ELECTROAPARATAJ

February 2003

Privatized in 1997, the Romanian electric appliances manufacturer Electroaparataj tightened its corporate governance requirements at the suggestion of the United States investment fund that became its majority shareholder, Broadhurst Investments Ltd.

Although it was still to early to assess the impact on the bottom line, Electroaparataj said the move "definitely" improved the company's stock market position.

Responding to ICC's questionnaire about its corporate governance regime, Electroaparataj said the company got help from Broadhurst's legal department in introducing the measures, which it said increased demands on management and on the company's public relations department.

"More reports go out to investors, and the company website has been upgraded. The company had to seek legal advice more frequently in order to protect confidential information without prejudice to investors."

Electroaparataj makes low voltage switching apparatuses for industrial use and domestic appliances. Exports - mainly to western Europe - represent 30-35% of annual turnover.

An immediate motive for revising corporate governance requirements was to qualify for admission to a special category on the Bucharest stock exchange. The company said it wanted to demonstrate to shareholders that a company can be both a successful business and remain transparent.

Electroaparataj said it provided a good example of equal treatment for majority and minority shareholders. Since it had already insisted on high corporate governance standards before going public, the introduction of stricter rules had been easier than if it started from scratch.

Advice had been readily available - from Broadhurst's legal department, from the Bucharest Stock Exchange and the Romanian Shareholders' Association. "The main issue is not finding information and assistance, but getting shareholders and management convinced of the value of applying sound corporate governance principles."

Please click here for Electroaparataj's full answers to ICC questionnaire.

For more information on Electroaparataj S.A, please contact Click here to send a mail, Financial Manager.
ICC thanks Click here to send a mail, Director of the International Center for Entrepreneurial Studies, University of Bucharest, Romania, and the Center for International Private Enterprise (CIPE) for their contribution to this case study.