FACULTY OF PSYCHOLOGY AND EDUCATIONAL SCIENCES
A GENERAL ANALYSIS OF CORPORATE GOVERNANCE
The TSU Faculty of Law continuously analyses global theoretical and practical issues, to adapt and apply these analyses to the Georgian economic and legal context. Several research institutes within the faculty collaborate in these efforts, targeting specific legal issues. One that stands out through its research is the Institute of Corporate, Bank and Economic Law, which has recently begun a new study entitled “A General Analysis of Corporate Governance’’ led by Assistant Professor at the TSU Faculty of Law, Dr. Giorgi Makharoblishvili. The research examines the fundamentals of corporate law and issues of corporate governance. This project was conceived in 2012 when it became obvious that there was a lack of relevant Georgian legal literature. In addition to this, an analysis is essential since corporate governance is highly complex and multidimensional, and of crucial academic significance. Research results have already shown the value of this work and are making a modest contribution to Georgian legal knowledge.
Important aspects of the study include an analysis of the core elements of corporate law that formulate the concept of corporate governance. To ensure sound economic planning and proper long-term management of accumulated property normative legal regulation and the presence of self-regulatory acts are essential, while corporate governance and so-called “soft law’’ are responsible for ensuring the status of a business. Indeed, a coordinated analysis of corporate governance and “soft law’’ make up the main strategy of corporate governance.
There can be no unified, universal formula for corporate governance since it varies according to geographic location, time, the economic-legal environment and the characteristics of each company. Thus recommendations for developing a formula for corporate governance principles and their implementation should be laid out with consideration for the legal realities of different countries and companies. This is why the comparative-legal research includes American, European and Georgian corporate-legal features. The study does not aim to provide an analysis of all aspects of corporate governance--its objective is to define a general paradigm that includes the functions of all major types of entrepreneurs. The results will allow readers to understand all the phases necessary for the correct operation of economic activities of a commercial society. Furthermore, this work is one of the first attempts to provide a unified presentation of the main aspects of modern corporate governance.
(One of the main founders of the systemic analysis of corporate governance, Adolph A. Berle, once clarified the function of the conclusions of any research work. In the last chapter of his (co-authored) book The Modern Corporation and Private Property, he summarized the main points in the end of the book. According to his own words, he did this for, “Very lazy, busy people, or those without any interest, who are too reluctant, busy or are uninterested in the academic arguments presented in a book’’.)
A main theme of the project is to conceptualize corporate governance systematically by classifying its internal and external mechanisms, then making a synthetic analysis of these mechanisms. The project offers further discussion of the mechanisms in terms of internal and external corporate governance then presents them as principles which are then contextually analysed. The conclusions offer an overview of all possible definitions of the complex notion of corporate governance, since there is no unified, universal classification for it. A significant part of the study is dedicated to the differentiation of two subcategories: The system of corporate governance and the model of corporate governance. These are differently defined and take different directions, however they also have similarities.
The study reveals an appropriate model of corporate governance for Georgian reality, the economic environment and the current legislation on corporate governance that offers unclear classifications of corporate governance patterns. Moreover, the corporate governance codex determining the best norms and recommendations is available only for entrepreneurs in banking. There are no models of recommendations for entrepreneurs working in other fields. The proportion of entrepreneurs in the Georgian banking sector is very small compared to that of other sectors--most entrepreneurs in Georgia require recommendations for non-banking activities.
In order to attract and accumulate capital, the management of a joint stock company should offer attractive, legally protected and economic conditions to their investors. Among these conditions, effective rules and clearly determined strategies are of utmost significance. National legislation and indeed the entire legal system should be responsible for ensuring these conditions for investors.
Effective corporate control implies that there is an institutionalized, formal process of monitoring and assessing executives’ activities. Tasks should be laid out clearly so that each party knows their place and responsibilities in the process of management control. In any case, all systems of corporate governance have their flaws. Eliminating these would obviously make corporate monitoring more effective. The characteristics of corporate governance were formed from the analysis of the corporate governance codex and the conclusions were made on the basis of the analysis is combined in the form of some theses presented in the concluding part of the study.
‘’A General Analysis of Corporate Governance’’ was completed within the framework of the Institute of Corporate, Bank and Economic Law at TSU, and will be published by the Institute. The monograph was written independently by the author; however Dr. Makharoblishvili received important support by the research editor, Professor Irakli Burduli. This work was not funded, but written with the aim of making a modest contribution to the Georgian legal field. After publication it will support any Georgian individual or legal entities in their capitalist investment relations, and can be used by specialists, students and practitioners of corporate governance.