits Bolkestein zitiert, der für eine einheitliche Regelung der Rechte von Kleinaktionären und Arbeitnehmern plädiert und damit die ungarische Rechtslage in die Richtung US-Modell weiterzuentwickeln nahe legt. 71

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Ein Artikel aus der Fachpresse von 1999 preist das sog. italienische Modell der CG an. Die extrem arbeitsteiligen norditalienischen Goldschmiede haben es geschafft ein Netzwerksystem zu errichten, das trotz seiner Spontaneität auf vielen Ebenen und trotz mediterranen Führungsstils extrem flexibel und damit erfolgreich ist. 4.3.3 Die amerikanische Krise Insgesamt wurde in acht Artikeln das Thema der Vertrauenskrise in – oder besser gesagt: ausgehend von – den USA, sowie deren Ursachen und Wirkungen beschrieben. Die Mehrzahl enthält jedoch Stimmen aus dem Ausland. Aus dem Munde von 15, von Business Week befragten amerikanischen Experten werden einige Ratschläge zur Wiedergewinnung des Vertrauens zitiert wie z.B. Zurückdrängung des Bargeldverkehrs; Unternehmen als Champion der Transparenz, des ethischen Verhaltens und der gerechten Entlohnung, weitreichende Kontrollrechte für die SEC etc. Ein anderer von Financial Times übernommener Artikel plädiert dafür, dass die umstrittenen und überhöhten Führungsbezüge zurückgezahlt werden müssten. Des Weiteren sollten per Gesetz schärfere Kontrollen der betrieblichen Rechnungslegung vorgeschrieben werden, die diesbezügliche Betrugsmöglichkeiten verhindern sollen. Auch die Gesetzesänderungen in den USA infolge der Vertrauenskrise sowie der personelle Geltungsbereich des Sarbanes-Oxley-Gesetzes werden beschrieben und teilweise erklärt. Eine ausführliche Arbeit (in Anlehnung an Business Week) formuliert – nach strukturierter Analyse der Ursachen der CG-Krise in den USA – Empfehlungen bezogen sowohl auf interne als auch auf externe Stakeholder. Lediglich ein einziger Beitrag spiegelt explizit eine Meinung aus Ungarn wieder und stellt einen direkten Bezug zur ungarischen Situation her. Es wird kritisiert, dass bisher in Ungarn noch kein Buchprüfer zur (finanziellen) Rechenschaft gezogen wurde, obwohl diese laut Gesetz auch persönlich für die Wahrheit der beglaubigten Bilanzen haften. In diesem letzten Beitrag findet sich einerseits vielleicht die Antwort auf die Frage, warum die internationale Krise und deren Auswirkungen in Ungarn in der Tagespresse kaum ein Echo gefunden haben: „Die Frage nach der Verantwortung von Auditoren bleibt in Ungarn eher der Theorie vorbehalten. Die Krise in den USA weckte weder in den heimischen noch in den ausländischen Investoren Unsicherheitsgefühle, niemand ist der Meinung, die Bilanz auch nur einer der börsennotierten Großbetriebe könnte ‚falsch‘ sein“ (n.n., HVG 10.08.2002). Andererseits weist dieses Zitat implizit und in durchaus kritischer Weise auf die bisherige Praxis in Ungarn hin – es bleibt für die Zukunft abzuwarten, inwieweit die „Meinung“, das die ungarische Corporate Governance mehr oder weniger keine Problemfelder besitzt, kritisch reflektiert wird.

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5 Der Corporate Governance Diskurs in Deutschland und Ungarn im Vergleich Sowohl die Datenlage als auch die aus der Datenlage zum Teil gezogenen Konsequenzen bei der Analyse des Materials zeigen an, dass die Diskussion um Corporate Governance in den zwei Ländern erhebliche Differenzen aufweist. Die folgenden, abschließenden Ausführungen stehen deshalb unter drei Leitfragen: 1) Wo liegen inhaltliche Differenzen in der Diskussion? 2) Welche strukturellen Unterschiede gibt es in der Diskussion? 3) Wie sind die in 1) und 2) aufgezeigten Differenzen zu erklären? Für die Beantwortung dieser Fragen sollen die Ergebnisse der ungarischen Analyse methodisch an die deutsche Auswertung angeschlossen werden. Frage 1 behandelt somit Differenzen auf der diskursiven Ebene. Die zweite Frage bezieht sich auf die Ebene der narrativen Tiefenstruktur. 5.1 Die diskursive Ebene Stellt man die Frage nach den inhaltlichen Differenzen auf der diskursiven Ebene und vergleicht man die semantischen Felder beider Diskussionen lässt sich folgende Tabelle aufstellen: Tabelle 1: Semantische Felder in Deutschland und Ungarn Semantische Felder deutsche Medien Semantische Felder ungarische Medien Corporate Governance Kodizes, staatliche Regulierungen Bilanzskandale u. -fälschungen Vergütung von Managern Börsencrash Vertrauenskrise der Wirtschaft Deutschland AG Mitbestimmung (im Aufsichtsrat und auf Betriebsebene) shareholder-value Prinzip

-, + + + + + + -

‚+’ bzw. ‚–’ in der Spalte für Ungarn stehen für thematisiert/nicht thematisiert

Der Vergleich der semantischen Felder zeigt, dass die ungarische Diskussion thematisch begrenzter ist. Auf einzelne Differenzen soll im Folgenden kurz eingegangen werden. Die Frage der Corporate Governance Kodifizierung spielt in den ungarischen Medien keine Rolle. Dies ist primär auf die erheblich stärkere politische Bedeutung (etwa Einsatz zweier Regierungskommissionen) der Kodifizierung in Deutschland zurückzuführen – welches sein Echo in den Medien fand. Zudem ist die Frage der Kodifizierung in den deutschen Medien direkt an die wirt73

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schaftlichen Krisenerscheinungen gekoppelt – der Kodex lässt sich als ein Heilmittel dieser Krise deuten und spielt deswegen eine erhebliche Rolle in der Diskussion. In Ungarn existiert erst seit kurzem ein Gremium – initiiert von Ernst & Young und der ungarischen Börse – welches sich mit der Formulierung eines Kodex beschäftigt. Das shareholder-value Prinzip wird auf ungarischer Seite ebenso nicht thematisiert. Es lässt sich nur vermuten, dass die Frage nach der Doktrin des shareholder-value in Deutschland vor dem Hintergrund einer Systemdiskussion (shareholder-value vs. stakeholder-value in Analogie gesetzt zu Angloamerikanisches vs. Rheinisches Modell) zu sehen ist. Das Thema Deutschland AG stellt als Label eine spezifisch deutsche Problematik dar. Ob jedoch ähnliche Verflechtungen in Ungarn existieren ist in den ungarischen Medien kein Thema bzw. wird nicht als Problem thematisiert. Weiterhin ist zu konstatieren, dass die ungarische Diskussion im Vergleich zur deutschen keinen semantischen Überschuss aufweist. Es werden keine Themen angesprochen, die nicht auch in der deutschen Diskussion eine Rolle spielen. Es gibt in dieser Hinsicht keine Spezifik des ungarischen Diskurses. Neben diesen thematischen Unterschieden ist der Blickwinkel oder Standort interessant, aus welchem heraus die Diskussion um Corporate Governance in Deutschland und Ungarn geführt wird. Es lässt sich feststellen, dass die deutsche Diskussion sich als inmitten der Krise befindlich versteht, während die ungarischen Medien sich aus einer Beobachterposition heraus dem Thema nähern. Diese Differenz der Perspektive erscheint hier in erster Linie aus der unterschiedlichen Materialität der Diskurse, d.h. der Kopplung der Diskurse an real-wirtschaftliche Ereignisse, erklärbar. In Ungarn gab es weder einen mit Deutschland vergleichbaren Börsenboom noch eine im gleichen negativen Ausmaß sich daran anschließende Krise. Es gab weiterhin keine „Skandale“ (EM.TV) oder die Problematik von Abfindungen (Mannesmann) und „überhöhten“ Managementgehältern. 5.2 Die narrative Ebene Der Vergleich der narrativen Ebene führt zur Tiefenstruktur der beiden Diskurse. Im Gegensatz zum deutschen Diskurs konnte in der ungarischen Diskussion keine Tiefennarration identifiziert werden. Anders formuliert: die ungarische Diskussion scheint einer narrativen Struktur zu entbehren. Weder finden wir einen Helden-Aktanten i.S. des „ehrbaren Kaufmanns“, noch lassen sich dessen Gegner oder Helfer ausmachen. Es ist lediglich zu vermuten, das sich narrative Elemente analog der deutschen Diskussion bei einer weiteren Analyse der außerungarischen Quellen der ungarischen Beiträge finden lassen (etwa der erwähnten Umfrage von Business Week unter amerikanischen Experten). Eine dem Textkorpus als Ganzes zu Grunde liegende Narration ist 74

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jedoch nach dem gegenwärtigen Stand der Analyse nicht zu erkennen. In den ungarischen Medien wird die Corporate Governance Problematik als offensichtlich lediglich peripheres, die ungarische Wirtschaft selbst nicht betreffendes Problem wahrgenommen. Diese geringe Bedeutung der Thematik steht dabei, so unsere Vermutung, in einem als zirkulär vorstellbaren Zusammenhang mit der ebenfalls in den ungarischen Medien fehlenden moralischen Dimension der Corporate Governance Diskussion. Diese Vermutung weist methodisch zurück auf den Zusammenhang zwischen narrativer Struktur und moralisch aufgeladener Weltdeutung- und -erklärung. Das Fehlen einer narrativen Struktur ist in diesem Sinne erklärbar.

