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Journal of Management and Governance

Erschienen in:

20.05.2016

Self-regulation of corporate governance in Russian firms: translating the national standard into internal policies

verfasst von: Ilya Okhmatovskiy

Erschienen in: Journal of Management and Governance | Ausgabe 2/2017

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Abstract

We consider how firms develop internal corporate governance policies based on external nation-wide standards. Flexibility in interpreting external standards allows firms to develop internal regulations focused on governance procedures that are only loosely coupled with expected governance outcomes. Our results demonstrate that firms tend to adopt less restrictive policies than what is recommended by the national standard and are more willing to adopt policies regulating governance procedures than policies regulating governance decisions. We also argue that the process of translating external standards into internal guidelines is affected by firm-specific characteristics and explore factors that determine to what extent firms switch the focus of internal policies from regulating governance decisions to regulating governance procedures.

Vorheriger Artikel Beyond trust: towards a practice-based understanding of governing ‘network organizations’

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This was the original meaning of “translation” as described by Serres (1982). Michel Serres influenced Bruno Latour and Michel Callon, who used the concept of translation in development of the actor-network theory (Callon 1986; Latour 1986). Even though the concept of translation is often associated with the actor-network theory (Czarniawska and Sevon 1996; Buck and Shahrim 2005), we follow those management studies that use the concept of translation as a stand-alone concept without evoking other ideas associated with the actor-network theory (e.g., Mazza et al. 2005; Yoshikawa et al. 2007).

This helped the adopters of internal governance codes to alleviate negative reputation effects of the mandatory disclosure of deviations from the FCSM Code. These companies could make a case that the FCSM standards are not universally applicable and instead present their internal governance codes as more relevant standards that take into account idiosyncratic circumstances faced by each company (Okhmatovskiy and David 2012).

While there is some variation in criteria used to evaluate inter-rater agreement based on kappa statistics, values between 0.61 and .80 are often considered as “substantial” and values above 0.8 as “almost perfect” (Landis and Koch 1977).

The overwhelming majority of depositary receipts are issued for “over the counter” (OTC) trading or under special “restricted” programs (such as Rule 144-A or Regulation S). Issuing such depositary receipts does not make companies subject to any particular corporate governance requirements. Only companies that issue “advanced” depositary receipts (Level II and Level III ADRs) have to meet particular corporate governance requirements and we consider separately several Russian companies that issued such advanced ADRs.

Ideally, ownership data should be captured at the moment when ICGC was adopted. In practice, we can only approximate this since the reports we used provide information about ownership at the end of the reporting period. Ownership data we used was available for even years and thus we recorded ownership at the end of 2002, 2004, and 2006; ownership at the end of 2002 was analyzed for companies who adopted ICGCs in 2002 or 2003, ownership at the end of 2004—if a company adopted ICGC in 2004 or 2005, and ownership at the end of 2006—if a company adopted ICGC in 2006 or 2007. For companies that have not adopted an ICGC by the end of the observation period, we recorded ownership and board composition at the moment when the observation period was terminated or when the company was liquidated.

Our hypothesis about foreign directors is based on the argument about their professional experience and thus, for the purposes of our analysis, their professional affiliation is more important than their citizenship or the country of birth.

Being included in the quotation lists is a next step after being officially admitted for trading. Securities can be included in the quotation lists if their monthly volume of trading exceeds a threshold level specified by a stock exchange. If companies meet the minimum volume of trading requirement, they can apply to be included in the quotation lists.

This interpretation is consistent with the argument made by Mazza et al. (2005), who suggested that heterogeneity in the diffusing practice may increase over time because late adopters have more models for imitation than early adopters. In our context, this effect causing increased practice heterogeneity among late adopters is apparently stronger than the effect of mimetic forces that were shown to decrease the degree of practice variation among late adopters (Westphal et al. 1997).

Only four companies in our sample issued high-level depository receipts (ADR II and ADR III) that make a company subject to SEC regulations (including corporate governance-related requirements). We replicated our test of Hypothesis 5b after removing these four companies from our sample and found that excluding these companies from the analysis did not have a noticeable effect on our results.

We should notice that “loose coupling” between procedures and outcomes does not mean that they are completely unrelated—adoption of procedures may have some effect on outcomes but oftentimes these effects are not direct or not immediate (Hironaka and Schofer 2002; Dobbin 2009).

After our study had been completed, the FCSM Code was revised and a new version of the Russian Corporate Governance Code was introduced in 2014.

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Titel: Self-regulation of corporate governance in Russian firms: translating the national standard into internal policies
verfasst von: Ilya Okhmatovskiy
Publikationsdatum: 20.05.2016
Verlag: Springer US
Erschienen in: Journal of Management and Governance / Ausgabe 2/2017
Print ISSN: 1385-3457
Elektronische ISSN: 1572-963X
DOI: https://doi.org/10.1007/s10997-016-9352-6

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