The Gaps and Lessons of Ethiopian Share Company Governance in Light of International Company Model Laws

Abstract

The proper governance of companies will become as crucial to the world economy as the proper governance of countries. It is the interaction between various participants (Shareholder, Board of Director and Company Management) in shaping corporation’s performance and the way it is proceeding towards. Besides, it is the system by which companies are directed and controlled. Thus, corporate governance requires a legal and regulatory framework which is strong in order to attract investors to invest their capital in a company or organization. This development of corporation makes the requirement of good corporate governance inevitable in the modern corporate business. Coming to the corporate governance under Ethiopian commercial code, the law recognizes board of directors, shareholders meeting and auditors as the three principal organs of management. However, the law is criticized for its inadequacy of ensuring the interests and rights of shareholders (for instance, it does not adequately address the issues of basic ownership rights and there is also a fusion of power on single individual which opens the way to abuse the assets of a share company to the detriment of the shareholders), and other stakeholders to cope with the need of the prevailing corporate issues in the country. Accordingly, as to there is an increasing in number of share companies and their potential contribution to the economy of Ethiopia, such development will be sustainable only when it is supported by adequate legal and sound corporate governance. It will be shown that Ethiopia’s corporate governance rules should be updated in order to increase the growth of companies and protect the interests of stakeholders. When a country revises its laws, it is an inevitable to look at laws and policies of advanced economies. In this regard the thesis critically analysis the Ethiopian share company governance with the OECD principles of corporate governance and EMCA general principles.

Keywords: Corporate Governance, Share Companies, Organs of Governance, OECD, EMCA and Basic Ownership Rights of Shareholders.

DOI: 10.7176/JAAS/71-03

Publication date: April 30^th 2021