The USV Annals Volume 12,

of Economics and Issue 2(16),

Public Administration 2012

A METHODOLOGY FOR MEASURING RESPONSIBLE

CORPORATE GOVERNANCE IN COUNTRIES OF EMERGING
EUROPE
Ph.D. Lecturer Mariana Cristina GANESCU
Constantin Brâncoveanu Universitaty of Piteşti, Romania
[email protected]

Ph.D. Lecturer Andreea Daniela GANGONE

Constantin Brâncoveanu Universitaty of Piteşti, Romania
[email protected]

Abstract:
This paper aims to create a methodology to measure responsible corporate governance with the help of an
index composed of five sub-indexes, each corresponding to a certain dimension of responsible corporate governance.
The research is based on a review of scholarly literature on responsible corporate governance and offers some
guidelines for measuring corporate governance in developed and emerging countries. It also aims to determine a
responsible corporate governance index based on the following dimensions: shareholders’ rights and equal treatment,
relationships with stakeholders, responsibilities of the management team to monitor company objectives, corporate
ethical behaviour and transparency, and the implementation of internal and external control systems. The methodology
for determining the index of responsible corporate governance enables a ranking of emerging countries in Europe and
can be used in any context.

Key words: corporate governance, responsible corporate governance, responsible corporate governance index,
corporate social responsibility, Emerging Europe.

JEL classification: G34, M14, P2.

INTRODUCTION

Sustainable development policies implemented by some countries of the world have clearly
highlighted the key role of corporate social responsibility. Environmental and social
responsibilities, but especially those related to responsible corporate governance are an integral part
of medium and long-term performance and sustainability.
Empirical studies regarding corporate governance conducted in various countries of the
world highlight the features of corporate governance in conjunction with economic performance,
ownership structure, industry, legal system, control actions and demonstrate the voluntary nature of
implementing corporate governance practices.
Corporate governance has become an important issue in emerging European countries in
recent years, but is still widely unknown in many other countries. In many emerging countries,
corporate governance remains a controversial idea in terms of conceptual basis, characteristics,
efficiency and future development (Kuznetsov and Kuznetsova, 2009), emphasizing the importance
of good corporate governance, which should result in an increase in share price and in attracting
capital (McGee, 2008).
The purpose of this study is to rank emerging European countries based on an index of
responsible corporate governance. First of all, we identified the dimensions needed to measure
responsible corporate governance and the components of each dimension. Then we determined a
method to calculate the index of responsible corporate governance for emerging European
countries. Thirdly, we ranked analysed states according to the value of the index of responsible
corporate governance. Finally, we analysed the correlations between indicators that form the
various dimensions of responsible corporate governance. We used the initial hypothesis that there is
a positive correlation between the dimensions needed to measure responsible corporate governance.

