Company Governance: Investing Throughout This Rising Marketplace of The Czech Republic

In the securities market of the Czech Republic company governance performs a critical role in instilling trader self-assurance and ensuring an successful industry. Post the drop of Communism, the financial system was transitioned from point out owned to capitalist in a very limited time. Given that then, the Czech Republic has arrive a extended way to swiftly attain expectations of other capitalist markets and efficiently acquire accession into the European Union. As the marketplace proceeds its progression, the require for transparency of info and alignment amongst board associates and supervisors in firms greatens.

From the Czech Republic’s voucher privatization software in 1992 to the late 1990’s, company governance was considered negatively and/or non-existent for publicly traded Czech companies. A path started with a deficiency of regulation, ongoing with a deficiency of enforcement, and ultimately turned instructions starting in 1998 with the Securities Fee Act. Even now, as Czech businesses endeavor to become much more competitive on a world-wide scale in the marketplace, the realization among companies of the want for structured company governance and far more transparency in their reporting of information will take hold as a ongoing effort required to report and align business ambitions with those of other stakeholders.

By means of an analysis of the top ten publicly traded firms, in conditions of market capitalization, on the Prague Stock Exchange, I will evaluate the availability of data relating to corporate governance in purchase to discern the recent point out of compliance with the Corporate Governance Code. This info will serve as a benchmark and will let investors to relate the positions of the biggest companies on the PSE to other firms inside the Czech Republic, and apply the understanding usually to the Czech securities market. The outcomes allow buyers and other stakeholders to get an concept of corporate governance practices and the transparency of data in the organizations operating in the Czech Republic right now.

Present Condition of Company Governance

I change now to the investigation of the company governance disclosure in present day Czech market place. Employing the ten biggest publicly traded businesses (see Table one) outlined on the Prague Stock Trade in conditions of marketplace capitalization, I will decide the diploma of their said corporate governance policy disclosure as found in their most latest annual reviews. This is the 2004 yearly report for all of the businesses. Furthermore, I will briefly evaluate the availability of data on the companies’ internet sites.

Desk 1
Best Ten Shown Organizations on the PSE

Rank Organization Market place Cap. (Mil. CZK)Industry Cap. (Mil. USD)

one ČEZ 402,881 sixteen,293

2 Erste Lender 317,598 twelve,844

3 Český Telecom 160,014 6,471

4 Komerční Banka 128,397 five,193

5 Unipetrol 42,922 one,736

6 Zentiva 41,683 1,686

seven CETV 39,718 one,606

eight Philip Morris ČR 32,816 one,327

9 Severočeské Doly 14,434 584

10 Prazská Energetika eleven,492 465

Resource: Prague Stock Trade, Novermber 2005


ČEZ, a joint inventory organization, is the largest energy conglomerate in Central and Eastern Europe. The company’s site has an trader section with data on shares, bonds, and financial information, and lists the day of the yearly common meeting, but does not give details especially connected to corporate governance practices and construction in standard. Czech Republic car registration Shareholder framework, relations, and dividends are presented on the web site. Within the once-a-year report, ČEZ follows the German company governance model, and has crucial users of the board also part of administration. Board composition and board customers are discussed extensively. The board of directors meets weekly as a matter of practice, the place the necessity is monthly. The company complies with the Industrial Code relating to security of shareholder rights, and bases its company governance on the Corporate Governance Code. The ČEZ Group truly participated in the 2004 drafting of the Company Governance Code. Total, the organization reports on most of the essential company governance places, but does not have 1 section devoted to their policy, creating it essential to scan the total report for related info.

Erste Bank

Erste Bank, dependent in Austria, is the major economic providers company in Central Europe. Its website contains an investor relations spot in which in depth details is provided, and also a company governance segment in which the company discloses it follows the Austrian Code of Corporate Governance in practice. In the yearly report, the company discloses it follows all of the statutory rules of the Code, and adheres to most of the recommendations. It directs people to the website for the genuine provisions of corporate governance, making the details obtainable, but not detailed inside of the yearly report alone. Moreover, procedures with regards to shareholder legal rights have been not simple to discern.

Český Telecom

Český Telecom is a telecommunications team that operates primarily in the Czech Republic. The firm has a internet site with shareholder data which includes board structure and notification of the annual standard assembly. In addition, accessibility to the company’s once-a-year report leads to in depth corporate governance discussion. The business acknowledges enhanced reporting in this region commencing with the 2004 yearly report as compared to prior annual reviews, and as said in the 2002 yearly report, the business will be in complete compliance of the Corporate Governance Code by 2005. One particular note created in the report contains a list of the members of the supervisory board that qualify as unbiased, an crucial provision as suggested by the 2004 Code.

Komerční Banka

Komerční Banka is among the most important banking companies in the Czech Republic and the Central and Japanese European region, and supplies comprehensive companies for consumers in retail, corporate, and expenditure banking. The company’s site gives accessibility to key shareholder information, and has an investor relations part. Nevertheless, there is not a specific company governance part. Accessing the yearly report makes it possible for one to see most of the requirements of company governance, but there is neither particular point out of their basic plan in the direction of company governance nor mention of their adherence or lack there of to the Company Governance Code.


