Organized by Association of Economists of Monte Negro and Socius the first Mediterranean Chairmen's Forum took place on September 27th in Pržno, Monte Negro, as a part of traditional Miločer Development Forum. The main topic of the Forum was Corporate Governance, Energy and Development.

First Chairmen's Forum in the region was attended by numerous reputable experts such as prof. dr. Helmut Sihler (ex Chairman of Porsche, Deutsche Telekom, Lead Director of Novartis, CEO of Henkel...), Mats Isaksson (author of the OECD Principles of Corporate Governance), Olli Virtanen (Secretary General of the Finnish Professional Board Members Association), dr. Roger Barker (Head of Corporate Governance at the Institute of Directors London), Irena Prijović (Secretary General of Slovenian Directors' Association) and others. A special feature to the conference was given by Ira M. Millstein (Millstein Center for Corporate Governance and Performance, Yale University), one of the founding fathers of Corporate Governance, with his video address to the participants of the conference.

Good Board work is a special form of human relationship

Prof. dr. Helmut Sihler shared his longstanding experiences in leading a Board of Directors as well as being a Member of the Board in many enterprises and talked about the real role of the Chairman. Firstly, the Chairman must know his company well. Objectives and priorities of leading a Board must be set in accordance with each company's specific status. There has to be a clear distinction between listed companies, family run businesses and state owned companies. Numerous state owned companies in the region are organized as joint-stock companies, although looking comparatively, in terms of size and capital they would better perform as a limited liability compay. Connected to this issue is the question of Supervisory Boards – why having them and what costs are we willing to pay. The answer of dr. Sihler is very simple – if there is a Supervisory Board in a company, then make it sure that it is performing its duties professionally and efficiently.

Family run businesses are the backbone of the world's economy and represent a special challenge to their Boards. Members of the Board have to carefully coordinate each owner's interests. Already everyday human problems, like greed, envy, hate or love, when present in the family, could lead to a defeating end of once a successfull story, if not solved correctly and in time. This is why it is very important to have Board Members as well as Chairmen with sufficient experience and expertise. The crucial point of development of these companies comes when they grow in size and have to reorganize, internationalize and let non-family Members enter into the structure of the company. Dr. Sihler emphasized the need for good Board communication – Board Members should always try to speak up. If the existing Members of the Board are not able to speak in one voice, it is better to hire people from outside the family. The role of the Chairman is to be tough. Good Board work is a special form of human relationship – good Board work is better than good corporate governance.

Risk is always an opportunity

Board work in times of crisis can be specially challenging to its Members. The Board itself must be composed of the appropriate number of Members, who have the knowledge needed to face the challenges. Relational trust among the Board Members is also an important aspect of the Board work.

The answer to the question, which governance system is doing better in times of crisis does not have a sole answer. There are supporters of both two-tier system and one-tier system, the latter being the preferable system of dr. Sihler under the condition that the roles of CEO and Chairman are separated in two different persons.

Regardless of the chosen system there are the following fields to highlight: sufficient time needed for the Board Members, in which they can comprehensively prepare for the future decisions; continuing education of the Members; more caution when delegating new Members; remuneration and incentives policy. Specially the issue of rewarding Members of the Board of Directors or of the Supervisory Board is one of the most vigurous problems of the corporate governance in the region. Why work on Board for »peanuts«? Some say the reason may be in ability to influence on the Board, in passion or in new challenges that always bring a new opportunity.

A good state owned company is privatized company

The title reflects the Washington Concensus policies which is nowadays irrelevant. Mats Isaksson, the author of the OECD Principles of Corporate Governance and OECD Guidelines on Corporate Governance of State Owned Enterprises, points out that it is essential to run the enterprise as efficient as it can get. Whether the maximum efficiency is achieved by the state ownership of the enterprise is the discretion of the leading government, which must be capable of answering the question in which enterprises and why is the state presence needed and good for. The presence of the state constitutes a specific position, as the state is being in its function of a regulator and of a manager at the same time, so it is essentially important that these two functions are separated. Another problem is the composition of the Board – should Boards have government officials as representatives or not, and the problem with financing enterprises – the state gives money and takes money as soon as there is a benefit.

Attracting investment requires protecting investors

»Not knowing the region, a high level of corruption and inefficient protection of investors are key problems of attracting foreign investments to the western Balkan«, critically determines Ira M. Millstein. Investor protection firstly requires effective enforcement of a law. Investors need to feel secure about their investments and know that their rights will be protected. Legislations of many developing countries do not contain proper law institutes which guarantee investors effective enforcement of their rights, neither is there a forum to which investors can go and enforce their rights. A lack of properly trained and experienced judges could also be a problem. Thus it is necessary that a good corporate governance practice is also spread by other capital market participants. Particularly important role goes to the media as well. Impact of free media cannot be underestimated.

Effective corporate governance is of key importance to attract private capital to the region. What is being done to rule out corruption at every level, how to establish investor protection, effective public enforcement institutions and properly trained directors and managers who are aware of fiduciary duties towards the shareholders are just the first steps needed to be done in a long process towards a modern, open and safe market.