Multinationals as Vectors of Corporate Governance Improvement in Emerging Economies in Eastern Europe: A Case Study

Emerging economies are characterized by a reduced level of transparency and accountability of their business environment. Previous research on corporate governance practices in these economies has highlighted the difficulties of implementing corporate governance codes, the reduced level of compliance with these codes and the reluctance of local businesses to change the manner in which they are managed. In this context, multinational corporations (MNCs) are often perceived as “knowledge transfer” agents contributing to the improvement of local practices. However, the transfer is not unilateral, but it should be rather seen as a process of mutual transformation and adaptation. The aim of this chapter is to investigate the role of multinationals in improving corporate governance practices in emerging economies. We conduct a case study on the privatization of Petrom, the largest company listed on the Romania's Bucharest Stock Exchange (BSE). The case suggests that the alignment of Petrom’s practices with the new owner’s (Austrian company OMV) vision and strategy, besides contributing to superior performance and accountability of the company itself, led to a significant improvement of the local corporate governance. This is a story of successful privatization which sheds light on the mechanisms of globalization and on how economic progress is obtained.