Marat Terterov: Armenia’s long term security will be better served by strengthening economic security, rather than defining national security on the basis of the Tsarist Russian catch-cry “armiya i flot”
The International Finance Corporation (IFC) and the Corporate Governance Center have presented a joint package of recommendations on improvement of corporate management and enhancement of information disclosure in Shen Holding CJSC. "Having chosen the path of development and armed ourselves with fixed determination to achieve our goals, we are willingly starting to use in practice the recommendations aimed at improving the management of our enterprise", Samvel Beglaryan, President of Shen Holding, says in his interview with ArmInfo.
The recommendations to Shen Holding referring to key components of corporate governance, in case followed completely and strictly, will lay the basis for up-to-date management and unlock the investment potential of the enterprise.
According to one of the priority recommendations Shen Holding should reorganize the Board of Directors of the Company; it should particularly revise the powers of the Board of Directors' members, as well as the structure and quantitative representation of the Board. "After discussing the given issue with Shen Holding, it was decided that the Board of Directors will consist of five members, three of them being "non-executive directors", i.e. they will not be involved in the corporate management process. In the meantime, Narine Melikyan, an expert at the Corporate Governance Center, explained that the "independence" of one of them will be defined in line with international standards, according to which, for instance, an "independent" member of the Board must not be an official or employee
of the company, or a related person. He/she must have a good business reputation, must be committed to high ethic standards and have the required leadership skills and entrepreneurial experience.
In accordance with the recommendations to Shen Holding, all the members of the Board of Directors must compulsorily undergo professional retraining (short-term training courses). At least twice a month the Board must convene a session; moreover, one of the sessions should be dedicated to discussion of the company's strategic goals.
The expert thinks that creation of a really "strong" Board of Directors will become the key factor of successful introduction of the best corporate management practice in the Holding. Melikyan stressed that the Holding should introduce an assessment mechanism to estimate the work of the Board of Directors, and it should also set up a professional team consisting of three key officials: director general, chief financial officer and chief operations officer.
"One of the priority recommendations is to create an efficient institute of a corporate secretary", Melikyan said. She added that the corporate secretary is one of the pivotal figures in the company and plays an important role in administration of the key spheres of corporate management. This official will work out the action plan on improvement of the corporate management practice, coordinate and ontrol all the processes related to introduction of the best corporate management practice in the company.
The expert pointed out that the Holding is offered to revise its Regulations and to bring them in compliance with international standards of corporate management. According to the recommendations, the Holding is to adopt a Code of Conduct and a Corporate Governance Code. In addition, Shen Holding should work at introduction of a compliance function. Melikyan specifies that the compliance officer will control the compliance of the company's activity with the
legislation in force: "his/her role will be to reveal any deviations not only from laws and legislative instruments, but also from the Corporate Governance Code, Code of Conduct and other internal documents of the company".
The other recommendations refer to internal control system and envisage introduction of an internal audit institute, including introduction of risk management system, which will allow the company to assess, warn and reveal the risks the company may face.
As regards information disclosure, the expert draws the company's attention to the fact that the company's website is focused first of all on the potential customers, and in this connection, "Shen Holding is offered to shift the focus towards the potential investors". The Holding is also offered to work out an information disclosure policy: "though the company regularly publishes its financial statements, nevertheless, there are certain cases when the company must promptly inform its partners of the essential changes in the company's activity". The specified policy fixes the cases and situations when the company should promptly respond and inform its partners.
Melikyan pointed out that the last provision of the package of recommendations is also for the potential investors and defines the order of compilation and the rules of publication of the company's annual reports. It is recommended that the Holding should regularly present information on the company's activity assessment, analysis of its internal and external capacities, its achievements, existing problems and plans for the future.
To note, the package of recommendations has been worked out on the basis of surveys conducted in the Holding and assessment of the corporate governance practice in line with the IFC's methodology. The project on introduction of the leading standards of corporate management in the Holding will last for about 6 months.
To remind, Shen Concern was founded in 1995. Having merged with Huntsman Building Products, Shen Concern was reorganized into Shen Holding, which currently includes Shen Concern CJSC, Huntsman Building Products and Shen Group CJSC.