Relationship between Corporate Sustainability and Compliance with State-Owned Enterprises in Central-Europe: A Case Study from Hungary

Abstract

Our study deals with the control of Hungarian state-owned business associations in order to find out whether there is any correlation between corporate sustainability and compliance. According to our hypothesis, the state has a greater responsibility for the sustainable operation of state-owned enterprises—one of the tools of which can be the efficient construction of so-called compliance controls. A state-owned enterprise can be sustained in its operation and function by doing what it has been assigned to it as a task. The sustainable operation can be achieved through the use of circular feedback and continuous control. Corporate sustainability can be influenced by a number of factors that are crucial to the integrity and adequacy of companies. In our study, these are the Initial Hazard Factors (IHFs), Hazardous Increasing Factors (HIFs), and Control Enhancement Factors (CEFs), which were used in indexed form for testing. For the specific analysis, we used the Analytical Hierarchy Process (AHP) method to rank and evaluate risk avoidance options. We analyzed the practice of the State Audit Office of Hungary and its results and found that in the case of state-owned enterprises, the current Hungarian legal system does not contain uniform normative regulations that would regulate the control of conformity in a broader sense. As a result, corporate integrity and corporate compliance are also subject to a fragmented set of rules in different jurisdictions. This has a negative impact on the development of the company’s long-term, sustainable operating principles. Based on our research, a number of factors have been identified (including enterprise size and intensive use of EU funding resources) that may result in a loss of corporate sustainability but can be mitigated or even eliminated by creating an effective internal control environment. Based on literature analysis, most of the Hungarian phenomena are typical of the former socialist countries of Central Europe. The interpretation of sustainability—in transition management countries—for first-generation enterprises which were developed in a socialist market economy is quite different from the most developed countries of the European Union. The main reason for this is that generational rules do not yet exist.

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“…Table 3. Comparative matrix of individual criteria, sub-criteria, and alternatives (Based on Anita Boros and Csaba Fogarassy [70] and author's modification).…”

Analytic Hierarchy Process (AHP)-Based Aggregation Mechanism for Resilience Measurement: NATO Aggregated Resilience Decision Support Model

“…AHP is a multi-criteria decision-making technique using pairwise comparisons made by the judgments of subject matter experts to derive priority scales that measure intangibles in relative terms [ 27 ]. The AHP method helps us to transform complex and unstructured problems hierarchically into a series of pairwise comparisons, aims to quantify the priority of the given set, and synthesizes the final judgment to evaluate which alternative has the highest-ranking [ 13 , 19 ]. AHP offers such advantages as the ability to take the preferences of decision-makers into account, the ability to evaluate qualitative and quantitative variables together, and to possess a flexible structure.…”

“…One example is the AHP-based evaluation system developed to assess habitability performance [ 14 ]. Other examples are the application of AHP for risk and sustainability assessment in power plant maintenance [ 15 ], urban flood management [ 16 , 17 ], rural water supply management [ 18 ], and corporate sustainability [ 19 , 20 ]. Besides the extensive usage of AHP, there are also other discussions about the weaknesses of the methodology.…”

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“…13 in detail in Hegedűs et al (2019).14 The dual structure does not only manifest in the task performance of local government owned companies, but that of state-owned companies, too. For details, see Boros, Fogarassy (2019) and Molnár (2018).…”