7 Literatur Angermüller, J. (2001): Einleitung: Diskursanalyse: Strömungen, Tendenzen, Perspektiven, in: Angermüller, J./Bunzmann, K./Nonhoff, M. (Hrsg.): Diskursanalyse: Theorien, Methoden, Anwendungen, Hamburg, Argument Verlag. Bronwen, M./Ringham, F. (2000): Dictionary of Semiotics. London, New York, Cassell. Foucault, M. (1973): Archäologie des Wissens, Frankfurt/Main, Suhrkamp. Foucault, M. (1974): Die Ordnung des Diskurses, München, Hanser. Gergs, H.-J./Schmidt, R. (2002): Generationswechsel im Management ost- und westdeutscher Unternehmen, in: Kölner Zeitschrift für Soziologie und Sozialpsychologie, 54, 3, 553578. Greimas, A.J. (1971): Strukturale Semantik. Methodologische Untersuchungen, Braunschweig, Friedr. Viehweg + Sohn. Greimas, A.J./Courtés, J. (1979/1986): Sémiotique: Dictionnaire raisonné de la théorie de langage, 2 vol. Paris, Hachette. Hartz, R./Steger, T. (2004): Geschichten von strahlenden Helden und bösen Mächten…Einblicke in den Wandel des deutschen Corporate Governance-Diskurses, in: Berliner Debatte INITIAL, Zeitschrift für sozialwissenschaftlichen Diskurs, 2004-1 (im Erscheinen). Jäger, S. (2001): Diskurs und Wissen. Theoretische und methodische Aspekte einer Kritischen Diskurs- und Dispositivanalyse, in: Keller, R./Hirseland, A./Schneider, W./Viehöver, W. (eds): Handbuch Sozialwissenschaftliche Diskursanalyse, Band I: Theorien und Methoden, Opladen: Leske + Budrich. Keller, R. (2004): Diskursforschung. Eine Einführung für SozialwissenschaftlerInnen, Opladen: Leske + Budrich. Linke, A./Nussbaumer, M./Portmann, P.R. (2001): Studienbuch Linguistik, Tübingen, Niemeyer. Nöth, W. (2000): Handbuch der Semiotik. Stuttgart, Weimar: J.B.Metzler. Propp, V.J. (1975): Morphologie des Märchens, Frankfurt/Main, Suhrkamp. Steger, T. (2003): Good corporate governance in transitioning economies – Some evidence from East Germany and Hungary, Vortrag an der Konferenz “Corporate governance

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and investments in transitioning economies” der Gorbatchev Foundation an der Northeastern University Boston, 23.-26. April. Viehöver, W. (2001): Diskurse als Narrationen, in: Keller, R./Hirseland, A./Schneider, W./Viehöver, W. (eds) Handbuch Sozialwissenschaftliche Diskursanalyse, Band 1: Theorien und Methoden, Opladen, Leske + Budrich. Viehöver, W. (2003): Die Wissenschaft und die Wiederverzauberung des sublunaren Raumes. Der Klimadiskurs im Licht der narrativen Diskursanalyse, in: Keller, R./Hirseland, A./Schneider, W./Viehöver, W. (Hrsg.): Handbuch Sozialwissenschaftliche Diskursanalyse, Band 2: Forschungspraxis, Opladen: Leske+Budrich, S.233-269. White, H. (1981): The Value of Narrativity in the Representation of Reality, in: Mitchell, W.J.T. (ed.) On Narrative, Chicago and London, The University of Chicago Press, 123.

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Manolescu, Irina/Prodan, Adriana ROMANIA

The Impact of Corporate Governance Pattern on Performance in Romanian Companies Abstract The purpose of this paper is to introduce and develop the concept of Corporate Governance (CG) through a study that assesses the impact of various CG systems upon the performance of the firm – especially upon the financial performance. The study will consider a comparison between various Romanian companies. The aim of the research is to understand if (and how) the corporate governance pattern affects company’s performance through managerial incentives and accountability enforcement. The empirical part of the research will be based on a comparison of this relationship (between corporate governance and performance) for Romanian companies, which will allow a much better interpretation of the results. The analysis will largely involve both quantitative and qualitative methods. An analysis of 107 listed Romanian companies on the Bucharest stock-market and Rasdaq, between 1997 and 2000 shows their dividend policy, its causes and the average values for each sector of the equity capital cost. Poor interest and the anemic activity on the Romanian stock market is explained by smaller amounts available for further investments.

1 Introduction The term of CG is already used in the Western literature, but it is almost unknown in Romania. It is necessary to line up to the concepts used in the specialized literature of the West. The future studies could prove to be a reference basis for the Romanian settlements concerning the shareholders’ rights, especially those of the minority shareholders. For the quantitative part of the analysis we mainly focus on the available accounting data of selected Romanian companies. The challenge is the gathering of the data in a representative amount for analysis and reliable conclusion. 77

The Impact of Corporate Governance Pattern on Performance in Romanian Companies

As there are rather important parameters difficult to measure in a purely quantitative mode, there is a need to gather qualitative data besides accounting data. For the qualitative part, a distinction can be made between ownership concentration (number of shareholders, presence of large shareholders, degree of ownership dispersion), organizational structure (the structure of the board of directors, committees and subcommittees, the number of independent directors), management structure, corporate level strategy, external environment, corporate social responsibility and regulation, etc. At the first stage, the analysis was carried out for the whole group of selected companies. Subsequently, by clustering the companies into broad homogeneous groups, the analysis was made for different clusters. As a result, similarities and differences can be defined so that more specific policy recommendation can be made. The paper examines the relationship between CG and performance. If the CG affects the performance significantly, then the performance can be improved by adjusting it. Understanding CG has also a high social importance, because it concerns the responsibility towards the equity of the corporation. The paper is intended to emphasize the role of the CG in Romania, thus leading to a better understanding of the economic problems. Finally, the CG improves the general transparency of the economy and facilitates competitive policies. In this context, the comparison between Romania, as a candidate for the EU, and others countries members of the EU, is the most appropriate.

2 Corporate Governance – Definition and Implications for the Companies According to the definition given by OECD in April 1999, “the corporate governance is a system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs.” It is presumed that there exists an internal and external impact of the firm’s corporate governance pattern on its performance. Inside the firm, corporate governance affects managerial incentives, which largely determine firm’s performance. In addition, it determines how investors enforce managers’ accountability and thus sends a signal to the market, which reacts by setting the firm value. Yet, there is a need for a deeper insight in this relationship. The debate on these issues is a relatively recent one in Western-European countries. In transition economies, it only began. However, a difference can be 78

Manolescu, Irina/Prodan, Adriana

expected between transition economies (such as Romania) and developed economies. First, there is much specificity in transition (mass privatization, underdeveloped stock markets, lack of competition, constantly changing legislation, etc.), which determine corporate governance patterns other than in developed countries. Thus, the transition economies face a more severe problem of insider control than developed countries. Second, because of different corporate governance, we can expect a different impact on performance in transition than in developed economies. For example, there are indications that state-owned or insider-controlled companies in transition undergo much less restructuring than outsider-controlled or de novo companies, which results in lower performance by the former. A comparison of the corporate governance patterns and performance in Romanian and Western European companies will be made to gain a better understanding in this problem. Since it is believed that economic income reflects firm performance better than accounting income, the residual income methodology will be used to measure performance. The topic of the relationship between the CG and the financial performance of the firm was the subject of some recent debates in the Western European countries. Despite that, in the countries in transition the concept is very little known and applied. Several questions can be asked: • Is there any relationship between the corporate governance pattern and performance (financial standing) of a firm? • What is the impact of corporate governance on managerial incentives? • How can investors enforce accountability? • What does it mean to govern well when the target is a moving one? • What are the differences between the impact of corporate governance on performance in a developed economy and a transition economy? • What are the differences regarding the application of residual income-based model for financial firms performance measure in a transition economy and a developed one?