Unipetrol, a team of businesses that run in the chemical industries sector of the Czech Republic, is a major firm in Central Europe. The company’s site has direct back links to board customers as properly as an trader website page with entry to its yearly reports, but does not supply comprehensive company governance details. The once-a-year report does not boost on the corporate governance plan of the firm. There is no statement regarding the firm’s policy towards company governance, and the data given is largely a listing of board customers. Skills are not given, and shareholder legal rights are not disclosed or discussed.


Zentiva is a pharmaceutical team that holds leading positions in the Czech and Slovak markets, and amongst the biggest gamers in Central and Japanese Europe. Zentiva’s site offers in depth company governance info, like the true guidelines governing the boards. Investor relations also has a well known situation on the company’s internet site, and lists shareholder info, the day of the basic assembly, and other crucial details. As said in the once-a-year report, the organization adheres to the Dutch Corporate Governance Code.


Central European Media Enterprises, or CME, is traded on the Prague Inventory Exchange as CETV. The business, based mostly in Bermuda, is an worldwide tv broadcasting firm, and operates a group of networks and stations throughout Central and Eastern Europe. The company’s internet site contains the users of the board and their skills, as well as monetary outcomes and business policies this sort of as their Code of Ethics. Curiously, analyst reports regarding CME are obtainable on the firm’s website. CME is shown on NASDAQ, so annual report details is available by way of their internet site beneath SEC filings.

Philip Morris ČR

Philip Morris ČR is an affiliate of Philip Morris Global, whose mum or dad firm is Altria Team. The site for Philip Morris directs all traders inquiring about shareholder info to its mother or father firm’s internet site, despite the fact that some monetary knowledge, its standard conference day, and agenda is disclosed for its Kutna Hora area in the Czech Republic. Just as was the case for CETV, Altria Team has comprehensive information disclosed in its SEC filings. On the Altria Team web site, corporate governance is reviewed thoroughly, and the by-regulations as properly as board customers and governance tips are shown.

Severočeské Doly

Severočeské Doly is the largest producer of brown coal in the Czech Republic. The business mines, processes, and sells brown coal and its by-products. The firm’s site lists the board customers and their skills and shareholder construction. There is no location focused to corporate governance composition or plan. In the yearly report, the firm disclosed they do not comply with the Corporate Governance Code, but it does regard the lawful demands and it hopes to adopt far more rules in the foreseeable future. Essential regions of corporate governance are straightforward to find in the report, and even though the company states it does not follow the Code, it does an very great work of reporting required as effectively as recommended details.

Prazská Energetika

Prazská Energetika is an electrical energy getting, distribution, and sales organization running in Prague and Roztoky, and an electrical power trader in the wholesale marketplace in the Czech Republic. Prazská Energetika’s site lists the management and board members, shareholder composition, and supplies obtain to its yearly stories. There is not a segment exclusively for company governance. In the once-a-year report, the business reports statutory data as required by the Business Code, but does not go into fantastic detail about company governance specifically. Moreover, it does not point out its adherence to any part of the Corporate Governance Code.


After reviewing the details offered both on the listed companies’ web site or their yearly report (see Table 2), it was uncovered that the transparency of details has been reached. At least as stated, most all of the companies comply with statutory provisions of the Business Code and other Functions, and 6 of the 10 companies comply with the suggestions of the Corporate Governance Code. Of the four that have not adopted the concepts of the Code, some mention of the corporate governance policy is produced through the disclosure of the relevant information.

I have identified that firms listed on the Prague Stock Exchange with a large market capitalization have enhanced upon their corporate governance reporting in their 2004 yearly reports from prior a long time. Steps have been taken by these companies to undertake the suggestions of the Company Governance Code even just before they have grow to be statutory restrictions. Although these are stated actions that have been taken, it is assumed the guidelines are followed as a consequence of the auditor statement regarding the reporting of information contained in the once-a-year stories. All round, trader self confidence in the Czech securities industry should enhance in light of the rising transparency of information, and the long term laws of added company governance needs will improve on this additional.

Desk two

Benefits of Company Examination

Disclosure of Info ČEZ EB CT KB U Z CETV PMČR SD PE

Does the firm disclose Y Y Y Y N Y Y Y Y Y
company governance composition
and plan?

Does the firm use the Y Y* Y N N Y** Y*** Y*** N N
Company Governance Code
as a foundation?

Is shareholder ownership Y Y Y Y N Y Y Y Y Y
disclosed and voting legal rights?

Board membership & Y Y Y Y Y Y Y Y Y Y
qualifications disclosed?

Board member remuneration Y Y Y Y Y Y Y Y Y Y

Does the web site incorporate a N Y N N N Y N Y N N
company governance area?

*Austrian Code of Company Governance
**Dutch Corporate Governance Code
***United States Securities and Trade Fee Needs
Supply: 2004 Annual Reports for Respective Businesses

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