THE GOVERNANCE OF PRIVATIZED FIRMS - AUTHORITY, RESPONSIBILITY AND DISCLOSURE

In any market economy, a fundamental question is how to make managemen t accountable to shareholders and also to the requirements of law. Thi s paper raises selective, critical issues of corporate governance that are particularly relevant to problems of the accountability of boards of directors to their shareholders in transition economies. These iss ues include the separation of ownership and control and the duties of directors; the need for disclosure given that separation; and the corp orate charter as a vehicle for the direct participation of shareholder s in governance. The paper suggests that one of the best models of cor porate governance that transition economies can use is that employed b y the leveraged-buyout (LBO) and venture capital funds operating in th e West. It argues that weaknesses in corporate governance may undermin e the entire privatization process. Economics and law are too often se en as separate disciplines. In reality, they come together in transiti on economies perhaps with greater impact than elsewhere.