New technologies and corporate governance: legal challenges in Serbia
| Autor | Predrag Dedeic |
| Páginas | 335-371 |
NEW TECHNOLOGIES AND CORPORATE
GOVERNANCE: LEGAL CHALLENGES IN SERBIA
1Predrag DEDEIC
Tempora mutantur, nos et mutamur in illis *
SUMMARY: I. IN MEDIAS RES.—1. Corporate Governance and Technology.—2. Corporate Governance
Problems and Technological Development.—3. Regulation.—4. Interlinking relationships.—5. The Fo-
cus of Analysis.—6. The Scope of Analysis.—7. Current Situation.—8. Future Prospects.—II. SHARE-
HOLDERS RIGHTS AND INFORMATION TECHNOLOGIES.—1. Waking up Shareholders.—2. Basic
Rights and Technology.—3. On-line Communication.—4. Advanced Assembly Procedures.—5. New
Voting Procedure.—6. Institutional Shareholders.—III. THE ART OF DATA DISCLOSURE.—1. Look-
ing for the Efficient System.—2. Report on Corporate Governance.—3. Financial Report.—4. Re-
port on Important Events.—5. Information on Possessing the Voting Share.—6. Auditing.—7. In-
formation Channels.—8. Stock Exchange.—9. E-reporting as a Pillar of Strength.—10. Privileged
Information.—11. Protection of Information.—IV. THE BOARD OF DIREC TORS.—1. Sharehold-
ers alter ego.—2. Novelty in Managerial Structure: Chief Information Officer (CIO).—3. Control Bod-
ies.—4. Internet Boards as a Challenge for Managers.—V. INSTEAD OF CONCLUSION: TEMPORA
MUTANTUR, NOS ET MUTAMUR IN ILLIS.
I. IN MEDIAS RES
1. Corporate Governance and Technology
Information and communication technologies are an important cohesive
factor in developing global economy and binding up capital markets. Cor-
porate governance as a foundation stone of these markets has its place in the
process of creation of new capital •ows. Financial instrument markets are
connected in their existence with relevant information and their dissemina-
tion, so that information technologies contribute to the ef!ciency of their or-
ganization and functioning.
Keeping and processing relevant information, an easy access to important
data by an endless number of bene!ciaries in real time and effective trans-
fer of information to all interested persons, are the characteristics which new
technologies bring about and make them a factor of cohesion.
* Times change and we change in time.
336 NEW TECHNOLOGIES AND CORPORATE GOVERNANCE: LEGAL CHALLENGES...
Corporate governance in•uences the capability of a company to access
the capital market (by issuing securities) and control risk more effectively. At
the same time it in•uences the share price, stability and ef!ciency of the mar-
ket. By its nature, technological changes, which in•uence the market, encour-
age the change of structure and processes which make the system of corporate
governance. Application of new technologies helps easier problem solution
regarding numerous corporate governance issues such as: rational apathy of
shareholders, principal-agent problem, transparency, information transfer, etc.
Technological solutions remove numerous barriers in capital •ow (the
difference between domestic and fo reign c apital i s dimin ishing), make p ar-
ticular mark ets compati ble with parts of the world market and contribute to
higher level of protection of participants and e ffective functioning on the
capital market.
Imperative requirement imposed on Serbian economy, especially on !-
nancial services market and public companies is to start its technical and
technological development without hesitation. Application of new technolo-
gies should provide easier •ow of capital, with reduced costs and without any
barriers, towards secure and liquid markets and entities which ful!l certain
standards of corporate governance 2. That •ow has to be done via information
system which is reliable, safe and harmonized with business operations and
adequate system of data protection.
Based on timely, complete, correct and relevant information, there is no
doubt that contemporary capital markets are !elds on which changes are con-
fronted, having been brought about by on-line business and e-governance.
However, they are the source of numerous challenges placed in front of le-
gal, managerial and judiciary function of all modern states, including Serbia
as well (particularly due to the fact that Serbia took over contractual require-
ments in terms of stabilization and accession to the European Union) 3.
If Serbia follows this way, and the European Union has already applied
new technologies in a great deal (E-Europe) and adopted standards of corpo-
rate governance, then it is logical that the process of integrating capital mar-
ket into the European system has to be founded on harmonization of infra-
structure with the existing standards. The same can be applied to our public
companies if they wish to protect themselves from competition and provide
an effective approach to external capital.
2. Corporate Governance Problems and Technological Development
Numerous problems arise on the capital market regarding application of
new technologies. A part of the problem refers to the very trade of securities
2 H. ALEN (2002), Electronic trading in wholesale financial markets: its wider impact and policy
issues, 50 (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=708142).
3 Stabilization and Association Agreement was signed on 29th april 2008.
PREDRAG DEDEIC 337
during electronic transfer where numerous issues arise (identity, irrevocabil-
ity, trust and integrity of the document, etc.) 4. Another problem addresses
the relations within joint stock companies whose shares are on the stock ex-
change. The third group of problems refers to relations among relevant en-
tities on the capital market. The fourth group of problems treats destructive
elements on the capital market which in certain segments tend to limit its de-
velopment, while in some other segments they tend to act illegally and abuse
technological innovations. Problems do not end by such listing.
However, in this article we have focused on the three groups of problems.
Further, the issues of applying technologies in processes which go on within
a company are discussed in terms of better distribution of corporate power
(inner segment of corporate governance), among participants on the capital
market (external segments of corporate governance), and •nally, in •ghting
against destructive elements on the capital market. Such approach is logical
for corporate governance is a system of measures which tend to direct syn-
chronized functioning of numerous heterogeneous elements (bearers of pub-
lic and private interest) towards protection of investors and effective func-
tioning of the capital market. Adequate application of information technology
can have a key role in that process.
Corporate governance has not been well developed in Serbia, nor is the
capital market. Reasons for that are numerous. In this paper we would high-
light the current situation, reasons which caused such situation and future
perspectives, starting from a hypothesis that application of modern technol-
ogies, especially information technologies, can contribute greatly to faster
changes in terms of improving corporate governance and effective function-
ing of the capital market and protection of investors. Technological changes
have to entail inner organisation of the company whose shares are traded on
the capital market (internal aspect) as well as other external component sys-
tems of corporate governance, which are present on the capital market and
make a very complex function of monitoring (primary markets by prospec-
tus 5, secondary markets by loyal and competent intermediaries and by ef•-
cient market for corporate control) 6.
3. Regulation
Regulations in Serbia support application of technological innovations in
economic activities. Company law, Code of corporate governance of the Ser-
bian Chamber of Commerce (the Code), regulations on the capital market, tax
4 R. GURURAJAN, A. RYLE and A. HAFEEZ-BAIG (2004), Legal and Regulator y Issues of Implemen-
tation of Electronic Signatures, pp. 3-6 ( http://conf.isi.qut.edu.au/auscert/proceedings/200 4/gururajan
04legal.pdf).
5 Must be taken into account that Prospectus does not only refer to the issuing of new securities
but to offering of the existing securities, too (suggested changes in the law on securities).
6 J. K. HOPT (2007), Modern Company and Capital Market Problems: Improving European Corpo-
rate Governance After Enron, p. 487 (http://ssrn.com/abstract=356102).
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