Proceedings

So, in contrast, an outside director in the same situation who does not resign faces the
risk of experiencing a loss of reputation as an outside director when the bad news
breaks. Such a loss of reputation may make it harder for the director to obtain other
board seats and perhaps even to keep the seats he already has. Furthermore, the
director would likely face an increase in his workload as the firm undergoes change
and restructuring. We believe that all these references to the directors may be
submitted under the auspices of the principle of responsibility of the Board of
Directors.
8. THE MANAGEMENT FROM THE PERSPECTIVE OF CORPORATE
GOVERNANCE PRINCIPLES: BETWEEN COMPETENCE, ABILITIES,
REPUTATION AND RESPONSIBILITY
A clear delineation of requirements for managerial positions in an enterprise, of the
skills required for them is specific to the dualist system of corporate governance. If
managers are elected by the Board of Directors from outside the enterprise, then most
likely they are chosen on the basis of competence and skills, as evidenced by learning
and experience. In the monist system, the choice for Chief Executive Officer can be
considered subjective. In Romania, the practiced system is no clearly defined, given
that art. 143, par. (3), says that the president of Board of Directors can be Chief
Executive Officer, offering this way the possibility for en enterprise to choose it.
We believe that the most appropriate would be for managers to be fully delimited
from the Board of Directors, so there could be a proper coordination at the enterprise
level. To support this statement, we must specify that the Companies Law the
organization of the dualist system in Romania, as Supervisory Board and the
Directorate, which are two separate entities, with separate responsibilities.
Related to Romania, corporate governance principles issued by Bucharest Stock
Exchange, do not have a separate chapter focusing on the responsibilities of
management for achieving a high level of corporate governance, it is evident that
management has an essential role to play if a company is to meet the governance
standards of the revised principles. The principles underline the fact that high ethical
standards, are in the long term interest of the company: they are essential if the
company is to be regarded as being credible and trustworthy. Many companies have
found it useful to develop company codes of conduct, often based on professional
standards and, sometimes, broader codes of behavior. There is a mention though to
the confidentiality of documents and information received, kept and signed during the
mandate period.
In terms of reputation, the problem is the conflict of interest which can arise in
managers’ case, regardless their level. They have the obligation to tell the truth, but
simultaneously have incentives, so they are motivated to send biased information to
the users. In the context of financial reporting, managers are relevant information
providers, who jointly produce financial reports with the auditors. Incentives for
biased reporting may arise for managers when bonuses are linked to performance
(Koch and Schmidt, 2010).
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