3 Romanian Business Framework – Main Characteristics and Attraction This paragraph tries to synthesize the recent data on the evolution of foreign investments in Romania, and tries to correlate it with the studies on the dimensions of the organizational culture of the Romanian companies. There are two poles of investment in Central and Eastern Europe: on the one hand, countries like Poland and Hungary, which have the advantages of the next integration in the European Union, and on the other hand, countries of the former Yugoslavia, where an economic boom is expected. At first sight, Romania does not fit in this map of investments. 79

The Impact of Corporate Governance Pattern on Performance in Romanian Companies

The little attractive situation for the investors – also for the foreigners as for the domestic ones – is illustrated by little attraction of the great companies of the state – between the first 10 greater companies quoted in stock-market, only 3 have received a rating greater than 5 of the rating agencies. The rate of investment in economy stays at a reduced level – 21.5% in 1998, 20.6% in 1999 and 19.8% in 2000. More, the venture capital invested in Romania by the international funds is only 500 thousand USD, as opposed to the capital invested in Poland – 2 mild. USD. The level of foreign direct investments’ stock in Romania is definitely much lower than in some other countries in the area (Poland – 30 billion USD; Hungary – 19 billion USD; Czech Republic – 16 billion USD; data for the end of 1999). At the same time, the level is also low in relation to the economic potential of the country. These data can be correlated with the ratings obtained by Romania as a result of different evaluations done by the main international rating agencies, and, at the same time, with the rate of opacity, that reflect the main factors that influence the foreign investments. After a study realized in 2000, Romania has a rate of opacity of 71 – in a scale from 0 – total opening, to 100 – total opacity towards the foreign investments. The result equals the one between countries in the area only Russia being catalogued more opaque than Romania (table 1). Between the 35 countries considered, China is more closed (with a rate of opacity 87), and more opened Singapore (with a rate of 29). Table 1: Values of opacity index of different countries Country

Opacity index

Czech Republic

71

Greece

57

Hungary

50

Lithuania

58

Poland

64

Romania

71

Russia

84

Turkey

74

USA

38

Great Britain

36

The level of foreign direct investments in any country is definitely influenced by a number of factors such as: the level of economic development, infrastructure (both physical and institutional), geographical location and the existence of functional market economy institutions and mechanisms. From these points of view Romania presented in the last decade a number of positives and negatives.

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The positives were mainly the following: geographical location, size of the country (similar with Great Britain), size of the domestic market (22.5 million inhabitants, second place in the area after Poland), some natural resources (including oil, natural gas, salt, minerals, fertile agriculture land), diversified industrial infrastructure, skilled, low cost labor, association with European Union and strong NATO support. The main opportunities are the preoccupation to make some industrial parks and the concentration of the resources of education and investigation for the industrial sectors high-tech. The negatives referred to unequally developed infrastructure across the country, lack of proper market institutions (especially in the banking sector), legal and institutional instability and slow privatization process. The attraction of Romania for foreign direct investments has been negatively affected by a number of aspects related to the evolution of reform process. The main limit, regarding both the attraction of foreign direct investments and the evolution of economy in general, was represented by the absence during the whole period 1990-2000 of an industrial policy which would have established a number of priorities in the development of industrial sectors and allowed an active policy of stimulation of economic activity on the basis of qualitative criteria. The absence of an industrial policy has meant implicitly the absence of the instruments by which such a policy would have been implemented (fiscal and financial instruments, effective means of intervention for smoothing the way for the foreign investor on the Romanian market, etc.). The lack of these concrete instruments led to the situation in which the activity of foreign direct investments promotion limited itself to general promotion activities (mainly consulting support and production and dissemination of information and promotion materials) and that of micro-economic investment projects. The absence of an industrial policy with a clear component regarding foreign direct investments has also determined an attitude from the part of Romanian fiscal, customs and administrative bureaucracies that was not always friendly or coherent towards foreign and domestic investors. It is likely that the slow privatization process has made the most important impact on the volume of foreign direct investments in Romania. As we have mentioned above, a direct correlation was noticed between the rhythm of privatization and the volume of foreign direct investments (FDI), at least during some periods, in the neighboring countries, over 80% of those FDIs being determined by the sale of some large state companies. As for Romania, an economist remarked that “until mid 1999, 28.3% of the assets owned by the state have been privatized. Extrapolating the results

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The Impact of Corporate Governance Pattern on Performance in Romanian Companies

obtained during the latest period, we reach the conclusion that we need further 15-16 years to conclude the privatization process”10. The high level of fiscality, as well as the lack of transparency also represented a less encouraging factor for foreign and domestic investors. Another limit, with implications more of a psychological nature, has been represented by the maintenance until the beginning of 1997 of a certain lack of clarity regarding the right of foreign investors to buy the land related to their investment in Romania. After 1997, the persistence of the legal and procedural problems related to the restitution of nationalized buildings and lands has determined in certain cases reluctance of foreign investors. Extreme institutional and legislative instability, which prevented foreign investors to make medium and long-term assessments on the profitability of their investments in Romania, led to specific problems between 1997 and 2000. A series of hesitations recorded in economic reform management has accentuated the reluctance of the foreign investors towards Romania, and the repeated downgrading of Romania during the period 1997-1999 by the international rating agencies as result of the economic decline. Moreover, the existing premises (specialists, politics, infrastructure, community and political means) are dispersed. Lack of access to the information prevents the acquisition of a percentage of the shares of companies listed on a stockmarket; therefore, the positive effects of the recent law of protection of the minority stockholders are lost in time. The weak international promotion of Romanian offer became acute since 1997 when practically no funds were allocated any longer for this activity. Romania eliminated itself from the financing granted by the European Union (van der Broeck facility) for the attraction of foreign investment (the respective funds being thus directed by the donor to the competing countries in the area) by closing the investment promotion agency at the end of 1997. In 1998 Romania became the only country with no specialized institution for attracting foreign investment. After 1997, Romanian governments have kept a strange silence on the foreign direct investment subject. Aside of some rare statements on public occasions, foreign direct investments are not even a subject included in the medium term (2000-2004) strategy. Starting early 1997, a number of changes regarding the legal and institutional framework for foreign direct investments have taken place, all of them converging towards a diminishing attention given to the subject by the Romanian authorities. 10

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Manolescu, Irina/Prodan, Adriana

The polarization of foreign direct investments in Romania in very small companies (usually having as foreign investors natural persons) or very large (having as investors companies) is explained under the circumstances of a transition economy like the Romanian one in which the functioning of the market mechanisms and institutions is far from normal. The large investors can operate on an imperfect market because they can afford long term strategies that allow for losses during the first years of operation. At the same time, these large companies may have access to the governmental institutions and have technical and legal assistance that helps them solve various problems. On the other hand, small companies and individual investors can operate on an imperfect market because they have a minimal inertia, they are not involved in large investments with long technological cycles and they can capitalize fast on favorable, short-term circumstances. In this context, one can expect that the increase of the weight of the medium sized companies among the foreign investors will represent a real barometer for the normal functioning of the market economy in Romania. The main sectors of activity in which foreign direct investments have concentrated in Romania were: • • • • • • • • • •

industry (mining, processing, machine building, tools and equipment) – 25.9% professional services – 20.6% wholesale trade – 14.5% food industry – 13.0% light industry – 10.8% retail trade – 7.8% agriculture – 2.7% transport – 2.0% constructions – 1.9% tourism – 0.8%

These options reflect, in fact, the characteristics of the Romanian economy during the ‘90s: a transition economy, with an internal market of 22.5 million inhabitants (second largest in the area) with a low and diminishing purchasing power, the existence of a high industrial potential in a series of branches, significant natural resources. From the point of view of territorial distribution, foreign direct investments in Romania during the period 1990 until May 2000 showed a high concentration in Bucharest (about 51.3% of the total foreign capital invested and about 53.5% of the total number of companies with foreign participation established).

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The Impact of Corporate Governance Pattern on Performance in Romanian Companies

The orientation of the foreign capital in Romania, during the mentioned period, by historical provinces was the following: • • • • • • • •

Transilvania – 10.5% Muntenia – 8.7% Banat – 7.6% Moldova – 5.4% Oltenia – 4.6% Crisana – 3.1% Dobrogea – 3.0% Maramures – 1.3%

To share the territory in zones less favored and to decide additional facilities for the investors in these zones has been a little effective strategy: often, the level of the facilities has surpassed the level of the investments. The sectors with certain opportunities at Romania are: • IT, with the support of the United States (3.5% of the companies are private, with 79.78% foreign capital); • Textiles, with several foreign investors, the production being made in the lohn system; Romania is at this moment the tailor no.1 of Europe; • The wood sector with several foreign investors, who have invested 500 million USD and hope at liberalization of the market to invest other 500 million. Could the success or failure of the foreign investments in Romania be explained from a cultural point of view? A study made of a company of consulting, D&D Research11, on 76 companies, shows some important characteristics for the companies of Romania (tables 2 and 3). Smaller results for the dimensions innovation and orientation on the objectives need to be noticed. A surprising result could be noticed as far as orientation towards regulations: the obtained figures of the international companies are greater than the one of big state companies. Among the examples, the evident ones are bound to the German companies, where orientation on the regulations (although combined with a financial motivation) leads to a high fluctuation of personnel.

