Organized and effective corporate governance in companies has become a crucial aspect for the attraction of investments, as the external investors seek confidence that their investments will be well managed. This thesis is confirmed by a variety of studies, corporate governance practice surveys, including the Organization for Economic Co-operation and Development (OECD), and it is acknowledged by experienced and recognized entrepreneurs.

Flemming Lindeløv has spent his career managing several international companies, including the Carlsberg Group. He, as a lecturer for the Education Program for Business Managers, Business Owners, Council and Board Members, organized by the Baltic Institute of Corporate Governance in October 2015, emphasized that the investors' approach to the requirements of company funding has changed. If companies that have been well-managed for decades were likely to attract investments with more beneficial provisions than currently, it is impossible to get any external funding without an organized and clear corporate governance system. However, is corporate governance only important to companies that sooner or later are seeking to attract investments?

Corporate governance has an important impact on increasing the company's competitiveness, business results, and efficiency. It ensures appropriate allocation of roles and corporate authority, efficient decision-making, accounting, and control systems, as well as resolution of potential disputes. The longterm capital and other business risks are well managed, transparency and disclosure regarding business operations and results are ensured. And, what is important, efficient governance has a positive effect on corporate reputation and it promotes the practice of responsible business conduct. For this reason, corporate governance is important to everyone – small, medium and large businesses, listed and unlisted companies, companies owned by the state, private investors or family, as well as problematic companies facing important changes.

Weakly or unsuccessfully governed companies leave an adverse effect on their financial results, as well as the business environment, the longterm development of the state or the region. Such companies often face failures and crises. Also in the case of Volkswagen scandal, experts believe that ignoring corporate governance principles, for example, ensuring the work of the efficient and professional non-executive board, was one of the precursors of the company crises and good governance would prevent and mitigate problematic situations in the future.

OECD pays great attention to the efficient work of the company non-executive boards (supervisory councils in Latvia) and in September 2015 it published the revised Principles of Corporate Governance, as well as the Guidelines on Corporate Governance of State-Owned Enterprises (SOEs). In 2016 also Latvia will see the reestablishment of supervisory councils in the largest SOEs such as Latvenergo, Latvijas Dzelzceļš, Latvijas Valsts Meži, and Latvijas Pasts. Supervisory councils are an internationally recognized tool for the oversight of company management boards, evaluation of company strategy, as well as financial control and ensuring transparency and accountability for the shareholders and the society. Considering that SOEs have an important impact in the economy of Latvia (6.25% of all employed, total turnover of around 18% of the GDP), they must be governed skillfully and objectively. One of the first steps towards that is to elect professionals in the supervisory councils of SOEs, furthermore, indicating that independent members should make up at least one half of the composition of the supervisory council. This will allow the promotion of long-term growth of the company value and business efficiency, as well as to mitigate potential failures and crises.

Andris Grafs,

Country Manager Latvia

Baltic Institute of Corporate Governance