Dr. Carlos F. Márquez Linares Dr. Enrique F. Quero Gervilla Doctoral Programme in Languages, Texts and Contexts Faculty of Translation and Interpreting university of granada

Terminology for Corporate Governance

1. Defining the field of Corporate Governance

The study of Corporate Governance, i.e. “the system by which companies are directed and controlled” (The Committee on the Financial Aspects of Corporate Governance, 1992, paragraph 2.5), is currently of great importance. Large companies need to be controlled and supervised. Corporate failures and misleading tactics have led to the creation of codes and rules directed at controlling Corporate Governance. Supervision of companies is needed on both a national and worldwide level. The errors and failures of corporations create pitfalls in the economies of different countries, and pose a potential threat to the environment, financial, ethical and legal situations, as well as community social welfare.

The roots of Corporate Governance “can be traced back to the seminal work of Adolf Berle and Gardiner Means in the 1930s, but the field, as we now know it, emerged only in the 1970s.” (Subramanian, 2015). The control of corporations faced a lot of problems which stemmed from “a patchwork system of regulation, a mix of public and private policy makers, and the lack of an accepted metric for determining what constitutes successful corporate governance” (ibidem). Best practices could not be achieved if there was a lack of control.

The modern history of Corporate Governance can be traced back to 1992, when the Cadbury report was created in the UK in order to control the behavior of big companies, shareholders and directors. Corporate Governance should be the responsibility of shareholders, who appoint the directors and the auditors, while “boards of directors are responsible for the governance of their companies” (FRC). The codes and rules focus on the protection of “widely dispersed shareholders against self-interested directors and managers” (Kibirige, n.d.).

Massive fraud, money laundering, false accounts, misreporting, “fat cat” salaries and the diversion of funds from pensions has forced experts to find the instruments which could prevent and combat such bad company behavior (Clark, 2016).

These events led to the combined code, which is now represented by the UK Corporate Governance Code (FRC). The code was designed for high standards of Corporate Governance to be reached. Various types of rules, codes and reports appeared in different countries. OECD (the

Organization of Economic Cooperation and Development) elaborated powerful principles for Corporate Governance in 1999: Principles of Corporate Governance (OECD, 1999). This document was issued in many updated later editions (OECD Principles, 2015). The work was “intended to help policymakers evaluate and improve the legal, regulatory, and institutional framework for corporate governance, with a view to support economic efficiency, sustainable growth and financial stability” (ibidem, p. 9). OECD gives attention to the importance of check and balances.

As previously mentioned, the bad behavior of companies forced the creation of serious organizations, which were intended to prevent underhand dealings. For example, one of America´s largest energy corporations, Enron, ended up in bankruptcy. The company “lied about its profits and stands accused of a range of shady dealings, including concealing debts so they didn't show up in the company's accounts” (Enron scandal at-a-glance, 2002). From December 2, 2001, the shares of the company “plummeted to $0.67 by January 2002”, having been worth

$90.75 “at Enron´s peak” (Investopedia). Another “global trading conglomerate”, Polly Peck International (PPI) “collapsed after the Serious Fraud Office (SFO) raided premises” of the empire built by its chief, tycoon Asil Nadir (Casciani, 2012). The Nadir´s behavior led to the crash of PPI, which triggered a devastating situation: “investors who lost money included large institutions, small investors and pension funds” (Raif, 2012). One of the most notorious cases of a corporation collapse, which involved “a Conflict of Interests and a Superannuation (Pension) Fund” was the bankruptcy of the “Robert Maxwell media empire” in 1991 (Australian Guardians). It was alleged that Robert Maxwell’s “financial risks led him into grand fraud and an apparent suicide” (Encyclopaedia Britannica, 2017).

It is important to note that modern Corporate Governance concerns a wide range of people and organizations, who are interested in sound functioning of corporations; i.e. shareholders, management, media, investors, customers, suppliers, employees, activists, regulators etc. (Clark). Accordingly, Corporate Governance should balance “the interests of a company's many stakeholders” (Investopedia).

Corporate Governance has the following purposes:

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  it focuses on the prevention of “corporate collapses, such as Enron, Polly Peck and the Maxwell companies” (Kibirige).
  