11

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See http://www.capital.ro.

Manolescu, Irina/Prodan, Adriana

Table 2: Results of different dimensions by organizational culture Support Innovation Objectives

Regulations

State companies of heavy industry

31.2

26.8

41.6

72.4

Institutions of administration

48.4

24.1

21.6

71.0

State companies of services

37.0

31.7

26.5

64.8

Privates companies of production

57.4

58.5

59.2

74.0

Privates companies of distribution

52.8

52.1

62.7

71.8

Privates companies of exploitation

30.8

60.1

63.1

66.1

International companies of distributions

66.4

65.2

72.4

82.6

International companies, import and representation

59.9

72.8

70.8

86.3

Advertisings

72.2

81.3

81.9

72.6

Research and teaching institutions

86.1

50.6

53.3

66.0

Average Results

57.4

50.6

53.3

66.0

Source: D&D Research Table 3: Particularities of managerial behavior State Privates Companies Companies

International Companies

Research Institutions

Consideration

41.4

71.7

76.4

88.7

Structuration

29.4

85.0

68.0

13.6

Representatives

54.7

44.0

46.6

22.2

Resolve the request

32.9

31.6

52.9

20.2

Tolerance of the incertitude

87.5

14.0

15.6

62.7

Be able conviction

31.9

50.1

75.3

52.5

Tolerance of liberty

24.1

46.2

70.2

89.6

Assume the paper

84.9

80.9

81.5

19.5

Prediction fidelities

16.1

48.8

70.1

28.8

Accents on the production

52.0

77.7

78.8

33.7

Integrations

41.4

58.6

68.4

31.0

Orientations towards the bosses

84.9

61.2

77.3

24.6

Source: D&D Research

On the managerial behavior, some characteristics can also be noticed: • a great power to tolerate the uncertainty of state companies’ managers, which apparently seems to be in contradiction with orientation on the regulations; the explanation consists in the instability of those regulations and the vague and redundant formulations; 85

The Impact of Corporate Governance Pattern on Performance in Romanian Companies

• a clear definition of its paper and its sense of expectancy for managers of private companies. It should be noticed that managers of the international companies have, for most of the studied dimensions, average figures, between the ones obtained by the managers of big state companies and managers of private companies. Most of the failures being caused by reduction of the purchase power or the lost of the traditional markets have also been based on the incapacity of managers to tolerate the uncertainty, to do slalom between the obstacles. The training and the attention in the process of selection of the managers seem to be key factors of success for the foreign companies.

4 Study Regarding Financial Performance of Romanian Companies – Methods and Results The initial hypothesis in this research is: The dependence relation between the capital structure and the industry is statistically significant. We consider in this analysis the public data of 107 Romanian firms listed on Bucharest Stock Market and on Rasdaq, between 1997 and 2000. There are public data, available to stockbrokers, found in the annual reports of activity of the companies. Between these 107 companies, only for 92 the values of the indices could be determined for each year considered in analysis. Consequently, the presented results will only talk about these 92 companies. The indices included in the analysis are the rate of indebtedness and the yield of the equity capital. The indices considered in the analysis of the leverage effect are not the classic ones, but they have undergone adaptations to the conditions of the Romanian financial market. The rate of indebtedness has been determined in percentage, like ratio between the total debts and total equity capitals of the company. This ratio has been preferred because the limitation to the debts to average and length term is not functional for the Romanian companies, the great majority of the debts being of short term (until a year), but holding a permanent character. In addition, the yield of the equity capital considered is represented for the ratio net benefit / equity capitals and is not a financial yield, of the shareholders, in the true sense. Between the 107 studied companies, near half (52) have not distributed dividends over this period. As a consequence, if we considered the normal ratio for the financial yield, between the annual gains of the shareholders (in terms of dividends and gains of capital) and the equity capitals, we obtained negative indices, or very small values. The instrument used in the econometric analysis of the financial data is the simple linear regression – the leverage effect is a linear function, having as a dependent variable the financial yield and independent variable the rate of indebtedness. The used informatics support is SPSS 10.0 for Windows. 86

Manolescu, Irina/Prodan, Adriana

The variables included in the regression are 9, between which only 8 including explicitly (and for which there is a statistical description in table 4): • a grouping variable – the activity sector (named sector), with values from 1 to 11, having the following meaning: 1) Energy, petroleum, gas 2) Chemical and pharmaceutical products 3) Electronic and electro technique 4) Equipments and installation 5) Metallurgy and other metals 6) Materials of construction 7) Textile and footwear 8) Food industry and agriculture 9) Banks and insurances 10) Wood and furniture 11) Transportation, tourism, constructions, commerce • dependent variables – financial yield for each one of the 4 years considered in the analysis (named rf00-rf97), expressed in percentage; • independent variables – the rate of indebtedness for each one of the 4 years considered in the analysis (named indat00-indat97), expressed in percentage. Table 4: The level of capital cost for different sectors Sector of activity\ Year 2000

1999

1998

1997

Energy, petroleum, gas

0.97

13.00

9.71

22.50

Chemical and pharmaceutical products

12.35

12.08

9.42

12.59

Electronic and electro technique

18.74

18.74

15.06

19.81

Equipments and installation

0.96

-4.19

-1.84

3.58

Metallurgy and other metals

7.97

4.87

2.99

4.75

Textile and footwear

16.70

12.86

5.77

6.03

Food industry and agriculture

15.23

18.97

18.30

18.00

Banks and insurances

23.59

23.59

23.54

30.87

Wood and furniture

3.54

3.23

4.60

4.50

Transportation, tourism, constructions and commerce

5.36

5.77

3.40

8.00

The average cost of shareholders capital

9.56

8.97

7.82

12.03

From the analysis we notice that the high values of the yield for shareholders appear for the sectors banks and insurances (as it is to be supposed from a principle), and electronics and food industry and agriculture (surprisingly). A fall of the level of the cost of capital is noted for the power sector in 2000. Reduced values, even negative in period 1998-1999, are noticed in the sector of constructions of equipments and installations. Globally, the evolution of the financial 87

The Impact of Corporate Governance Pattern on Performance in Romanian Companies

yield for the listed companies has not undergone important variations, remaining in interval 7-12%, much under the level of the inflation for the considered periods. In order to prepare the regression, we have tested the existence of significant differences between the values of the rate of indebtedness for 2 years. The average values of the variables differ from a period to another, the rate of indebtedness knowing a maximum in 2000 (406.12%) and a minimum in 1999 (189.98%), while for the financial yield the maximum has been in 1997 (12.03%) and the minimum in 1998 (7.82%). The null hypothesis of the comparison consists in the fact that the difference between 2 years consecutive is insignificant from the statistical point of view. In this statistical analysis we notice relatively low correlations between the consecutive series of years 2000, 1999 and 1998, but high one in the case of years 1998 and 1997. All the calculated coefficients of correlation are significant at a level of 2.5%. With respect to the existence of some significant differences between the values of the rate of indebtedness in the studied period, the probability of accepting the null hypothesis is greater than 50% only for the comparison between 1999 and 1998. The results are not very conclusive from the statistical point of view. The estimation of the regression coefficients and the model results are presented in table 5. The regression was made by every year. Table 5: Estimation of the coefficients of regression and the statistical tests Model Coef Values Std. Deviation t Sig. rf00 = a + b*indat00 rf99 = a + b*indat99 rf98 = a + b*indat98 rf97 = a + b*indat97

a

9.916

2.395

4.140

.000

b

-8.866E-04

.001

-.789

.432

a

11.674

3.047

3.831

.000

b

-1.423E-02

.007

-1.919

.058

a

262.558

115.188

2.279

.025

b

-2.271

4.689

-.484

.629

a

263.593

117.559

2.242

.027

b

-3.440

4.667

-.737

.463

F

Sig.