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THE CONCEPT OF CORPORATE GOVERNANCE - DEFINITIONS

The process of identifying definitions for the concept of corporate governance facilitates the
understanding of differences between views regarding the content of this concept. The first attempt
to explain the concept of corporate governance belongs to Berle and Means (1932) who consider
that corporate responsibility refers to the "equitable control" that managers must exert to meet the
interests of shareholders.
A widely used definition belongs to the Cadbury Committee (Mallin, 2007): "the system by
which companies are directed and controlled". Shleifer and Vishny (1997) approach corporate
governance while having in mind the means by which "resource providers" and financial investors
ensure the profitability of their investments. Corporate governance can mean: „leadership,
organizational structures and processes that help ensure that an organization’s functions sustain and
extend its strategies and objectives. Put more simply, it is the culture, policies, procedures and
controls that help ensure a company will meet its business goals.” (Lamm, 2010a), "a system of
rules and norms, of either institutional or market nature, within which various categories of
stakeholders, shareholders, management, public administration, staff, customers, suppliers, etc.
arise or develop" (Bostan and Bostan, 2010), "a concept that encompasses a wide range of
activities, rules, processes and procedures designed to ensure optimal use of resources and corporate
strategies in order to meet its objectives " (Dobroţeanu et al., 2011).
The development of the concept of corporate governance was made in connection with a
number of theories. The agency theory (Jensen and Meckling, 1976) dominates other theoretical
approaches of corporate governance and extends the basis theory on the separation of ownership
from control, analysing the relationships between those who delegate authority (shareholders) and
those who perform services to the benefit of the former (CEOs), as a consequence of information
asymmetry. Recent research demonstrates the implications of transaction costs on resource
allocation and on the structure of organizations (Iacobuţă and Frunză, 2006). Transaction cost
theory states that the transaction is the basic unit of analysis in economics; economic governance is
essential to optimizing resource allocation and increasing economic efficiency (Williamson, 1975).
Stewardship theory shows that managers, as administrators of the business, are inclined to meet the
interests of shareholders. This theory (Donaldson, 1990) eliminates the idea of personal interests,
arguing that variations in performance obtained by managers are determined by their position.
Stakeholder theory (Donaldson and Preston, 1995) provides a legal framework for the inclusion of
stakeholders in the managerial decision-making process (Crane and Ruebottom, 2011). The main
goal of management should be to create value and satisfaction for all stakeholders (Aggarwal and
Chandra, 1990; Kochan and Rubinstein, 2000). In this context, some research sought to analyse the
topic of shareholder value versus stakeholder orientation based on empirical studies of managers
from top U.S., UK and European companies (Stadler et al., 2006).
A series of corporate governance models have been individualised in scholarly literature.
Albert (1993) distinguishes two models of corporate governance: shareholder value model (Anglo-
Saxon model) and stakeholders model (Rhineland model). De Jong (1997) considers that there are
three alternative models of corporate governance: American (Anglo-Saxon or market-oriented
system), continental (Germanic or network-oriented system) and Latin (represented by companies
from Italy, France, Spain, etc.). Yoshimori (1995) believes that we can identify three distinct
concepts related to corporate governance: "monistic, dualistic and pluralistic". In another vision
(Bostan and Bostan, 2010), the two models of corporate governance are: the “insider system” model
and the “outsider system” model.

TOWARDS RESPONSIBLE CORPORATE GOVERNANCE

According to traditional understanding, corporate governance practices may be involved in

societal activity provided that they are fully voluntary and result in a positive contribution to profit.
Only for this reason, directors are informed about environmental risks, liabilities and key

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environmental compliance issues the company may be facing (Kuhndt et al., 2004). Starting from
this idea, the corporate boards are believed to be accountable only to their shareholders and to no
other group in society. Hence, the board is answerable to shareholders and, in some systems, to
employees and creditors.
Recently, a new approach to corporate governance has been developed which relies on the
assumption that man is free and responsible (Aras and Crowther, 2010). On this basis, corporations
are viewed as communities of free and responsible persons engaged in a creative project, able to
contribute to the common good. The terms "good corporate governance" or "responsible corporate
governance" are used ever more often in scholarly literature. Bad governance is being increasingly
regarded as one of the underlying causes of all evil in our societies (Shil, 2008).
Good corporate governance is a must in ensuring the values required by different
stakeholder groups. It enhances the performance of corporations, by creating an environment that
motivates managers to maximize return on investment, enhances operational efficiency and ensures
long–term productivity growth. Consequently, such corporations attract the best talent available on
a global scale. It also ensures the alignment of corporations to the interests of investors and society,
by creating fairness, transparency and accountability in business activities among employees,
management and the board (Oman, 2001). Good corporate governance in a corporate set up leads to
legal maximization of shareholders’ value, in an ethical and sustainable manner, while ensuring
equity and transparency to every stakeholder – customers, employees, investors, vendor-partners,
government, and community (Murthy, 2006).
Another aspect of stakeholder empowered corporate governance is the development of
“Leadership for Responsibility”. This refers to utilising the resources of corporations to bring about
societal change. A leader in responsible corporate governance sees the whole policy approach as an
opportunity rather than a challenge. Leadership requires the creation of a demand for sustainable
action rather than answering demands for responsible action (Kuhndt et al., 2004).
Some authors believe that corporate social responsibility is an important regulator of
corporate governance. Responsible corporate governance „is a stakeholder-oriented policy that
allocates responsibilities to societal actors and that will drive corporate accountability” (Kuhndt et
al., 2004).
Responsible corporate governance is a never-ending process, which progresses through
conflicts, under the condition that conflicts are solved, as far as possible, through integration and
not through domination and compromise. Therefore, responsible corporate governance lies in
entrepreneurial democracy, which systematically questions the organization’s mission and its
relation to the common good (Aras and Crowther, 2010). Good corporate governance therefore sets
the balance between economic and social growth (Zinkin, 2010).
Contemporary experts have identified the elements of responsible corporate governance:
“stakeholder empowered corporate governance; management and performance evaluation systems;
transparency enhancement; accountability verification” (Kuhndt et al., 2004).
Businesses characterized by responsible corporate governance must abide by the following
principles (Kuhndt et al., 2004): „assume societal leadership for responsibility; clearly and
specifically identify their social, environmental and economic values in accordance with the
demands of their stakeholders; define their social, environmental and economic priority areas of
action; adopt specific management practices to integrate these values into their operations and take
measurable action; disclose comprehensive data on their social, environmental and economic
impacts; involve in comprehensive review of their activities; strive for continuous learning”.
In our view, responsible corporate governance can be used with direct reference to
governance that is based on three important principles: fairness, transparency and accountability.
Responsible corporate governance practices are the foundation of the organization's overall
vision, decision-making processes and structures that support long-term business sustainability.
Adoption of responsible corporate governance practices is considered a voluntary act of
organizations (Anand et al., 2006), enabling them to generate economic, social and environmental
results. According to this view, best practices in corporate governance require vision, processes and

