Corporate governance is gradually improving in Ukraine but remains murky in a large number of companies, according to a recent report by investment bank Concorde Capital that covered 114 companies.
The report, released in October, noted that the percentage of firms in the top rating category since 2007 has risen while the percentage earning the poorest rating has decreased.
“When we look at the set of 82 companies that we ranked in all three reporting years (of 2007, 2008 and 2011), we notice more incremental improvements in governance over the last four years than declines,” said Brad Wells, Concorde’s corporate governance and political analyst.
Better corporate governance practices are being driven by the companies that have gone public since 2008 and have had to clean up their act.
“In the aftermath of the global financial meltdown in 2008, heightened scrutiny and challenging valuations have meant only the strongest companies truly dedicated to tapping global equity markets have been successful,” the report reads.
Concorde’s Wells noted that since 2008, the majority of Ukrainian companies that went public did so outside Ukraine where compliance, accounting and reporting standards are much higher.
“London’s stock exchange, for example, has a corporate governance code and a ‘comply or explain’ provision,” Wells said.
The analyst also said a company’s ownership type matters to its corporate governance rating.
According to the report, companies owned by management or transnational companies on average rated two points higher on a 10-point scale than companies owned by the state or by oligarchs.
“There is a clear correlation here,” Wells said.
Overall, the average rating of a Ukrainian company covered by the report is a mediocre 5.2 on a 10-point scale.
The report noted that the nation’s economic backbones – basic materials manufacturers and industrial companies – lagged behind the average while consumer goods and financial companies led the pack.
“By far the most disappointing finding was the high level of strategic risks associated with investing in Ukrainian corporations for minority shareholders,” reads the report.
Kyiv Post staff writer Mark Rachkevych can be reached at [email protected].