.622

.432

3.683

.058

.235

.629

.543

.463

Except 1999, we note that any model does not pass the meaning testes, as much for the regression coefficients (that show the impact of the rate of indebtedness on the financial yield), that for the explanation of the variability (F test). For the different sectors, given the relatively reduced number of available data, we calculated only the correlation between the two variables, comparing the

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result with the global value of the correlation for every year. The results for 2000 are presented in table 6. The correlation has low significance for every year considered (the results are only presented for 2000). In addition, except sector 8 (Food industry and agriculture), the global coefficient of correlation has the lower value. The sectors for which the correlation is significant are: 1 (Power, petroleum, gas), 2 (Chemical and pharmaceutical products), 9 (Banks and insurances) and 10 (Wood and furniture). Table 6: Correlations between the rate of indebtedness and the financial yield in 2000, globally and by sectors Sector of activity Pearson Correlation Sig. Global

-.083

.432

Power, petroleum, and gas

-.910

.004

Chemical and pharmaceutical products

-.538

.058

Electronic and electro technique

-.159

.798

Equipments and installation

-.273

.207

Metallurgy and other metals

-.096

.805

Textile and footwear

-.481

.275

Food industry and agriculture

.028

.940

Banks and insurances

.942

.000

Wood and furniture

1.000

.000

Transportation, tourism, constructions, commerce

-.333

.519

5 Debates The relation of the leverage effect is verified for each individual company. It is a mathematically constructed relation, and, at the individual level, its negation is not possible. The goal of this study is to determine, at a collective level, a relation that allows determining the cost of equity capital, based on the rate of indebtedness. The constant of the equation will be an approach of the economic yield average and the coefficient of the regression for the variable rate of indebtedness will be an approach of the difference between the economic yield and the interest rate. At the sector level, since the economic yield is not expected to support sudden changes from one period to another, the model has a great chance to work. Things change at the level of the whole population of the companies. The economic yield differs in significant way from one sector to another, so the global model has all the opportunities not to be functional. Given the fact that the great majority of the studied companies are listed on the most important stock market of Romania, a minimum yield level has to be imposed (this level 89

The Impact of Corporate Governance Pattern on Performance in Romanian Companies

have to be one of the criteria of admission to evaluation), and, as a consequence, the construction of a model will be opportune. The hypothesis presented at the beginning of the paper, by the realized analysis, had been partially confirmed, for some sectors only. The leverage effect has a negative impact for the Romanian companies, the difference between the economic yield and the interest rate being at the level of averages by sectors, negative. In conditions of reduced capitalization of the Rumanian companies, in conditions of a negative evolution of the Romanian stock market, and because the interests of the minority stockholders are not defended explicitly, the access to financing sources with reduced costs is essential for the company survival. The excessive use of the banking credit, when the banks do not have priorities to maintain in certain limits the rates of indebtedness, is a solution only on the short term. Practically, it is possible to be arrived at a situation similar to that of the companies that finance themselves by issuing junk-bonds (bonds that are issued when the company already has a very high level of debts, being speculative; the high interest rate tries to compensate the high risk). This form of financing has known a spectacular development in the ‘80s and ‘90s in the U.S.A. being specific for the companies outside the main stock markets. The risk of those financial titles is the effect of the two joint factors: • The critical financial situation of the issuing company • The excessive volume of the debts of this company The higher values of the yield for shareholders appear for the following sectors: banks and insurances, electronics, food industry and agriculture. Reduced values, even negative in period 1998-1999, are noticed in the sector of constructions of equipments and installations. Globally, the evolution of the financial yield for the listed companies has not undergone important variations, remaining in interval 7-12%, much under the level of the inflation for the considered periods. The yield of the shareholders is, in average, constantly inferior to the interest rate, for the whole period under anlaysis. Although the cost of the credit, when it is compared with the cost of the equity capital, must be diminished as a result of the inflation, it seems that for the Romanian financial market this recommendation of the financial theory is not functional. This because the equity capitals do not undergo annual re-evaluations and the increases of the prices of the shares at least proportionally with the index of the inflation is purely accidental. The equity capitals are insufficiently remunerated in the listed Romanian companies, turning out little interest to invest in the stock market. The destinations of the net benefit for these companies, in addition to the habitual ones (payment of dividends and investment funds) to a great extent include also the 90

Manolescu, Irina/Prodan, Adriana

lost cover of the previous years, and prizes of managers and the personnel. For the most of the listed companies, the share price is under the nominal value, which reflects the reduced interest for investments in this market. The causes of reduced dividends invoked by management are the losses of the current year or the previous ones, a reduced level of the benefit, which makes the distribution of dividends inopportune. Between the companies that have distributed dividends, only 38 have distributed them every year; frequently, although the company announces that it will distribute dividends, due to the reduced liquidity, we notice delays in the effective payment, even of order of the years. For 2000, only for 22 companies the level of the dividends was greater of 20% by the share price, and only for 19 companies the ratio dividends/nominal value has been superior to 0.2. Finally, we must mention that, frequently, a great part of the benefit is distributed to the employees and to the members of the administration board (10-20%), which harm the interests of the shareholders.

6 Conclusions The presence of the determinant factors of capital structure (bankruptcy and monitoring costs, motivation of the managers, institutional restrictions, transaction costs and taxes) represents an argument for the validation of the first hypothesis, but their incidence is exceeded by the low liquidity of the Romanian capital market. All these elements have opposed effects on the cost of capital and the resulted conclusion is the impossibility to obtain an optimal capital structure, especially on Romanian capital market. The impact of the debt is constantly negative for the Romanian firms. The existence on Romanian stock market of the listed firms with a debt ratio (debt/ equity capital) higher than 500%, but sometimes reaching incredible values like 10000%, raises serious questions over the admittance criterions on stock market quotation. These highly indebted firms have descending trends in activity and profits and the questions about financing policy can be raised both on the firm and financial institutions levels.

7 References Artus, P. (1996) : Crise financière, stratégie d’investissement dans les pays à risque, comportement des investisseurs, dans, in: Economie Internationale, 9. Brancato, C.K. (1996): Institutional Investors and Corporate Governance: Best Practices for Increasing Corporate Value, Irwin Professional Publishers. Charkham, J./Simpson, A. (1999): Fair Shares: The Future of Shareholder Power and Responsibility, Oxford Univ. Press.

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Chişu, V.A. (2001a): Majoritatea managerilor româneşti au orbul găinilor, in: Capital Review, pp.26- 28. Chişu, V.A. (2001b), Pe piaţa de consultanţă în management din România banul şi clientul se câştigă greu, in: Capital Review, 28. http://www.capital.ro. http://www.investromania.ro. Keasey, K./Wright, M. (eds.) (1997): Corporate Governance: Responsibilities, Risks and Remuneration, John Wiley & Sons. Millstein, I.M. (1998): Corporate Governance: Improving Competitiveness and Access to Capital in OECD, OECD. Nickell, S. (1995): The Performance of Companies: The Relationship between the External Environment, Management Strategies and Corporate Performance, Blackwell. Parkinson, J. (1995): Corporate Power and Responsibility, Oxford. Rappaport, A. (1997): Creating Shareholder Value: A Guide for Managers and Investors, Free Press. Warner, A./Hennell, A. (1998): Maximizing Sharehold Value, Trans-Atlantic Publications.

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Experiences of Banking Internationalization: Estonia and Russia Case Abstract Banking reforms in Central and Eastern Europe (CEE) have attracted many international banks since early 1990’s. Their entrance to new markets plays an important role in success of reforms in CEE countries and has been discussed for the last decade actively. Obviously, it will become actual issue in the future. Market reforms in neighboring Estonia and Russia will have essential influence on the development of these countries’ economies, especially on banking. Restructuring of banking sector in these countries began almost simultaneously, but results are different. The aim of this study is to analyze market entry strategies of foreign banks on example of Estonia and Russia, compare similarities and differences of their internationalization process. This study will focus on (1) basic theories explaining the banking internationalization worldwide and in CEE countries, (2) explanation of entry strategies types, timing, institutional mode and fields of business activities, (3) search new trends of foreign banks’ strategy and activity on Estonian and Russian markets.

1 Introduction Previous studies on banking internationalization were primarily focused on US banks’ overseas operations. Nowadays advanced transition economies of CEE are opening up their banking sectors for foreign competitors and itself beginning expansion towards new markets. Therefore, these twofold processes reflect the new stage of development of international finance in context of globalization. International banks can easily provide transition countries’ financial needs if local authorities allow them to enter local market. The banks’ internationalization has various goals and forms. Originally, international banks seek a way of entering into foreign markets to serve increased foreign trade and foreign direct investments, due to the liberalization of target financial markets. Consequently, the aim of this study is to analyze following research questions: 93

Experiences of Banking Internationalization: Estonia and Russia Case

• What kind of market strategy have foreign banks adopted in two different markets like Estonia and Russia? • What kinds of entry modes were used? What motivates bank to enter foreign markets? • Test hypotheses confirming main theoretical concepts of banking internationalization in case of Russia. Chapter one focuses on the existing theoretical concepts and empirical studies explaining internationalization of banks. The aim of this chapter is select the basic postulates and nuances, which characterize process of internationalization and especially in banking. In chapter two are discussed main strategies of internationalization. In chapter three discussed the situation and development of banking sector in Estonia and Russia and resumed some empirically tested results. Chapter four sets up empirical evidence of foreign banks’ entry to the Russian market.

