Corporate Governance in Slovakia in “Nine Minutes”

1. Corporate Governance in Slovakiain“Nine Minutes” Vratko Kaššovic Chairman of the Board of Central European Corporate Governance Association Corporate Governance Roundtable in Budapest Media Center, Budapest Stock Exchange, January 25, 2006

2. Corporate Governance (CG) Institutional Framework, NationalCG Codex, World Bank Report (Country Assesment)on CG, Transposition of the EC Recommendations in Slovakia

3. 1. CG Institutional Framework in Slovakia Ministry of Justice, Economy and Finance of Slovak Republic – Ministries Responsible for: • Compliance of National CG Legislation with EU Directives • “National Position” to EU Plan - Modernizing Company Law and Enhancing CG in the European Union • Cooperation with OECD in CG development Bratislava Stock Exchange: • “Pioneer” in Development of Corporate Governance in Slovakia • Implementation of CG Code through the Listing Rules Central European Corporate Governance Association– CECGA • Not-for-Profit organization with the objective to address Corporate Governance issues in Slovakia and in Central Europe

4. CECGA – Brief History, Structure and Mission After more than two years of activities of the Bratislava Stock Exchange in the area of Corporate Governance, with the financial support and assistance of the FIRST Initiative, London, and personal initiative and activity of Mrs. Jennie S. Mills from Milford International, London, the Central European Corporate Governance Association (CECGA) was successfully founded on 27th October 2004. CECGA has the legal status of a civil association andis open for individuals - board members, managers, company secretaries and academic members. At present it has 41 members. CECGA Structure: Board of Association (9 members), Advisory Board (5 members), Membership and Ethics Committee (3 members), Academic Committee (3 members) and Honorary President (State Secretary of Ministry of Justice). CECGA Mission is to ensure Professional Development of Board Members (including both executive boards and supervisory boards) in the area of Corporate Governance and to help resolve professional needs and requirements of board members directly related to their serving in the boards of companies.

5. CECGA – Objectives • Establish and ensure effective operation of a professional institution for both existing and potential board members • Monitor international developments in corporate governance, to update the Unified Code of Corporate Governance currently in effect and to promote its principles as part of the activities of board members • Promote excellence in the Association members’ performance of their duties as board members through quality education and professional development programs; • Encourage academic research on corporate governance matters, to disseminate its results through the Association and to promote the subject as part of the business study curricula in high schools, universities and its own training courses. • Provide relevant and up-to-date information on corporate governance issues to the Association members and professionals; • Represent members’ interests domestically and internationally • Advocate policies of members in their performance of board membership • As an organization with an independent governance structure, the Association intends to become the opinion leader on board membership issues and trends in corporate governance; • Collaborate with key institutions that have a role to play in promoting the best practices of corporate governance both in Slovakia and abroad

6. CECGA – Core Activities • Attracting quality members, maintaining their loyalty and sustaining their enthusiasm • Organizing orientation courses for new members as well as other specialized courses focused on all key aspects of modern corporate governance practices • Undertaking academic research on the latest international trends and preparing educational materials for the members of company boards • Organizing roundtables on current corporate governance issues, which will include presentations on the subject and informal discussions allowing the solving of common problems and networking of members • Publishing an e-magazine, which in the initial stage can be produced in conjunction with the BURZA magazine • Developing and administering the website with all necessary information on the Association and its activities. The website will also provide a gateway to a virtual library where all fundamental documents, articles and publications on corporate governance will be accessible, along with information on board membership and other relevant information • Building relations and starting collaboration with similar institutions in the country as well as abroad in order to share information and experience, and to possibly organize joint events.

7. CECGA – Future Ambitions Create „National wide Platform“ – Network of People from State, Public, Private, Academic and other Companies and Institutions for Open Dialog on Corporate Governance Development Link National Platform for CG with relevant partners in CE Countries in order to transfer/share Best Practice in Corporate Government on all levels

8. 2. National CG Codex in Slovakia In September 2002 a group of entities interested in improving the transparency of Corporate Governance and led by the Financial Market Authority, Bratislava Stock Exchange and professional Associations assembling financial-market institutions, created a ‘Unified Code of Corporate Governance’, based on the OECD Principles from 1999. Effective from April 2003, Listing Rules of the Bratislava Stock Exchange require that the companies with shares listed on the main and parallel listed market of the Stock Exchange include in their Annual Reports a statement on compliance with the Code requirements, on the ‘comply or explain’ basis For the first time, the statement has been a part of the Annual Reports of listed companies for the year 2003.

9. Principles of „National CG Codex“ 2002 • The Company should be headed by an effective executive board and supervisory board which should lead it and account to the shareholders • The Company should protect shareholders’ rights • The shareholders are obligated to inform the company of all capital structures and any arrangements that enable certain shareholders to obtain a degree of control disproportionate to their equity ownership. The company is obligated to ensure disclosure of all such capital structures and arrangements. Some capital structures allow a shareholder to exercise a degree of control over the company disproportionate to the shareholder’s equity ownership in the company • The company should ensure that all shareholders, including minorities and foreign shareholders, are treated equitably • The company should ensure that timely and accurate disclosure is made on all material matters regarding the company, including the financial situation, performance, ownership, and governance of the company which will enable shareholders to determine whether to invest or not. • Institutional investors/shareholders should act responsibly in their dealings with the Company • Shareholders should have certain rights and exercise certain responsibilities in connection with the company • The corporate governance framework should recognize the rights of stakeholders as established by law and encourage active co-operation between companies and stakeholders in creating wealth, jobs, and the sustainability of financially sound companies

10. 3. World Bank Report on CG in Slovakia Corporate Governance Assessment was completed in September 2003 as part of the joint World Bank-IMF program of Reports on the Observance of Standards and Codes (ROSC) in cooperation with Ministry of Finance, Financial Market Authority (FMA), Ministry of Justice, Bratislava Stock Exchange, Central Depository, Association of Securities Brokers, and many other experts from relevant institutions Key Findings and Proposals: • the general Weakness of the Supervisory Board, which causes some non-compliance with several OECD Principles; • lack of Protection for Shareholders of “Free Market” Companies, • inadequate Authority and Institutional Capacity at the Financial Market Authority • Institute of Directors should be created to train supervisory board members, disseminate best practice, and promote dialogue between the public and private sectors.

11. 4. Transposition of EC Recommendations • 2004/913/EC fostering an appropriate regime for the remuneration of directors of listed companies Incorporation in Slovak Company Law in March 2006, in cumulative form only • 2005/162/EC on the role of non-executive or supervisory directors of listed companies and on the committees of the supervisory board implementation is under the discussion between Ministry of Justice and CECGA • Modernising Company Law and Enhancing CG in the European Union – APlan to Move Forward Slovak position – November 2005 • http://europa.eu.int/comm/internal_market/company/consultation/index_en.htm

12. Instead of “The End” Few relevant Internet links: Bratislava Stock Exchange www.bsse.sk www.bsse.sk/map.aspx?LANG=EN CECGA www.cecga.org www.bsse.sk/map.aspx?LANG=EN National CG Codex www.bsse.sk/Content/EN/Issuers/corp_gov/Corporate%20Goverance%20Code_1.pdf?LANG=EN World bank Report on CG in Slovakia www.worldbank.org/ifa/rosc_cg.html