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structures that ensure long-term sustainability.

MEASURING CORPORATE GOVERNANCE IN DIFFERENT STUDIES

Macey (1998) suggests three empirical ways of measuring the performance of a system of
corporate governance: by determining the level of control exerted by shareholders compared to their
participation; by measuring the willingness of entrepreneurs to make initial public offerings of
stock; by analysing the functioning of internal and external markets from a corporate control point
of view.
For this purpose, some studies succeeded in measuring the growing influence of
shareholders and the effects this has on industry and even nation-wide relations, and proposed ways
to reduce shareholder pressure by trade union actions (Van den Toren, 2000).
Most of the attention in terms of corporate governance was geared towards making
predictions about the performance of organizations as a result of the choice of corporate governance
practices (Gillan et al., 2003) or associating costs to some corporate governance mechanisms
(McKnight and Weir, 2009).
Indices for measuring corporate governance were developed by many companies and
researchers, but most of them are relevant only for developed countries: the corporate governance
index developed by Khanna, Joe and Krishna (2001), Klapper and Love (2002), Ananchotikul
(2008), the FTSE-ISS Corporate Governance index, the Gompers, Ishii and Metrick index (2003).
Also, some institutions, such as the Institutional Shareholder Services, The Corporate Library and
Governance Metrics International, have developed corporate governance rankings. Corporate
governance issues are the focus of agencies such as Moody's Investor Services, Standard and Poor's
and Fitch Ratings.
The evaluation of corporate governance for Chinese listed companies focused on six
dimensions: „the index of controlling shareholders’ behaviours, board governance index, top
management governance index, information disclosure index, stakeholders’ governance index and
supervisors’ committee governance index” (Li and Tang, 2007). The results show that the
implementation of responsible corporate governance leads to increased profitability, operational
efficiency, financial flexibility and security for analysed companies.
Another study focused on quantitative measurements of the quality of corporate governance
and ownership (Bebczuk, 2005) and used the example of 65 Argentinian listed companies to
highlight the considerable effect of governance measures on assets’ profitability.
In some emerging countries, the national system of corporate governance is reflected in
standards and measures aimed at increasing foreign investment and channelled towards protecting
investors (Kuznetsov and Kuznetsova, 2009). The state and dynamics of corporate governance in
Russia are described in some studies (Lazareva et al., 2009), which show that most companies
operating in that country adhered to standards of corporate governance. Some studies carried out on
emerging markets emphasize the connection between corporate governance, investor protection and
performance (Klapper and Love, 2002) to better understand the environment in which corporate
governance is of greater importance.
Another interesting research aims to identify a composite index of corporate governance
regulation in European countries between 1990-2005, based on three distinct categories of indexes,
“the protection of shareholder rights index, the minority shareholder protection index and the
protection of creditor rights index” (Martynova and Renneboog, 2010).

A METHODOLOGY TO DETERMINE AN INDEX OF RESPONSIBLE

CORPORATE GOVERNANCE FOR EMERGING EUROPEAN COUNTRIES

In Romania there are still very few studies on corporate governance (Răileanu et al., 2011;
Popescu-Duduială and Stoichin, 2011) that assess corporate governance compliance of listed
companies or corporate transparency in applying corporate governance principles.

