Dawn of a New Era in Corporate Governance


Dawn of a New Era in Corporate Governance Ethical BoardroomBy Merima Zupcevic Buzadzic – Regional Corporate Governance Lead for Europe and Central Asia, International Finance Corporation (IFC)


Today, nearly 20 years after the precepts of good corporate governance were first introduced to the newly-formed market economies of Europe and Central Asia, there is more widespread acceptance of the importance of strong governance standards in improving firm performance, attracting and retaining investment and expanding the economic base.

There is also growing demand for corporate governance consulting services and increased willingness on the part of companies to pay market rates for such services as part of a suite of business consulting offerings.

To meet this growing demand for corporate governance services, International Finance Corporation (IFC) is training a new generation of locally-based corporate governance advisors, many of whom already work in thriving business or legal consulting firms.

In the European region where countries are still struggling to regain lost ground from the global financial crisis and where economic growth slowed to a lower-than-expected 2.4 per cent in 2014, according to the World Bank, expanding the universe of business consultants with strong corporate governance skills and knowledge is critically important. It enables outreach to more companies and banks, helping them increase their operational efficiency, reduce risks and improve decision-making. In turn, improved performance and stabilised operations will help attract new investment and contribute to much-needed broader-based economic improvements for the countries in the region.

For the consulting firms themselves, building skill sets on corporate governance advisory services represents an addition to their portfolio of offerings, creating a new revenue stream and new expansion opportunities. In turn, these businesses become more sustainable and, as the offerings gain market traction, an entirely new industry niche is established.

In essence, this approach sits at the heart of the IFC’s development mission: to end poverty and boost shared prosperity by supporting private sector development and business and industry growth, creating jobs and expanding the economic base in the countries where we work.

Building relationships

We work hand-in-hand with our partners, building their skills with a combination of formalised training events and informal experiential learning-by-doing in the field. Annual learning events also give our partners the opportunity to network with each other, building their own partnerships and sharing knowledge and experiences with each other. These are relationships in the true sense of the word; it is not about simply handing out a packet of material on our corporate governance methodology or a standardised workflow to help clients improve their corporate governance practices. Rather, it is about undertaking a journey together, collaborating and working towards a shared goal of self-sustainability, while promoting leadership in the newly emerging corporate governance market.

The relationship extends to business development. We often call on potential clients together, initially taking the lead in pitching corporate governance advisory service offerings. This is a mutually beneficial approach: our brand gives clients confidence that they are working with an internationally respected organisation, while our partners have more extensive local connections and reach than we would on our own.

Tailoring partnerships to meet market demands

While markets across the region may share some similarities, they are at varying stages of development and have transitioned from different types of economies, running the gamut between former socialist governments to self-management systems. IFC’s capacity-building efforts reflect the unique characteristics and conditions of the markets where we work. For example, in countries where there is a sufficient base of interest, we have focused on helping to set up institutes of board directors, which have a primary goal of promoting good corporate governance. In countries such as the former Yugoslav Republic of Macedonia, where the institute of directors has developed an extensive member base, we work with the institute’s corporate governance advisors, who provide corporate governance reviews to member companies as part of their membership benefits.

In other countries we are helping consulting firms expand their existing offerings to include corporate governance services. These offerings vary depending on market demand. For example, one Serbian firm has decided to pair corporate governance with its corporate restructuring services. The combination of the two creates a complete solution for companies in distress: the consultants help restructure their debt while at the same time strengthening their corporate governance to include tighter risk controls. In this way, the companies are better positioned for the future and stand a better chance of avoiding their earlier problems.


“Expanding the universe of business consultants with strong corporate governance skills increases efficiency, reduces risk and improves decision-making”


In Bosnia and Herzegovina, the growth of the securities market has triggered new demand for business services to assist with initial public offerings. One IFC partner, a Bosnian consulting firm, is offering corporate governance as part of its portfolio of services for companies preparing for an IPO or seeking to attract other types of investment and financing.

