As capital markets play a leading role in a country’s economy, the demands for effective protection of minorities in listed companies have increased dramatically. A modern governance framework that every developing economy should have should include:
1. To oblige the Board of Directors of the company to establish and implement a corporate governance system, which includes all the required elements and their periodic evaluation, including the internal control system.
2. There should be detailed provisions for the composition of the Board of Directors, specific requirements for the suitability of its members as well as their exact responsibilities. In addition, there should be the active participation of independent members in the meetings of the Board. and since their prolonged absence is automatically counted as resignation.
3. Provision for operating regulations with an extensive minimum content.
4. Establishing a general principle to ensure adequate resources for the internal control of the company for the committees of the Board of Directors.
5. Rules establishing the approval of the general meeting of shareholders with an increased quorum and majority in case of disposal of significant assets.
6. Provision for significant financial penalties in case of violation of the law approaching up to 5% of turnover.
In addition to fines, there should be the possibility of public announcements, after the audit, on the shortcomings of the company, in order for the market mechanism to function as a sanction.
Only with such a framework of rules will the goals of any new legislation be achieved, but also the stock markets of emerging economies will be able to avoid turmoil in the short term.