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This is the reason why we set out to propose a methodology to assess the national level of
responsible corporate governance in emerging European countries.
Emerging Europe Monitor grouped these countries into three categories (Emerging Europe
Monitor, 2012): Central Europe & Baltic States (Czech Republic, Estonia, Hungary, Latvia,
Lithuania, Poland, Slovakia), Russia & CIS (Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan,
Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan) and South-East
Europe (Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Macedonia, Montenegro, Romania,
Serbia, Slovenia). Of these, for Turkmenistan, Uzbekistan, Kyrgyzstan, Tajikistan, Armenia and
Belarus no relevant data was found. We found it useful to include Turkey in the analysis because of
its geographic location and economic position.
The Organisation for Economic Cooperation and Development first established the basic
principles of corporate governance in 1999, and then revised them in 2004: ensuring the basis for an
effective corporate governance framework; the rights of shareholders and key ownership functions;
the equitable treatment of shareholders; the role of stakeholders in corporate governance; disclosure
and transparency; the responsibilities of the board (OECD, 2004).
Starting from the OECD vision, we recommend the following dimensions of measuring
responsible corporate governance, structured as follows: D1 - Shareholders' rights and their equal
treatment; D2 - Relations with stakeholders; D3 - Responsibilities of the Management Board in
pursuing corporate objectives; D4 – Ethical corporate conduct; D5 - Transparency and the
implementation of internal and external control systems.
To assess the five dimensions of responsible corporate governance we used the Global
Competitiveness Report published by the World Economic Forum (Schwab and Sala-i-Martin,
2012) as a data source. We chose this source because it evaluates all countries covered by our study
in a consistent manner, ensuring data comparability. From the multitude of indicators used for
reporting, we chose those indicators that cover the content of the proposed dimensions.
Dimension 1, "Shareholders' rights and their equal treatment", refers to corporate obligation
to protect shareholders' investment and to equal treatment for shareholders, providing secure
mechanisms for registration and confirmation of shareholder ownership, voting rights and
collection of dividends. To determine this sub-index, we used the following indicators: I1.1 -
Protection of shareholders and I1.2 - Investment protection. Dimension 2, "Business relations with
stakeholders", aims to maintain transparent and fair relations between company and its stakeholders
(employees, customers, etc.). In this respect, we chose the following indicators: I2.1 - Hiring and
firing practices, I2.2 - Relations between employers and employees, I2.3 - Degree of focus on
consumer. Dimension 3, “Responsibilities of the Management Board in pursuing corporate
objectives", is assessed with the use of two indicators: I3.1- Management training and I3.2 -
Delegating responsibilities to employees. Dimension 4, "Ethical corporate conduct", is based on a
single indicator (I4), which measures the perception of ethical corporate behaviour in a given
country relative to other countries. Dimension 5, "Transparency in the implementation of internal
and external control systems", refers to compliance to reporting standards and is determined using
indicator I5.1-Compliance with reporting and auditing of financial performance. Any organization
needs to maintain independent external auditors as an important tool of responsible corporate
governance.
Limitations to this study arise from the nature of collected data, which expresses perceptions
of respondents in the respective countries. As the countries of the world will improve reporting on
their social and economic environment and ensure its continuity, the proposed methodology could
be applied to quantitative data generating better scientifically proven results.
The index of responsible corporate governance for emerging European countries is a
composite index based on five sub-indexes, which correspond to the responsible corporate
governance dimensions explained above, and each sub-index is determined by using the chosen
indicators.
The methodology of calculating the index of responsible corporate governance is the
following:

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- the values of each indicator within each dimension are sorted in descending order and the
best (maximum) and lowest result (minimum value) are defined;
- each value of indicators receives points from 0 to 100 (0 for the minimum value and 100
for the maximum value);
- normalization is achieved by applying the following formula:
Pi=100*(Xi-valmin)/(valmax-valmin) (1),
Where: Xi=the value of the indicator to be normalized, valmax =maximum value, valmin =minimum
value;
- weighting coefficients are set: each indicator is equally weighted within each dimension
and each dimension has equal weight in the overall index;
- dimensions are aggregated by multiplying the number of points awarded during
normalization with the weighting coefficients (0.50 for D1, 0.33 for D2, 0.50 for D3, 1 for D4 and
D5), using the following formula:
Pi/d= Pi*C d, (2),
Where: Pi/d=points for indicator i after weighting, Pi=points for indicator i, C d = weighting
coefficient;
- the index is calculated by summing the points of each sub-index, using the following
formula (total index will have values between 0 and 1):
Ic= (Pi/d1+Pi/d2+Pi/d3+Pi/d4+Pi/d5)/5/100, (3),
Where: Ic=composite index, Pi/d1,2,3,4,5=points for indicator i after weighting;
- states are ranked in decreasing order in terms of responsible corporate governance, the
state with the highest index value having greater awareness of responsible corporate governance.

