How to judge whether a company's governance works

The management of a company is gaining ever greater importance in the modern economy, under the influence of the tendency for the owner of capital to separate from the management that runs production. The reason is the deep penetration into the modern economy of the institution of investment which, unlike the Soviet model of state ownership of the means of production and of a state apparatus managing that production, often does not involve the investor directly in the management of production. The investor puts money into production in the expectation that the project will pay for itself and will return a profit. Professional managers carry the project out, and secure and run production. In that model the investor's immersion in the detail of the project is limited to the strategic matters reserved to the general meeting of the company's participants or shareholders.

When questions of building a system of corporate governance are discussed, particular attention is due to the detailed regulation of the legal relations between the owners of capital and the managers, and to the regulation of their relations with third parties. For quite a long time corporate law, as a sub-branch of civil law, did not receive sufficiently detailed regulation in statutory instruments. That was due both to objective historical premises (the absence of a tradition and a culture of corporate legal relations) and legal premises (over-detailed regulation of civil-law relations may excessively restrict the rights and freedoms of the parties), and to practical premises (the lack of experience in using the tools of corporate governance produced a certain chaos in the formation of its first institutions). These circumstances also had a substantial negative effect on the investment appeal of the economy of the Russian Federation.

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