Module II·Article II·~2 min read
Corporate Governance: Bodies and Principles
Corporate Law
Turn this article into a podcast
Pick voices, format, length — AI generates the audio
What is Corporate Governance
Corporate governance is a system of rules, practices, and processes by which a corporation is directed and controlled. Good corporate governance ensures management's accountability to shareholders, protects the interests of all stakeholders, and provides transparency and sustainability.
The OECD Principles of Corporate Governance (2023) are the global standard to which regulators and institutional investors around the world look.
Corporate Governance Bodies in a Joint-Stock Company
General Meeting of Shareholders (GMS) — the highest governing body. Makes key decisions: approves the charter, elects the board of directors, approves major transactions, reorganizations/liquidation. Ordinary questions are decided by a simple majority; strategic ones — by a qualified majority (3/4, 2/3).
Board of Directors — strategic guidance and oversight of management. Key functions: appointment and dismissal of the CEO, approval of strategy, supervision of the risk management and internal control systems, approval of major transactions.
Composition of the board: independent directors (not affiliated with majority shareholders), executive (top managers of the company), non-executive (representatives of major shareholders). Best practice is to have a majority of independent directors.
Sole Executive Body (CEO/Chief Executive Officer) — manages day-to-day activities. Reports to the board of directors. Personally responsible for decisions made.
Revision Commission / Audit Committee — oversight of financial reporting, interaction with the external auditor.
Principal-Agent Problem
The key problem of corporate governance is the conflict of interests between owners (shareholders) and managers. Managers may make decisions in their own interests (high bonuses, excessive perks, risk avoidance) rather than in the interests of shareholders.
Mechanisms for aligning interests: tying compensation to long-term results (stock options, restricted shares); independent board of directors; transparent reporting; active institutional investors.
Shareholder Rights
Key shareholder rights: voting at the GMS, receiving dividends, selling shares (subject to restrictions), receiving information on company operations, participating in the liquidation surplus.
Protection of minority shareholders: right to demand buyout if disagreeing with reorganization; right to dividends (if payment is decided); anti-dilution (preemptive rights — priority right to new shares).
Practical Assignment
Study the composition of the board of directors of Sberbank or any other PJSC. Determine: (1) how many independent directors there are, (2) whether board committees exist (audit, remuneration), (3) how the CEO is compensated and whether this is linked to long-term performance indicators. Evaluate the quality of corporate governance according to the OECD methodology.
§ Act · what next