Board Structure and Competencies after Mass Privatization -- The Case of the Czech Republic

Maly, Milan
June 2006
EBS Review;2006, Issue 21, p117
Academic Journal
The development of corporate governance in the Czech Republic attempted to follow the example of European market economy countries, sometimes without fully understanding the logic of the whole system. The topic of this article is the development of board structure and competencies after mass privatization as an example of such a misunderstanding. The organizational architecture of boards in the Czech Republic was based on a two-tier structure. The influence of mass privatization and the decisive role of investment funds resulting from voucher privatization substantially influenced the original two-tier structure. Two variants of the two-tier model have been developed: the "German model," following the classical competencies of management and supervisory boards, and the "Czech version of American model" (CVAM), attempting to restructure the design and competencies of the boards. The reasons for the implementation of the CVAM can be divided into objective ones, such as stronger supervision of managers by the shareholders in the classical principal-agent approach and rather subjective ones, i.e. increasing the personal incomes of board members who are also often representatives of investment funds. It is expected that in the near future, the system will follow the classical two-tier structure.


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