CC BY
0
UDK 2428
Khamraeva F.Sh.
student
Tashkent State University of Economics Uzbekistan, Tashkent
IMPROVING CORPORATE GOVERNANCE SYSTEM OF UZBEKISTAN IN LINE WITH SWEDEN EXPERIENCE
Abstract. Corporate governance has emerged as a critical element for the sustainability and growth of companies worldwide. While Uzbekistan has made strides in improving its corporate governance framework, there are lessons to be learned from countries with well-established systems like Sweden. This article explores the current state of corporate governance in Uzbekistan, compares it with Sweden's model, and proposes strategies for enhancement. Through a comparative analysis, we identify best practices and recommend reforms to align Uzbekistan's corporate governance with international standards.
Key words. Corporate governance, Uzbekistan, Sweden, comparative analysis, best practices, code, transparency, accountability.
Introduction. 'Corporate governance is the system by which companies are directed and controlled' (Cadbury Committee, 1992). Effective corporate governance ensures accountability, fairness, and transparency in a company's relationship with all its stakeholders, including shareholders, management, customers, suppliers, financiers, government, and the community.
Improving the corporate governance system in Uzbekistan is critical for fostering economic growth, attracting foreign investment, and ensuring sustainable development. As Uzbekistan continues to transition towards a market economy, there is an increasing recognition of the need to enhance corporate governance practices. By examining the well-established corporate governance framework of Sweden, Uzbekistan can identify effective strategies and practices that can be adapted to its unique context.
Sweden is renowned for its strong corporate governance system, characterized by high levels of transparency, accountability, and stakeholder engagement. The Swedish Companies Act and the Swedish Corporate Governance Code provide a comprehensive regulatory framework that governs corporate activities and ensures that companies operate with integrity and responsibility. One of the key strengths of Sweden's corporate governance is its emphasis on the role of independent directors and the inclusion of diverse stakeholders in decision-making processes. This inclusive approach not only enhances the quality of governance but also fosters a culture of trust and cooperation within the corporate sector.
Methods. To conduct a comprehensive comparative analysis of corporate governance practices in Uzbekistan and Sweden, a multi-faceted methodological approach was employed. This approach includes a review of existing literature, analysis of legal frameworks, examination of regulatory structures, and assessment of corporate governance indices.
Results. Uzbekistan has been actively working to enhance its corporate governance framework through a series of legal reforms and the establishment of regulatory bodies. Key aspects of the current corporate governance environment in Uzbekistan include:
- Legal Framework: Uzbekistan's legal framework for corporate governance is anchored by the Law on Joint Stock Companies and Protection of Shareholders' Rights. This law aims to protect shareholders and outline the responsibilities of corporate boards. However, the implementation and enforcement of these laws are often inconsistent.
- Regulatory Bodies: The State Committee on Competition and the Central Bank of Uzbekistan are the primary regulators overseeing corporate governance. These bodies are tasked with ensuring compliance with governance standards, but they often face challenges due to limited resources and enforcement capabilities.
- Transparency and Disclosure: Transparency remains a significant issue in Uzbekistan. Many companies provide only the minimum required information, which hampers stakeholder trust and investor confidence. Financial reporting practices are improving but still lag behind international standards.
- Shareholder Rights: Minority shareholders in Uzbekistan frequently encounter difficulties in exercising their rights. Protection for these shareholders is limited, leading to a lack of confidence and participation from potential investors.
- Board Composition and Practices: Boards of directors in Uzbekistan are often dominated by major shareholders, which can lead to conflicts of interest and undermine the board's ability to make impartial decisions. Independent directors are rare, and corporate governance practices are not always aligned with best practices.
Sweden exemplifies high standards of corporate governance, with a framework characterized by rigorous legal and regulatory structures. Key elements include.
- Legal Framework: The Swedish Companies Act and the Swedish Corporate Governance Code provide a comprehensive legal basis for corporate governance. These laws ensure clear guidelines for the responsibilities of corporate boards, the rights of shareholders, and the standards for financial and non-financial disclosures.
- Regulatory Bodies: The Swedish Financial Supervisory Authority and the Swedish Corporate Governance Board are instrumental in regulating corporate practices. These bodies ensure that companies adhere to high governance standards through effective oversight and enforcement.