RESEARCH RESULTS

By applying the methodology described in the previous section, we determined the value of
the responsible corporate governance index (RCGI) for each state. The results show (Table 1) that
ten of the twenty-three states have average and above average performance in terms of responsible
corporate governance, with RCG index values over 0.5. Estonia ranks first, far from runners up with
an index value of 0.911, which shows that the perception of respondents is very favourable to
following responsible corporate governance principles. Out of five dimensions, three scored a
maximum value. Romania ranked 20th, with a low value of the index.
Figure 1 presents a comparison of the RCG index for the top 3 countries and Romania. The
differences are significant and our country recorded above average values for only one of the five
sub-indexes.
1
100
80
60
6 2
40
Estonia
20
Polonia
0
Lituania
România
5 3

Figure 1. Romania, compared to top 3

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Table 1. States ranked by RCG index value

State / acronym Sub-index Sub-index Sub-index Sub-index Sub-index Index
D1 D2 D3 D4 D5 GCR
Estonia (Est) 71.3 84.4 100 100 100 0.911
Poland (Pol) 66.2 55.3 48.7 57.9 82.4 0.621
Lithuania (Lit) 59.5 63.3 57.5 47.4 70.6 0.597
Albania (Alb) 88.3 84.6 55.8 42.1 23.5 0.589
Latvia (Let) 65.4 63 51.3 47.4 52.9 0.560
Turkey (Tur) 68.3 71.8 37 47.4 52.9 0.555
Kazakhstan (Kst) 88.2 64.4 39.9 42.1 41.2 0.551
Montenegro (Mnt) 75.8 49.6 57.7 57.9 29.4 0.541
Slovenia (Svn) 57.3 36.4 54.1 57.9 52.9 0.517
Azerbaijan (Azb) 74.9 84 41.7 42.1 11.8 0.509
Czech Republic (Ceh) 56.6 54.4 56.6 15.8 64.7 0.496
Georgia (Grg) 66.9 55.4 15.8 52.6 29.4 0.440
Hungary (Ung) 44.9 48.7 15.8 26.3 76.5 0.424
Bulgaria (Blg) 57.4 54.7 21.2 21.1 29.4 0.368
Slovakia (Svc) 44.0 45.2 45.1 15.8 29.4 0.359
Macedonia (Mcd) 64.0 49.7 2.6 26.3 35.3 0.356
Moldavia (Mld) 38.2 37.5 23.9 15.8 23.5 0.278
Bosnia-Herzegovina (BoH) 27.2 56.9 46.1 0 5.9 0.272
Croatia (Crt) 29.4 22.6 15 26.3 23.5 0.234
Romania (Rom) 51.5 19.8 12.4 5.3 11.8 0.201
Ukraine (Ucr) 20.5 60.1 6.2 5.3 0 0.184
Russia (Rus) 20.5 25.2 7.9 15.8 0 0.139
Serbia (Srb) 16.3 15.9 7.1 0 5.9 0.090

To demonstrate the existence of connections between the indicators that compose

responsible corporate governance dimensions, we applied the correlation method. The results
(Table 2) obtained using Excel’s Data Analysis show very strong correlations between
“Management vocational training” and “Compliance in terms of reporting and auditing of financial
performance” (value 0.75), between “Management training” and “Delegation of responsibilities to
subordinates” (value 0.74), between “Management training” and “Shareholder protection” (value
0.71), between “Shareholder protection” and “Ethical corporate conduct”, between “Shareholder
protection” and “Compliance in terms of reporting and auditing of financial performance”.

Table 2. Results of statistical correlation

I 1.1 I 1.2 I 2.1 I 2.2 I 2.3 I 3.1 I 3.2 I4 I5
I 1.1 1
I 1.2 0.281021 1
I 2.1 0.183219 0.351694 1
I 2.2 0.630532 0.435429 0.523895 1
I 2.3 0.633708 0.204991 0.053439 0.518598 1
I 3.1 0.710048 0.075189 0.001229 0.670689 0.672739 1
I 3.2 0.537535 0.294665 -0.0682 0.566228 0.613186 0.745555 1
I4 0.671693 0.444015 0.10375 0.583298 0.546065 0.687856 0.639744 1
I5 0.670343 0.068146 -0.20113 0.420803 0.576502 0.752921 0.44626 0.69684 1

