engleski

Improving corporate governance in Croatian companies owned by the municipal authorities to the best practice of the European union

The issue of good corporate governance is the question of the relationship between confidence in the management and transparency of the system. Opportunistic behavior in companies owned by local government, which stems from the possibility of management to use position of agent to their advantage, and contrary to the interests of shareholders, can be viewed from two angles. The first is the prospect of privatization of companies owned by local government which results with the transfer of control mechanisms on the agency relationship between private shareholder and manager. Another perspective is based on the importance of transparency in the management of public companies. Given that the companies owned by local governments are usually companies from utility industry and hence have characteristics of natural monopolies, privatization option is less desirable than in the company from other industries. The emphasis of the paper is the thesis that the most important way to improve corporate governance practices in companies owned by the local governments is improving the system of corporate reporting. From this position the paper elaborates the key elements of the corporate governance system in Croatian companies, with a focus on companies in the public domain. The mechanism of corporate reporting is seen as a key way of balancing between the private interests of managers and the public interest in companies owned by local governments. The paper gives analysis of the best practices of corporate reporting prescribed by the European Union and offers a model to improve the Croatian system of corporate reporting in accordance with the European standard.

corporate governance, municipality ownership, public companies, corporate reporting, Croatia, European Union

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