Business Environment and Corporate Governance in Public Entities

For several years, private business has adopted corporative governance on the grounds of national and international codes to enhance investor confidence in companies and economic entities, especially those that are listed on the stock exchanges. The business environment for the public sector has not benefited from corporate governance due to certain bureaucratic, but logical reasons, such as the fact that the representatives of the State/Government/local authority apply the shareholder’s decisions without considering any other principles, procedures or rules reflecting the organization and the operation of the public entity.

Economic and social reality has shown that many public entities have been confronting with different issues in making managerial decisions and obeying managerial principles of neutrality when appointing directors or establishing their remuneration, without prejudice to the objectives of those entities, many of them with losses and arrears that could generate bankruptcy to a private entity. More in-depth relations of Romania with the European Union and international financial organizations have imposed the importance of the corporate governance in public sector business environment as well, which the Government settled with the adoption of specific legal rules. A general appreciation implies that the decisions made are important, but entirely efficient, many of them being simple statements without concrete effects on the organization and the improvement of managerial work. Consequently, certain corrections are expected and a series of future developments of corporate governance aspects should be examined in private business.

The codes of corporate governance in the private sector should be taken as such and as for the public economic environment, additional provisions relating to the applicability of public patrimony administration should be considered while recognising the specific characteristics of each economic entity according to the type of ownership, features necessary to be relevant in its management. In any instance of corporate governance, it is important for its benefits to be reflected in financial results as good as possible.