- Transparency and Disclosure: Swedish companies are known for their high levels of transparency. They provide detailed financial and non-financial disclosures, which foster trust among stakeholders and enhance investor confidence.
- Shareholder Rights: Sweden offers robust protection for shareholders, including minority investors. Shareholders have significant rights and are actively engaged in corporate governance, often through institutional investors.
- Board Composition and Practices: Swedish boards typically include a balanced mix of independent and executive directors. This structure promotes impartial decision-making and aligns with best practices in corporate governance.
Discussion. In order to improve corporate governance in Uzbekistan, several key recommendations and actions are proposed (Table 1). Strengthening the regulatory framework involves updating existing legislation, establishing independent regulatory bodies, and harmonizing regulations with international standards. This can be achieved through capacity building for regulators, engaging stakeholders, and implementing changes in phases to ensure a smooth transition. Improving transparency and disclosure is another critical area, requiring the implementation of comprehensive disclosure standards, mandatory regular reporting, and the use of digital platforms for disseminating information. Training for executives and board members, emphasizing the importance of transparency, and consistent monitoring and evaluation of disclosures are essential strategies for this improvement.
Table 1.36
Recommendations for improvement of corporate governance in Uzbekistan
Recommendation Key Actions Implementation Strategies
Strengthening the Regulatory Framework - update legislation; - establish independent regulatory bodies; - harmonize regulations. - capacity building for regulators; - stakeholder engagement; - phased implementation.
Improving Transparency and Disclosure - implement comprehensive disclosure standards; - mandate regular reporting; - use digital platforms for disclosures. - training for executives and board members; - emphasize transparency; - monitor and evaluate disclosures.
Reforming Board Structures and Responsibilities - define clear board roles; - promote board diversity; - implement regular board evaluations. - train board members; - engage with institutional investors; - regularly assess board reforms.
Integrating Corporate Social Responsibility (CSR) - adopt CSR policies; - report CSR activities; - engage stakeholders in CSR dialogue. - provide CSR training; - facilitate CSR workshops; - track and report CSR performance
36 Compiled by author
Reforming board structures and responsibilities is also necessary to enhance corporate governance. This includes defining clear roles for board members, promoting diversity within boards, and implementing regular board evaluations. Training board members, engaging with institutional investors, and continuously assessing the effectiveness of board reforms will support these changes. Lastly, integrating Corporate Social Responsibility (CSR) into corporate governance frameworks involves adopting CSR policies, reporting on CSR activities, and engaging stakeholders in CSR dialogue. Providing CSR training, facilitating workshops, and tracking and reporting CSR performance are vital strategies to ensure that CSR becomes a fundamental aspect of corporate governance in Uzbekistan. Through these comprehensive recommendations and strategic actions, Uzbekistan can significantly enhance its corporate governance practices, aligning them more closely with international best practices.
Conclusion. Improving corporate governance has become a pivotal aspect for the sustainability and growth of companies worldwide, and this is especially true for emerging economies like Uzbekistan. Despite the progress made in recent years, there is still much to be learned from countries with well-established governance systems, such as Sweden. Through a comprehensive comparative analysis, the study has identified best practices from Sweden that could be adapted to Uzbekistan's unique context. Key recommendations include strengthening the regulatory framework through updated legislation and independent regulatory bodies, improving transparency and disclosure standards, reforming board structures to ensure diversity and accountability, and integrating Corporate Social Responsibility (CSR) into the corporate governance framework. Implementing these reforms will require capacity building, stakeholder engagement, and a phased approach to ensure smooth and effective transitions. By aligning its corporate governance practices with international standards, Uzbekistan can foster a more transparent, accountable, and investor-friendly business environment, thereby contributing to its long-term economic growth and stability.
References:
1. Central Bank of Uzbekistan. (2020). Annual Report. Tashkent: Central Bank of Uzbekistan.
2. OECD. (2020). Corporate Governance in Sweden. Paris: Organisation for Economic Co-operation and Development.
3. State Committee on Competition. (2019). Corporate Governance Code. Tashkent: State Committee on Competition of Uzbekistan.
4. Swedish Corporate Governance Board. (2020). The Swedish Corporate Governance Code. Stockholm: Swedish Corporate Governance Board.
5. World Bank. (2019). Doing Business 2020: Comparing Business Regulation in 190 Economies. Washington, DC: World Bank.