2 Theoretical Concepts of Banking Internationalization There are many theories explaining the process of internationalization. Most of them have been discussed according to the theory of comparative advantage (primarily introduced by Ricardo and further developed by Hecksher and Ohlin). Aliber (1976) applied this concept to the banking. He assumed that the banks with a comparative advantage in producing bank products or services would tend to dominate the world banking market on increasingly favorable terms due to their higher relative profits. This will accelerate their increased market share due to lower costs, and as a result, further increase profits. Due to market failure, the bank will not sell its advantage and will internalize it via various forms of representation overseas (Aliber 1976: 5-6). The theory of multinational banking (Grubel 1977) proceeds the comparative advantage concept. According to this, multinational banks have some comparative advantages. Banks go abroad to better serve their domestic clients, who have gone abroad, which is called gravitation pull effect. Banking internationalization grows in parallel with FDI as banks try to meet the demand for banking services of MNC abroad. These banks’ behavior is seen as a defensive strategy necessary to assure the continued business with the domestic parents of foreign subsidiaries. Banks also do some business with local and wealthy individuals by offering them specialized services and information for trade and capital market dealings within their native countries (Paula 2002). According to the theory of industrial organization (Grubel 1977) most of banks moves abroad are of the follow the customer type. International expansion should be undertaken when the expected marginal cost of expansion does not exceed the expected marginal gain. Theory can be regarded as a specific application of the general theory of internationalization (Coase 1977, Hymer 94

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1976) and adopted into the banking sector by Cho (1983). According to this concept banks’ international strategy may be explained by network effect. Banks expand abroad in order to enable clients to avoid the imperfections of the international markets. In this case the bank is investing offshore to internalize existing contractual and information relationships. Khoury (1980) among others insist that multinational banking growth due to the geographical expansion of home-country customers. Gray & Gray (1981), Yannopoulus (1983) used Dunning’s classical eclectic FDI paradigm and applied it to banking. There are the main conditions, which give rise to FDI: imperfections in product market and in factor or input market, economies of international operation, entry into a growth or high-growth market and ensuring control over a raw material source. Generally, the main reason for direct investment in banking is a perceived need for direct contact between banks and clients (Walter & Grey 1983, Konopielko 1999). Face-to-face contact appears to be important in cases of initial contact or when customers need unique services. Additionally, it’s essential factor in situations of a higher degree of uncertainty (Tschoegl 2000). Further application of the eclectic framework to multinational banking has provided more specific examples of ownership, location advantages and internationalization (access to skilled personnel and managerial resources, widespread and efficient banking networks, knowledge and experience in multinational operations, prestige etc.). There are several other possible reasons why banks establish actual entities abroad: (1) to be in contact with domestic enterprises that have international activities, (2) may be eager to enter profitable niches such as the provision of services to wealthy individuals and the foreign communities, (3) there may be a purely speculative desire to establish a presence in the industry (Bonin 1998).

3 Main Strategies of Banks’ Internationalization Summarizing theoretical concepts considered above, it’s possible to choose five main banks’ strategies for expansion to the emerging markets: • • • •

Follow the customer Leading the customer Market-seeking strategy Follow the leader

Originally, multinational banks didn’t have a specific strategy expanding into emerging markets. The strategy varies greatly according to the banks’ basic strategy of internationalization and its advocate status (foreign or domestic). Mode of entry (by joint venture or alone) and types (greenfield or mergers & acquisitions) proceed also from bank’s long-term goals. 95

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For example, ABN Amros’ request to become (1) a universal bank, catering mainly multinational corporations; (2) and specialized bank in selected emerging markets (consumer financing). Bank applies very flexible approach entering onto market from segment to segment, from wholesale to retail (for example, Russia before 1998 crisis) or vice-versa. Bank prefers to go abroad alone, but may accept a minority stake for a limited lapse of time. (Bouteiller/Marios 1999). It means that the branch status is more appropriate than the subsidiary, wherever it is possible due to the less costs and more control. With greenfield investment, new entrance need to build up reputation and branch network from whereas they can potentially benefit from existing customer contacts when buying up an existing bank. Under perfect information about business conditions, cost of the two modes of entry should be the same. Under uncertainty, however, greenfield investment is likely to entail higher costs (Bush 2000). Greenfield entry was also conducted by the joint venture. Example of two Western banks: Dresdner Bank and Banque Nationale de Paris (BNP). The business strategy of these banks was developed according to their co-operation agreement of 1988. According to this agreement the banks will establish common active operating entities in Eastern European transition economies (Hummel 1999: 381). BNP-Dresdner, a partnership of the French and German banks had operated jointly in Russia since 1993 to pool resources and reduce risks (Financial Times 1999). However, Joachim von Harbu, one of the directors of Dresdner Bank announced in the beginning of 2001 that the BNP-Dresdner Bank alliance, which had been in existence for seven years, had broken up. Von Harbu pointed out that Dresdner Bank intends to pursue a more active and vigorous policy. That’s way they decided to depart from co-operation with BNP and to conduct the activities of the St. Petersburg subsidiary independently (ItarTass 2001). Another pattern of the joint venture of two foreign banks, that both come from one country. The State Bank of India and the Central Bank of Russia in November of 2001 signed a protocol of intentions for the opening of a wholly Indianowned subsidiary in Russia. The commercial bank would be a joint venture by the State Bank of India and Canara Bank in which they would have 60-40% stake, respectively. The new bank is expected to become operational in 2002 and will provide trade and finance products such as line of credit and guarantees. Other samples of joint ventures of Russian and foreign banks are RussianGerman Trade Bank, Russian-Turkish Bank, and Ziraat Bank. Societe Generale has a global niches approach without being willing to become a universal bank. Bank uses more joint venture of entry when there is no other way. Inversely, Barclays had bad experiences with joint venture therefore is 96

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very sceptic for this mode of entry. Banks focus on specialized products for worldwide customers. Therefore, maintains commercial banking representations in the emerging markets. Domestic status plays significant role and allows using follow the leader strategy. Banks’ ambitions in Asia are to generate at least 15% of the total bank’s revenues. It wants to turn ABN AMRO into one of the three leading banks in Asia, alongside Citibank and HSBC (Granitas 1998). The domestic status gives an opportunity really to enter the market and is looking for retail banking or consumer banking. Decentralization of decision making is the key in order to succeed inside a given market. The centre can only focus on the very top management (Bouteiller/Marios 1999). In the framework of domestic status the theory of comparative advantage is even more useful because it enjoys a comparative advantage relative to local banks and their international competitors. If the main goal is the foreign status, bank are specialized on the high value added and the wholesale market (Barclays Bank and Societe Generale), and their clients are mainly large companies from home-market and abroad. There are two sub-approaches of the foreign status: (1) relationship approach under which bank follows its customers. Hence, emerging markets are only an extension of overall international strategy. It allows entering new markets according to the local legislation and acceptable institutional mode. (2) Product approach needed the development of a worldwide network of commercial offices to maximize the economy of scale in a selection of a few global products. In this case new markets seems to be a ‘deterrent’ as it is synonym with limited customer requirements and thus an unnecessary dispersion of the energy of bank. While banks may merely be following their customer into foreign countries, they may as well be present in foreign markets prior to their corporate clients, pursuing the so-called leading the customer strategy (Buch 1997). In this case banks operate as an agent of home country clients developed new contacts abroad. Especially small- and medium-size enterprises particularly interested in establishing trade relations and in collecting data about the existing political and economic and cultural situation in the country. Bank gives the possibility to improve and enlarge their scope of products and services and to strengthen their client ties. Through these services banks affect the loyalty of their clients and acquire new clients (from competitive banks) and to fix their market position. (Stephan 1998). Market-seeking strategy means that the bank tries to find a new niche in the international market. It may penetrate foreign markets with certain intent to serve foreign clients due to existing know-how and means. Also they can follow some existing clients, but it is not important. It is supposed that purely marketseeking strategy is associated with larger risks and uncertainty than, for example, the follow the customer strategy. Therefore, mainly experienced and 97

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strong international banks follow this strategy. Such banks, aiming to achieve a geographically wide service network, should be multicultural, synergistic and whole. According to Mohanty et al. (1998), only a few banks are large enough to penetrate through home-country loyalties to attract other customers. The follow the leader explanation leads to an identification problem, for the factors that explain why firms headquartered in one country set up foreign subsidiaries might also explain why banks headquartered in this same country also set up branches abroad, quite independent of whether domestic firms are investing abroad (Aliber 1984). On the international scale, oligopolistic rivalry brings about a number of typical conflict patterns, which often referred as follow the leader pattern. It means when a given bank shows an interest in a foreign country, all its competitors move into the country concerned as well, out of fear that the advantages acquired by the first mover might threaten market positions within the industry (Bouteiller/Marois 1999). Follow the leader strategy is associated with less risk in relation to the market seeking strategy. It is not necessary to analyze deeply acceptable level of risk due penetrated competitor do it before. At the same time it is worth to take into account existing opportunities and international experience, otherwise the market penetration may fail. Therefore the internationalization of banks depends primarily on the strategic choices (domestic or foreign) and on other essential factors such as the location or the timing of the move (before, during or after the opening market). Thus, the eclectic paradigm suits the different behavior best.

