Two aspects of the environment played a role in shaping corporate governance in Latvia. The very first part of this story takes place in 1991 when Latvia won its independence by seceding from the political and economic institutions of the Soviet Union. This event marks the beginning of this particular narrative. Confusion reigned supreme among business owners who were fighting for a management structure for Latvian companies that was distinct from the one that had been implemented by the Soviets. The structure that had been implemented by the Soviets was similar to the one that had been implemented by the Soviets. The creation of an entirely new market and economy, in which Latvia had neither prior experience nor a point of reference, constituted the second motive. Around this time, the program to privatize state-owned enterprises in Latvia was put into motion. These days, a sizeable portion of Latvia’s commercial enterprises are predicated on the aforementioned idea.
Corporate governance
As a direct consequence of the privatization initiative, some newly founded private companies and the privatization of pre-existing businesses were both made possible. Both the limited liability company and the joint stock corporation are rapidly becoming the two most common types of business structures used across the country. The primary objective of good corporate governance is to maximize the value of a firm by taking into account the needs and desires of its shareholders.
Another component that is vital to efficient corporate governance is the concord that exists between the council and management board of a company. The equilibrium is preserved as a result of the accumulation of experience, expertise, integrity, and responsibility among the board members, as well as the board members’ compliance with the requirements set forth by management. The majority of the time, it is expected of members of the council will comply with the same regulations.
The role shareholders play in company administration
The principles established by the Organization for Economic Cooperation and Development (OCED) are the basis for the good corporate governance suggestions that Latvia has developed. A corporation is required to hold at least one annual meeting in Latvia, at which it must provide its shareholders the opportunity to vote on certain management decisions.
On the other hand, it is conceivable to organize extraordinary gatherings. All of the stockholders’ interests should be considered on an equal footing. It is essential to develop strategies for the distribution of profits to guarantee that shareholders will receive benefits from the payment of dividends. Shareholders have a right to obtain all information promptly. At least 14 days in advance of the next meeting of shareholders, the shareholders are required to be informed of the meeting, and they are required to be furnished with any relevant materials.
The management board of Latvian companies
In Latvia, the management board is responsible for the day-to-day operations of the firm and also acts as the shareholders’ representative when dealing with other parties. The board of directors is accountable for managing day-to-day operations and is required to take the most effective actions to increase the value of the company for the benefit of its shareholders. It will be the responsibility of the board to ensure that all of the regulations established in the Latvian Commercial Law are followed.
In addition to putting together the annual budget, the management board is in charge of drafting corporate business strategies, ensuring that those plans are implemented successfully, and determining the objectives of the organization. The members of the management board of a Latvian company will be people who have substantial education and experience in their respective fields.
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