In Kazakhstan, demand is high for the training of corporate secretaries. Here, IFC is helping local consulting firms capitalise on the market opportunity by creating corporate governance service offerings aimed at this very important corporate governance stakeholder group. And in Georgia, Kazakhstan, Russia, Serbia and Ukraine, which are home to burgeoning local management consulting scenes, IFC partner firms are taking on an increasing corporate governance workload.

Even when it appears at first glance that the pre-conditions are not in place, we have seen from our experience that a well-contextualised offer can make an impact. For example, in Albania and Tajikistan, where the capital markets are essentially non-existent, the focus is on corporate governance for family-owned or controlled companies. This focus has resonated with family companies, such as Tajikistan’s Tajero, which embarked on a corporate governance improvement initiative with IFC’s assistance. Today, the company credits governance improvements with helping it to raise $3million in new financing to support growth.

Family firms, including Kyrgyz Republic-based Altyn-Ajydaar also have seen the value in seeking guidance on governance improvements. After strengthening its internal controls, implementing a code of ethics and formalising succession planning as suggested by IFC, the company was able to reduce its cost of capital.

The lesson here is that no single template fits all and building demand takes time and patience. Whether it is service delivery models, the types of local partners or the business development approach, the situation varies depending on the market.

Building a talent pool

In addition to the focus on professionals who are already building their consulting careers, the effort to train a new generation of corporate governance experts is extending further back into the pipeline. With IFC’s help, 15 universities throughout the region have introduced undergraduate and postgraduate corporate governance programmes, courses and modules.

Increasingly, academic instruction is being paired with hands-on experience, as consulting firms and institutes of directors establish formal internship programmes. This gives students insight into the real world of corporate governance consulting work and helps create a new generation of business leaders who embrace the value and benefit of good corporate governance. As these interns move into the workplace, they will bring this commitment to corporate governance with them, contributing to a change in mindset that will result in even more widespread adoption of corporate governance improvements.

Creating self-sustained and tailored markets

While still early in the game, the approach is clearly working. Although challenges remain, including getting companies to prioritise corporate governance when they may face other pressing issues , several partners have reported good progress on business expansion. Others are in hiring mode, including consulting firms in Armenia, Kyrgyz Republic and Tajikistan.

IFC’s focus on creating this new industry is part of our own exit strategy. It builds on our track record of nearly 20 years of corporate governance experience in the region, which would not have been possible without the generous and continuing support of Switzerland’s State Secretariat for Economic Affairs (SECO).

SECO has long demonstrated a commitment to IFC’s corporate governance efforts as a foundational element of sustainable development. To date, this commitment, along with support from other donors, has helped IFC reach more than 11,000 companies, financial institutions and other interested parties, enabling more than 400 companies to improve their performance and raise more than $1.5billion in financing due to better corporate governance. However, work at the company level alone does not make much of a difference unless it is accompanied by reforms and changes at the institutional, regulatory and policy levels. IFC’s donor-supported efforts in the region have contributed to the adoption of 25 laws, regulations, codes and nationally disseminated corporate governance tools.

Through the years, we have learned the importance of constantly adapting our approach based on what the individual markets are telling us and not what we think these individual markets need. Now, these markets are telling us that they are becoming ready to be self-sustaining. We are helping them build this stand-alone corporate governance advisory services industry, tailored to the unique conditions and circumstances of the country, which will support the region’s forward-focused development trajectory.



About The Author:

MERIMA ZUPCEVIC BUZADZIC is the Regional Corporate Governance Lead for Europe and Central Asia at IFC. She has 9 years of experience in the corporate governance field. She has worked with companies and banks across Europe and Central Asia, as well as on global corporate governance projects of IFC, providing advice to financial institutions, family businesses, joint-stock companies, and state-owned enterprises. She has also been advising regulators and capital market institutions on enhancing the corporate governance framework through laws and regulations. She has been working with companies on IPO preparation and corporatization of non-profit entities, and is a published author on post-conflict development. She is a Bosnian national, fluent in Bosnian/Serbian/Croatian and English, intermediate in German. She is based in Istanbul, Turkey.