Legal Regulation of Corporate Governance in the Czech Republic

The current economic situation has intensified the pressure on compliance with corporate governance rules, which regulate not only the functioning and competencies of company's bodies but also their relationships with creditors, investors, shareholders, auditors as well as the contents of information duties and many other matters.

Corporate Governance is especially regulated by these laws:   

The Czech rules of Corporate Governance (CZ only) are mostly included in binding legal provisions, and further rules shall be deemed as mere recommendations that are not legally enforceable. Since 2004, when the Securities Commission issued the Corporate Governance Code based on OECD Principles (the “Code”), numerous changes in legal regulations have been adopted that are no longer reflected in the Code. Moreover, the development of legislation requires a review of the current procedures and their adaption to newly-introduced European rules and current trends that substantially expand the information duties. EU high-level experts have developed a new initiative striving for the review and consolidation of effective corporate governance rules. There will be a continuous pressure for implementation of changes, and sooner or later the companies will be forced to adopt the new rules. 

 OECD Definition of Corporate Governance

"OECD defines corporate governance as follows: “Procedures and processes according to which an organisation is directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among the different participants in the organisation – such as the board, managers, shareholders and other stakeholders – and lays down the rules and procedures for decision-making."

    Source: OECD web pages

 Financial Times Definition of Corporate Governance

"How a company is managed in terms of the institutional systems and protocols meant to ensure accountability and sound ethics. The concept encompasses a variety of issues, including the disclosure of information to shareholders and board members, the remuneration of senior executives, potential conflicts of interest among managers and directors, supervisory structures, etc."

    Source: Financial Times web pages

Cadbury Report Definition of Corporate Governance

"Corporate governance is the system by which companies are directed and controlled. The boards of directors are responsible for the governance of their companies. The shareholder’s role in governance is to appoint the directors and the auditors to satisfy themselves that an appropriate governance structure is in place. The responsibilities of the board include setting the company’s strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship. The board’s actions are subject to laws, regulations and the shareholders in general meeting."

    Source: Cadbury report, European Corporate Governance Institute Definition of Corporate Governance

"The framework of rules and practices by which a board of directors ensures accountability, fairness, and transparency in a company's relationship with its stakeholders (financiers, customers, management, employees, government, and the community). The corporate governance framework consists of (1) explicit and implicit contracts between the company and the stakeholders for the distribution of responsibilities, rights, and rewards, (2) procedures for reconciling the sometimes conflicting interests of stakeholders in accordance with their duties, privileges, and roles, and (3) procedures for proper supervision, control, and information-flows to serve as a system of checks and balances."

Useful Links

Green Paper: Audit Policy - Lessons from the Crisis

CovProposes to strengthen the position of audit in its role in supporting the financial system’s stability, underlines the corporate governance of audit companies and starts a discussion on the creation of a single market for the provision of audit services.
Publication date: 10/2011 | File size: 3.8 MB


Green Paper: Corporate Governance in Financial Institutions and Remuneration

Includes the principles of effective corporate governance intended especially for large financial institutions for the purposes of financial system’s stability.
Publication date: 10/2011 | File size: 3.8 MB


Green Paper: The EU Corporate Governance Framework

Covers three areas that are considered the basis of effective corporate governance: the functioning of the company’s bodies, the involvement of shareholders in the company’s activities and the enforcement of compliance with national codes of corporate governance.
Publication date: 10/2011 | File size: 3.8 MB