4 Banking Sector as a Target Market for Foreign Banks 4.1 Russian Banking Sector Development In fact emerging countries all are different and each have own specific features including the banking sector. Foreign banks seem to find a way of entering markets where the underlying conditions are favorable. Table 1 demonstrates economic and banking indicators and the banking reform’s scale in Russia and Estonia compared with other Central and Eastern European countries.

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Table 1: Euromoney country risk ratings, financial institutions and dynamic of banking sector reform in Central and East European countries in 2001 Country

Number of banks (of which foreign owned)

Country risk rating (total score 100)

Credit rating (total score10)

EBRD index (score 1-4) of banking sector reform in 2001 and 1992

Slovenia

19 (12)

73.82

6.88

3.3 (2.0)

Hungary

41 (31)

70.17

6.67

4.0 (2.0)

Czech Republic

38 (26)

68.48

5.83

3.7 (3.0)

Poland

64 (46)

65.81

5.63

3.3 (2.0)

Estonia

7 (4)

63.46

6.04

3.7 (2.0)

Slovak Republic

24 (5)

62.54

4.17

3.3 (2.7)

Latvia

19 (12)

58.30

5.00

3.3 (2.0)

Croatia

43 (24)

55.80

4.38

3.3 (1.0)

Lithuania

14 (4)

54.42

4.17

3.0 (1.0)

Kazakhstan

44 (15)

47.85

3.13

2.7 (1.0)

Bulgaria

35 (26)

45.64

1.88

3.0 (1.7)

Romania

33 (24)

43.53

1.25

2.7 (1.0)

1319 (35)

35.90

2.08

1.7 (1.0)

Russia

Source: Euromoney, March 2002: Transition Report 2002.

Table 1 shows that the number of foreign-owned banks in Russia has grown to 35. Foreign banks are attracted to opportunities that Russia can offer them. There are: 1. 2. 3. 4. 5. 6.

Size of the market and long-term potential for productivity growth Economic and political stabilization Continuing market reforms Improving of the legislation and tax policy Low entry costs Foreign listing of leading companies

Recently most of the well-know top-10 Western banks have been presented in the Russian banking market. There are: Citibank is largest foreign-owned bank in Russia, their share of total assets of Russian banking is 1,3% on the beginning of 2002. In 2002 bank opened the first retail office in Moscow initially for testing the market before deciding on substantial retail expansion in Russia. Overseas Private Investment Corporation (OPIC) guarantees to support Citibank’s US dollar and local currency projects in Russia and other countries. Raiffeisen is subsidiary of an Austria-based Central and Eastern Europe network. It’s been the 15th largest bank in Russia by size of assets, but it was the 7th biggest by the size of private deposits. 99

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International Moscow Bank (IMB) is not a single subsidiary of any bank, but it is co-owned by Bayerische Hypo-und Vereinsbank (43%), Nordea Bank Finland Plc (22%), Eurobank (10%) and others (joint venture). The IMB has merged with Bank Austria Creditanstalt Russia in the third quarter of 2001, in a bid to expand services and increase its customer base. That is how the fourth largest credit institution of Russia appeared. Its share of total Russian banking assets as of 01.01.2002 is 2.2%. In the Russian case Hypo-Vereinsbank as majority owner follows the strategy of gradual increase of its share in the bank: at first a minor participation as a way to a major participation or even full overtaking of the given bank. ABN AMRO, ING, Deutsche Bank, Credit Lyonnais, Commerzbank and Dresdner appeared only marginally interested in the deposit market, corporate or private, and usually offices that support multinational client of the parent banks. Some are also involved in cross-border investment banking or lending deals, usually led by the foreign offices. Since beginning of 1990s Russian banking sector has been one of the most dynamically developing sectors of the Russian economy. Nowadays many indicators of banking activities have reached the pre-crisis level of 1998, but nevertheless banking is still weak and undercapitalized. The current situation in the Russian banking sector has been characterized like this. • System is strongly controlled by the State Banking sector is like a small pie with too many banks, where Sberbank is clearly leader on the market. It has the reputation of retail bank for the middle and lower class. In Sberbank has been concentrated more than 70% of households’ deposits. This bank enjoys the most diversified client base due of the one of biggest retail branch networks in the world. Banks is well capitalized and highly profitable, but its major problem is low efficiency. The Government and the Central Bank have made clear that they do not plan to split or privatize Sberbank any time soon (Ernst & Young 2003). Vneshtorgbank remain the position of the second largest Russian bank. In several years it might be able to challenge Sberbank’s monopoly position. Vneshtorgbank historically does a lot of business with the corporate and government markets, in particular with export and import organization. Recently the bank strengthened its presence in the individual deposits market, most likely through the salary accounts of its corporate clients.

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• The level of financial deepening of banking sector is relatively low, and the ratio of banks’ assets to GDP is about 15% Compared with other transition countries for example Estonia, where bank assets exceeded 71.5% of GDP in the end of June 2001. The ratio of banks’ assets to GDP is 102% in Finland (2002), and an average, approximately 200% in EU (Bank of Estonia, 2002). In Russia retail deposits are 6% of GDP, against, for example, 30% in Poland and 52% in Germany. Russian banks remain extremely inefficient, with the ratio of operating costs to assets far higher than in the West. • Banks playing yet the role of intermediary between small savers and investors in productive projects and securities than banks take on in developed economies Very few have ever been engaged in market-driven deposit taking or corporate and consumer lending. Modernization of banking system and the economy will be not impossible without building a true regulatory structure and without greater foreign investment. Despite of mentioned above, it’s necessary to look at the Russian banking sector not only from the problems, but also at the market conditions and opportunities, which attracts Western banks. In 2002 Standard & Poor’s upgraded Russia’s sovereign credit rating from BBto BB. This is the highest rating ever for Russian risk from Standard & Poor’s. In November 2002, the European Union and USA formally gave Russia market economy status, which will improve Russian companies’ position in the major international markets. On 05.12.2002 Russia entered the league of top European nations by number of projects in the first half 2001 and in the first half of the year 2002 it moved up to 7th place. Russia has seen a twofold increase in the number of FDI projects announced, compared with the same period a year early. This, alongside that of Hungary, Romania and Lithuania, is one of the highest growth rates in Europe. USA and Germany are the main strategic investors on Russian market with share of 25% and 13% accordingly (Ernst & Young 2002). Therefore, the conditions for foreign capital investment will be more comfortable. Regional stock market and foreign listings of selected companies offer exclusive opportunities for the investments. In April 2000 Russia has cancelled 12% limitation on foreign capital in the banking system, opening the door for Western financial institutions. But up to the present moment only the subsidiaries of foreign banks are allowed to work in Russia. The proportion of foreign capital in the Russian banking system has risen from around 5% in 1998 to 14% in the beginning of 1999, but by January 1, 2002 it has fallen to 10.9%, because Russian banks had to restore their capital

