Mass Privatisation Schemes in Central and East European Countries. Implications on Corporate Governance

Privatisation is the major component in all the transition processes carried out in the Central and East European countries. With different pace and scale across the counties, it took distinct, sometimes even opposing forms. Nevertheless, almost all these countries have developed processes of rapid, massive and free of charge transfer of property to large groups of population - the so-called “Mass Privatisation”. They started at different times and the countries were on different stages of implementation by publishing of the volume. In some, like Czech Republic, it was already finished, others like Poland and Romania made important steps of it, Bulgaria was about to change it radically and Slovakia seemed to had it interrupted. Although similar, the “Mass Privatisation” schemes varied throughout the CEE countries. The varieties provided ground to expect different results from the application of the Mass Privatisation Schemes (MPS) as well. Thus, a comparison of that schemes looked a really challenging task for the scholars studying the economic problems of the transition in Central and Eastern Europe, since it ensured a free exchange of ideas not only on the development of the mass privatisations, but also on the whole privatisation programs. This volume presents the results from one such a comparative project, which became reality due to financial support of the EC PHARE-ACE Program. The project No P95-2043-R, coordinated by Dr. Plamen D. Tchipev, involved scholars from Bulgaria, Czech Republic, Poland, Romania, Slovakia, The Netherlands and the United Kingdom. The participants in the project observe and analyse the concrete development of the forms and the actual results of the mass privatisation in their own countries emphasising especially their role for establishing of the new mechanisms for corporate governance. Revised versions of some chapters of that volume were later published as journal articles. The underlying field research had been carried out simultaneously in the all five CEE countries, following a common analytical model built on the theoretical apparatus of the Institutional Economics and Law and Economics. The model incorporates two different analytical tools – a questionnaire and a so-called checklist. This methodological approach ensured a close treatment of the empirical evidence in the different countries. Although, there is no full uniformity of the country papers; each of them places emphasis on different aspects of the privatisation according to the specific economic, legal or political conditions in the relevant country. Thus, while the Polish researchers put a lot of effort on the analysis of the legal framework of the centrally-created mass privatisation intermediaries, the Romanian concentrate on the changing privatisation model and the Slovakian on the crucial role of the political intervention in the mass privatisation. The country studies and the workshop discussions provided the basis for creation of a market compatibility index for each privatisation scheme. Its values fluctuate between 0 and 1 showing how compatible is a particular MPS with the market mechanism. The study had been strongly policy oriented and effort had been made for conveying the results of the study to the policy makers in the CEE countries, including widely disseminated working paper containing comments and suggestions on the mass privatisation policy. The study showed that the decentralised mass privatisation model chosen by Czech Republic is not the only one possible; Poland and partially Romania have chosen more or less centralised models. Although, the competitive (i.e. more random) resulting portfolio of the decentralised models, is not an obstacle for creating sufficiently large holdings for strong control over the enterprises. In both Bulgaria and Czech Republic after the official distributive process started an intensive intra-fund exchange of packages of shares resulting in concentrated holdings. In the Bulgarian case the above tendency shaped in almost 90% of all the Privatisation funds acquiring the legal form of a classical holding company. Although, it was not clear what was the goal of such a large process; there were signs that it is mostly a willingness to avoid the rigid legal regulation imposed on the investment intermediaries and not a strong inclination against the active monitoring. Those doubts were fuelled by the Czech experience which had already history of such holdings, but still did not show a firm predominance of the governing behaviour over the companies. Surprisingly, the Polish model did not seem less desirable as an instrument for corporate control because of the opportunity for an administrative decision requiring a more serious involvement, through the appointed managers. It had at least one apparently strong advance to the other models: it provided for a much better maintenance of the intra-companies connections and production chains which were (not just) initially broken in the other models. Perhaps, the most important observation was that in all the countries there was no clear orientation towards one or another of the best world-wide known models for corporate governance. In all of them the stock markets were welcomed and many efforts were put on their development, but in all of the countries the banks played (or tried) very important role in privatisation.