Anghel's code

The long awaited corporate governance code of the Bucharest Stock Exchange launched yesterday, surprised everyone with its small size, so small that those who read it calculated that each page cost 30,000 Euros, and that is while also considering that half of each page was represented by white space and logos.

Another calculation states that every page in the Code took 65 days to be drafted, given that the BSE announced the awarding of the project in June 2013.

Lucian Anghel, the president of the BSE, said that it shouldn't be a surprise if many companies or even all of them failed to meet all the criteria of the Code.

Marian Petre Miluţ, the CEO of Prefab - a company listed on the BSE, said that the principles in the Code are good, but, in his opinion, their application in Romania involves additional requirements, which, if they are not met, will make this code yet another hurdle to overcome in order to get listed.

"I think that in Romania, just like we want good cars and we have no roads, we have a very good Code, but we have no money.

In fact, the Bucharest Stock Exchange doesn't have capital", Mr. Miluţ said, and he went on to say: "This code must be a challenge for companies, a beginning.

But it cannot be that starting with January 4th 2016 (ed. note: the day the Code came into effect).

For instance, we have 3 members on the Board of Directors and I cannot come up with two new members in two months (ed. note: according to the Code, the Board of Directors must have at least five members). We need to see who will contribute while sitting on a Board of Directors. When one wants to be a member on the Board of Directors, they must be a stockholder. You cannot appoint someone on the Board of Directors without them having a financial stake in the company".

The issue of the BSE is that private companies don't get listed because of the difficulties which issuers that are currently listed are experiencing, according to Mr. Miluţ, who yesterday addressed the CEO of the BSE, Ludwik Sobolewski: "If you do not have companies listed on the Stock Exchange, Mr. Sobolewski, you don't because we (ed. note: the issuers) are more credible. When I tell them the hassle I have to go through to upload some information on the website or when a minority shareholder sues me for wanting to sell an asset that isn't performing, that is real-life experience".

The representatives of the BSE and the EBRD, which offered the 300,000 dollars financing for the new Corporate Governance Code, have boasted the fact that the document is concise, unlike its counterparts issued by other exchanges.

But Mr. Miluţ said that the provisions of the Code need clarifications. "Very long Codes answer questions. This Code does not answer any question. 300,000 Euros for 12 pages is a huge amount".

For 300,000 Euros, the 12 pages should have been perfect.

But in the very beginning of the Code, in Section A, one look is enough to detect a waste of a few thousand Euros, if we take the average cost of 30,000 Euros as accurate, because the first phrase could have been expressed within the second: "The role of the Board of Directors in a single-tier and the role of the Supervisory Board /Directorate in a dual-tier system must be clearly defined and documented in the articles of incorporation of the company, in the internal regulations, and/or other similar documents.

The Council must ensure that the articles of incorporation of the company, the decisions of the General Shareholder Meeting and the internal regulations include a clear separation between the powers and the duties of the general shareholder meeting, the Board and the executive management".

Then, in the third phrase there is a diacritic missing - the accent on the letter "ă" of the last word: "The Board must be structured in such a way as to allow it to fulfill its duties with diligence". One wonders how much would that extra accent have cost?

Gian Piero Cigna, Senior Counsel EBRD, said that the old Corporate Governance Code was too big and not accurate enough to induce companies to have a certain behavior.

According to the BSE, the implementation of the new rules will be based on the "apply and explain" principle, meaning that companies that do not apply certain principles will have to explain why they aren't doing it.

According to the BSE, companies will include in their yearly report a corporate governance statement, in a distinct section in the annual report, which will contain a self-assessment of the compliance with the "provisions that must be abided by", as well as the measures taken for compliance with the provisions that are not fully abided by.