Hungary : Corporate Governance Country Assessment

Abstract

This report assesses the corporate
 governance policy framework and enforcement and compliance
 practices in Hungary. Hungary has already invested
 considerable resources in upgrading its legislation to meet
 European Union Directives, and the legislative and
 regulatory framework dealing with corporate governance
 issues is robust. The major issues identified by this review
 include: (1) the general weakness of the supervisory board,
 which causes some non-compliance with several OECD
 Principles; and (2) a conflict between law and practice in
 the area of share registration, particularly the problems
 related to the ability of all shareholders to attend
 meetings and exercise their voting and other rights.
 Strengths and weaknesses are highlighted, and the policy
 recommendations made may be grouped under three categories:
 legislative reform, institutional strengthening, and
 voluntary/private initiatives. The report recommends
 creating a "share registration working group" to
 synchronize law and practice in the area of shareholder
 record keeping and voting. It also makes recommendations to
 be implemented as part of a Company Law update. Finally, the
 report promotes private sector initiatives and capacity
 building to build on legislative progress on corporate
 governance reform. It recommends developing a Hungarian
 corporate governance code of best practice, which would
 address key issues to include supervisory board roles and
 institutional investor responsibilities. The report also
 proposes that an Institute of Directors be created train
 supervisory board members, disseminate best practice, and
 promote dialogue between the public and private sectors.
 Together, these measures give issuers the choice to
 implement best practice and investors a benchmark against
 which to measure corporate governance in Hungary.