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  it helps to “build an environment of trust, transparency and accountability necessary for fostering long-term investment, financial stability and business integrity, thereby supporting stronger growth and more inclusive societies” (OECD Principles, 2015, p. 7). It should create “transparent and fair markets, and the efficient allocation of resources” (ibidem, p. 13);
  
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  it facilitates “effective, entrepreneurial and prudent management that can deliver the long-term success of the company” (FRC);
  
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  it is “primarily concerned” with companies “listed on a Stock Exchange” (Kibirige, n.d.).
  

Accordingly, Corporate Governance should possess the following characteristic features:

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  it should ensure the accountably of the management to the board, and of the board to the shareholders (ibidem)
  
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  it should be fair, i.e. protect the rights of shareholders and “treat all shareholders, including minorities, equitably” (ibidem) ;
  
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  it should be transparent, i.e. accurate about performance, ownership, financial situation and governance itself (ibidem);
  
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  it should be based on independence, i.e. the directors and advisers are “free from the influence of others”; conflicts of interests are to be avoided by essential procedures (ibidem) ;
  

The global objective of Corporate Governance is to fulfill the aims of a company, i.e. “it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure” (Investopedia). Boards aim at ensure “better governance and risk management practices” (Wright, et al., 2013, p. 15). For this reason, the Corporate Governance field is closely related to the regulation of finance and risk management.

Any big company or corporation faces a lot of pressure from society (media, public), legal structures (law), commerce, ethics and government (Clark, 2016). These negative stimuli have created Corporate Social Responsibility, i.e. “movement aimed at encouraging companies to be

more aware of the impact of their business on the rest of society, including their own stakeholders and the environment”; “a business approach that contributes to sustainable development by delivering economic, social and environmental benefits for all stakeholders” (Financial Times Lexicon). Accordingly, big companies should be aware that they pose a potential threat to society, the environment and the economy. The actions of corporations have long-term influence on the whole world. Big companies should be responsible for their procedures, trying to create environmentally, economically and socially amicable situations.

Each country has its own history of Corporate Governance, outlining the models for their businesses. The Anglo-US model focuses on the interests of shareholders. It “is characterized by share ownership of individual, and increasingly institutional, investors not affiliated with the corporation (known as outside shareholders or “outsiders”); a well-developed legal framework defining the rights and responsibilities of three key players, namely management, directors and shareholders; and a comparatively uncomplicated procedure for interaction between shareholder and corporation as well as among shareholders during or outside the AGM” (EWMI/PFS Program, 2005).

“The Anglo-American legal family” came “closest to full compliance” with Corporate Governance Principles (Vasiliev, 2000). Industrialized countries have a lot of experience in controlling and running big companies.

The development of Corporate Governance has only recently begun in Russia in comparison with West-European Countries, the USA and Canada. At the beginning of 1990s Russia had its own “model of privatization”. It “determined the basic characteristics of the structure of corporate ownership and governance in Russia <…>” (ibidem). Privatization exerted an influence on the emergence and development of Corporate Governance in Russia. The most important Corporate Governance features in Russia are the “substantial dominance of insiders at the initial stage of post-privatization development” (ibidem) and market economy. The special and delayed development of Corporate Governance in Russia is at the root of its current situation: “the system of corporate governance of post-communist Russia does not fit comfortably any standard conceptual framework based on the example of other industrialized countries” (Singh, 2010, p. 143).

The development of Russian Corporate Governance indicates the challenges for the translation of terminology. The English-speaking countries generating Corporate Governance terms are oriented at the procedures and techniques, which exist in the Anglo-Saxon model. Just as the Russian and Anglo-Saxon models do not match each other, Corporate Governance terms in Russian and in English cannot fully coincide.

According to all the characteristic features of the Corporate Governance Field, the translators of Corporate Management terminology into Russian are faced with the following challenges:

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  Corporate Governance Terminology is a subcategory of Management Terminology. It uses terms from different management spheres and there are no clear-cut lines between them;
  
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  The history of Russian Corporate Governance is relatively new. Nearly all the terms have been borrowed from the English Corporate Governance domain, which is under constant development. The English language is constantly coining terms, which change their forms and meaning;
  
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  The model of Russian Corporate Governance is different from the Anglo-Saxon one, which causes some concept discrepancies.
  

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