The introduction of good corporate governance and compliance systems in companies and institutions has been one of the key recommendations by the FICIL’s Investment Protection and Court Efficiency Work Group in the past three years. FICIL recognizes the progress made in this area, especially related to the corporate governance of state and local government controlled limited liability companies and joint stock companies.
In FICIL’s recommendations for 2018 and 2019 it was stressed that to ensure the compliance of the activities of a capital company controlled by the public sector in particular, it is necessary to implement and continuously improve such essential good governance and compliance systems as: general corporate governance system, internal audit system for the prevention of money laundering and terrorism financing, system for monitoring the risks of sanctions, and other compliance systems, taking into account the specifics of the company’s activities and risk-based assessment
Although managing the risks of the company and setting sustainable strategy for company growth is the responsibility of company management, FICIL believes that the overall improvement of corporate governance of companies in Latvia is a joint effort by the companies, the State, and the experts, who can provide guidance in this process. Therefore, apart from the published recommendations, FICIL has been actively involved in various processes that has led to improved clarity of what is expected from the companies as well as actual tangible improvements of the corporate governance and compliance practices of many companies.
In April 2020 Riga Municipality formed a management advisory board for municipal companies and shares. The main tasks of the council are assessing and giving recommendations on municipal strategic project documents regarding municipal shareholding management. The council is led by the Vice-president and the Director in Latvia of the BICG (Baltic Institute of Corporate Governance) Andris Grafs, the group also includes FICIL’s Investment Protection and Court Efficiency work group leader Māris Vainovskis.
Māris Vainovskis has also been active in developing the new Corporate Governance Code in Latvia. To update the corporate governance recommendations in accordance with modern requirements, in the period from 2018 to 2020, an Advisory Board for the development of a new Corporate Governance Code was established under the auspices of the Ministry of Justice, developing the new set of rules that are based on best international practices in corporate governance.
Following the publishing of the code, in August 2021 the first competition for the Latvian Corporate Governance Awards was announced, aiming to highlight excellence in corporate governance and to set a good example for other companies.
All these developments truly demonstrate the contribution of FICIL to introducing the recommendations of 2018-2019 to companies in Latvia by actively participating in the dialogue and developing guidance for the companies.
Māris Vainovskis, the leader of the FICIL’s Investment Protection and Court Efficiency Work Group is pleased with the many developments in this area over the past few years: “I have seen an increased interest and appreciation of good corporate governance practices in both private and state and municipality owned companies in Latvia, especially recently. Many improvements have been made in internal practices and governance systems, however, there is still much work to be done, and our next aim is to encourage more companies to consider raising capital in the regulated market.”
FICIL continues to advocate for improved corporate governance of state and local government controlled capital companies. Moreover, we believe that the inclusion of these companies in the regulated market would promote both the efficient management of the companies, complying with the principles of good corporate governance, as well as promote the development of capital markets in Latvia. To achieve this aim, the new recommendations of the FICIL’s Investment Protection and Court Efficiency Work Group will include continuing the assessment of capital companies owned by public persons, including regarding the suitability of the company’s business model, capital structure and corporate governance.