Also, there are no connections between “Hiring and firing practices” and “Delegation of
responsibilities to subordinates” and between “Hiring and firing practices” and “Transparency in
implementing internal and external control systems”.
In this study we developed a two-dimensional classification of countries of emerging
Europe using the responsible corporate governance index and the GDP/capita (as an indicator of the
level of economic development of the analysed states). We aimed to emphasize that responsible
corporate governance is related to economic development by applying descriptive statistics (Adams

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et al., 2007), which allows a graphical representation of data. Thus, we were able to observe a
scattering of states based on two elements (scatter plots).
Index GCR 100

90 Est

80 PERFORMERS
SENSITIVES
70

Pol
60 Alb Lit
Tur
Kst Let
Mnt
50 Azb Svn
Ceh
Grg Ung
40
Mcd Blg Svc
30
LOSERS Mld BoH INDIFFERENTS
Crt
20 Ucr Rom
Rus
10 Srb

0
0 5000 10000 15000 20000 25000 30000
GDP/capita
Figure 2. Two-dimensional classification of states of emerging Europe

Figure 2 shows four categories as follows:

9 Performers are countries with excellent performance in terms of corporate governance and
the highest level of GDP/capita. Estonia’s noteworthy position is based on the best
performance in corporate governance, although its economic development places it slightly
above average; Czech Republic and Slovenia’s positions are also worth mentioning because,
while they do not benefit from the best economic conditions, they achieved average
performance in terms of corporate governance.
9 Losers represent about a third of the emerging European countries, including Romania, and
have a low level of both responsible corporate governance and economic development. We
believe that these countries can improve their business performance and competitive
position in international markets by using tools and practices of responsible corporate
governance.
9 Sensitives are those who have above average scores in terms of responsible corporate
governance index, but extremely low levels of economic development. This paradox can be
explained by a favourable perception of respondents.
9 Indifferents are the category of states with real opportunities of developing responsible
corporate governance practices, as they have higher GDP/capita. However, they have a
correct perception of the importance of adopting responsible corporate governance.
We consider that the methodology used to determine the responsible corporate governance
index and to establish a dimensional classification of states can also be applied to developed
countries, not only to emerging ones.

CONCLUSIONS

Responsible corporate governance involves a long-term vision that integrates economic,

social and environmental responsibilities into the business strategy, highlighting opportunities and
allocating capital to meet the interests of shareholders. The role of corporate governance is
manifested in: creating value for the corporation and supporting transparency (Lamm, 2010b);
protecting shareholders' rights and ensuring their equal treatment, acknowledging the interests of all
entities that develop relationships with the company, assuming responsibility by the Board of
Directors, integrity and ethical behaviour, transparency in implementing internal and external
control systems to certify the validity of corporate financial reports (Dobrotă, et al., 2011). We
therefore consider that responsible corporate governance has the following functions: allows
monitoring corporate activities with the purpose of following its basic principles, supports the

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control of activities in order to abide by the principles of social responsibility, protects shareholder
investment, reflects the importance of corporate management and corporate monitoring, supports
sustainable corporate development.
As well as being fundamental to investor confidence, good corporate governance is essential
to attracting foreign new investment, particularly for developing countries, where good corporate
governance is often seen as a way of attracting direct investment at a favourable rate (Mallin, 2007).
It appears that not even scholarly literature is very concerned with measuring responsible
corporate governance, but rather studies the voluntary aspect of corporate governance, in general,
and the legal regulations of different states aimed at imposing the principles of corporate
governance.
The responsible corporate governance index established in this study encompasses the major
aspects of governance that any investor would want to know, possibly in the form of sub-indexes.
The results of applying this methodology to determine the index highlights major differences in
perception between emerging European countries, which stem from the environment that
corporations create in those countries. The ranking of emerging European countries into categories
based on responsible corporate governance index and GDP/capita shows interesting relationships,
perception differences and paradoxes. The study shows that little is known about the role of
responsible corporate governance in most of the analysed states.
However, the research can be interesting for investors who establish their investment
strategy based on a correct understanding of the specificity of responsible corporate governance,
possibly based on rankings like the one proposed by our study.

ACKNOWLEDGEMENTS

This work received financial support through the "Postdoctoral Studies in Economics: a
training program for elite researchers – SPODE" co-funded by the European Social Fund as part of
the Human Resources Development Operational Programme 2007-2013, contract no.
POSDRU/89/1.5/S/61755.

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