101

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as well (Korjukin, Filimonov 2000). Recently the share of foreign capital in the banking sector continues to remain quite low, about 5%. It had been three stages of entering of foreign banks onto the Russian market. • The first stage began in late 1992, when the first foreign bank – Bank Austria – obtained a license to operate in Russia. Since then mid- to late-1993, other twelve Western banks (Chase Manhattan, Citibank, Societe Generale, ING, ABN, AMRO etc.) entered the market. Banks are licensed as Russian banks, capitalized by their Western parent companies. A general license allowing them to accept deposits and make loans to both Russian and foreign clients with minimal formal limitations. These international banks seeking to gain a substantial share in the Russian banking market. During 1993-1995, foreign banks made significant inroads toward establishing actual operations in Russia. • The second wave of entering began in 1995-1998. The fifth largest bank of Germany – Westdeutsche Landesbank – entered Russian market in February of 1996. It opened the first subsidiary in Russia with 100% of German capital. Other foreign banks (among others Republic National Bank of New York, Garanti Bank (Turkey), Raiffeisenbank (Austria) have also established their subsidiaries. The case of Raiffeisenbank is made remarkable by the fact that the bank that is one of the market pioneers in many other Eastern European countries has used the strategy of the follower in Russia (Nikitin 2002). • Since 1998 began the period for later followers (pre- and post-crises entering). Two foreign banks obtained a license before the crises (1998): Iktisat (Turkey) and one of world’s largest banks – Deutsche Bank. In comparison with others multinational banks Deutshe Bank pursues an extremely cautious strategy in the Eastern Europe (among other factors for saving its prestige). Estonian commercial banks had some experiences of internationalization into Russian market. Hansapank was the first one successfully entering into neighbouring countries. Beginning in 1995 from purchase of Deutsche-Lettische Bank it is a third biggest bank in Latvia now and the leader on the Baltic market. After the success of Hansapank the others competitors followed the leader and began to make plans for buying up the banks not only in Baltic, but also in Russia and Ukraine. The main reason for the internationalization was market seeking argument (Varblane, Sõrg 2002). In September 1997 Eesti Hoiupank (Savings Bank) bought in Moscow FABA Bank. After merger with Hansabank it sold FABA Bank in April 1999. Eesti Ühispank (Union Bank) in April 1997 opened a representative office and a leasing company in St. Petersburg. Is operating nowadays, but have marginal markets share. Forekspank in 1997 opened a representative office in Moscow. Office was closed in 1998 after merger Forekspank with Estonian Investment Bank. EVEA Pank in 1997 opened a representative office in Moscow Office and closed it after finishing activities of EVEA Pank in 1998. 102

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Similarly to foreign banks Estonian competitors have used three strategies in their internationalization (Varblane, Sõrg 2002): 1. Setting up subsidiaries and branches (greenfield) 2. Buying up local banks (complete takeover) 3. Acquiring a significant stake in some local bank The Estonian banks’ wide presence on the Russian market was terminated not only due the local takeover, but also as a result of financial crises in autumn 1998. Despite on specific advantage like knowledge-based technology, organization culture etc. banks haven’t sufficient preliminary knowledge about target market specific features. It played negative role. The entry cost into the Russian market is still comparatively cheap. For example, a bank with US$ 210 million capital would become the 10th biggest Russian bank. But foreign banks are not household names in Russia and they may need 5 to 10 years and large marketing budgets to build a name (Ernst & Young 2002). Furthermore, foreign bank Russian office imago would negatively impact if parent bank has any problem. According to Ernst & Young forecast in future Russian banking will become more consolidated and the banks will become bigger and better. Most programs suggest that there will be some 5 to 15 Federal/Moscow banks and perhaps 20 to 30 strong regional banks. The question is who will own these banks and how will they be able to divide the market? Obviously, the future development of Russian banking is from small pie and too many banks to bigger pie and fewer banks (Ernst & Young 2002). 4.2 Estonian Banking Sector The cornerstones of Estonian financial sector are: • Fixed exchange rate and currency board agreement since 1992 • Liberal external policy (abolishment of most restriction on capital transaction since 1994) • Fiscal stability Banks are still prevalent financial intermediaries, where financial conglomerates of Swedish and Finnish origin hold 82% of banks share capital. Banking market is a concentrated and fully privatized. Specific features are: • • • • • • •

Small size Short period of development Universal banking model Contemporary business culture Technological innovations Financial groups are active in all Baltic states EU accession country status 103

Experiences of Banking Internationalization: Estonia and Russia Case

The Table 2 demonstrates main indicators of Estonian banking sector development. Table 2: Indicators of Estonian banking sector development 1996

2001

Number of commercial banks

13

7

Number of private banks

12

7

Foreign ownership in share capital

33.4%

85.9%

Foreign ownership in total assets

2.6%

97.5%

Total assets/GDP

43.8%

71.8%

Capital adequacy

12.4%

14.4%

ROA

2.9%

1.2%

ROE

30.6%

8.4%

Source: Bank of Estonia (2001)

Soundness of financial reforms had been created favorable conditions for entry of foreign banks. Table 3 resumed the results of studies, which was made by researchers from CEE countries. The banks in all countries were asked to evaluate different questions on a 5-point scale, where the score 1 is not important at all and 5 is very important. Table 3 and 4 summarized the result from following countries (ES-Estonia; LI-Lithuania, CR-Croatia; PO-Poland; RO- Romania and RU-Russia). Table 3: Main Reasons of Entry to the Central and East European Banking Markets ES LI PO RO Mean

RU

Following existing clients

4.0

3.2

3.0

3.1

3.30

4.57

Looking for new business opportunities

4.4

4.8

4.2

4.9

4.58

3.86

Supporting foreign trade relations

3.6

3.5

2.7

3.4

3.30

4.57

Meeting the competition of other foreign banks

2.8

3.3

3.4

3.2

3.18

3.14

Following expansion strategy

2.8

4.3

4.2

4.2

3.88

4.00

Supporting the local client base

4.0

3.7

3.4

3.6

3.68

3.43

Source: Dubauskas (2002), Florescu (2002), Kowalski/Uiboupin/Vensel (2002), Nikitin/ Shorikova (2002)

Table 3 shows, that the most important motives for foreign banks’ entry to the CEE markets are new business opportunities (the average grades 4.58). Unlike Russian market, where the main reasons for entry is the perceived need for support of foreign trade relations and following existing clients from home market (the average grades 4.57 respectively). The expansion strategy was evaluated as a second important reason in CEE countries (3.88). Following the existing client was very important for entry in Estonia, but not in other countries. Supporting

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and developing the local client base was mentioned also as quite important motive (3.3 and 3.68). Table 4: Main Fields of Foreign Banks’ Activities in Central and East European countries ES CR PO RO Mean RU Corporate finance

4.2

4.6

4.2

4.0

4,25

4.57

Foreign exchange trading

2.4

3.5

3.4

3.8

3.28

4.57

International trade finance

3.0

4.5

3.3

3.5

3.58

4.43

Project financing

3.4

-

3.0

4.0

3.47

4.00

Dealing in securities market

2.6

3.2

3.3

2.0

2.78

3.29

Retail banking activities

3.2

4.8

4.0

4.0

4.00

2.14

Capital market activities

3.2

2.4

2.6

2.6

2.55

2.00

Asset management

3.6

1.6

2.6

3.5

2.83

1.29

Source: Dubauskas (2002), Florescu (2002), Kowalski/Uiboupin/Vensel (2002), Nikitin/ Shorikova (2002)

Results of study indicate that there are no very significant differences between CEE and Russian banks in main fields of activities. Corporate financing is the most important field of activity (4.25 and 4.57 respectively). Market activities depend on country’s specific features. Dealings in securities market are not very essential in Estonia because all active banks are universal. Differently from Estonia, retail banking activities were evaluated by Polish and Romanian foreign banks more highly (4.0 points) and Croatia – 4.8 points. Half of the volume of Russian retail market, serviced by foreign banks, was the share of two banks – Bank Austria and Raiffeisenbank. Among others, project financing was highly evaluated by Romania banks (4.0).

5 Empirical Evidence of Foreign Banks’ Entry to the Russian Market In order to estimate more precisely the presence of foreign banks on the Russian market it is expedient to use the binary model. The dependent variable, Y, may take on only two values – Y might be a dummy variable representing the occurrence of an event, or a choice between two alternatives. In our case, the dependent variable is Y=1 for banks that are presented in Russia (in the form of subsidiary or representative office) or Y=0 for banks that are not presented in Russia. The formulation has the form: Prob (Y=1) = F (x,β) Prob (Y=0) = 1 – F (x,β) 105

Experiences of Banking Internationalization: Estonia and Russia Case

The independent variables of the model are the following. 1. ASE – size of bank assets. Banks require a minimum size to develop their international presence and international activity. The banks with considerable resources are more probable to go abroad. In our case, the total value of assets is used as a measure of size of banks. Data for calculations are taken from the list Top-1000 of the magazine The Banker (July 2000), which gives data on the world’s largest banks in terms of capital. 2. EX and IMP – volume of foreign trade (export and import) of Russia with the foreign bank’s homeland. One of the most important purposes of foreign banks in Russia is not only to serve the import from their homeland, but as well to be engaged in export of Russia because Russian banks are not able to provide high operational standards. Data for calculations are taken from World Trade Yearbook 2000, which gives data on trade relations between countries of the world. 3. FDI – inflow of foreign direct investment from the foreign bank’s homeland. Follow the customer hypothesis has been already described above. There was used Russia’s Goskomstat data as of January 1, 2000 on accumulated foreign direct investments into Russia. 4. DIS – distance between the capital of Russia (Moscow) and bank’s headquarters’ city in homeland. It is assumed that monitoring costs increase with distance. Cultural distance should be taken into account as well. The population of the regressions consists of the 50 largest banks. The results of the first estimation display means of the independent variables12 at different values (0 or 1) of dependent variable presence (Table 5) and the t-test of the equality13. Due to these data it is evident that all variables, except FDI, are statistically significant at the level of significance p