The Role of the EU in the (Trans)formation of Corporate Governance Regulation in Central Eastern Europe — The Case of the Czech Republic

Abstract

The European Union (EU) has a crucial influence on the institutional development of corporate governance structures in Central Eastern Europe (CEE). As most political forces in the region favoured quick entry to the EU, one outcome has been an asymmetrical power balance between European regulators and national socio-economic configurations. We identify the EU's objectives and strategy with regard to the restructuring of corporate governance as crucial to understanding the role the EU is playing within the transformation of governance structures in CEE. Using the case of the banking and financial sector in the Czech Republic we analyse the changing regulatory framework of corporate governance. Central to our analysis is the role of the European Commission, which as a transnational actor, has played a major role in promoting and advocating regulatory policies conducive to further embedding socio-economic structures in CEE into the transnational political economy of neoliberal capitalist restructuring.

Regulating Corporate Governance in the EU

“…These 'growing pains' of the regulatory transformation have been most prominently manifested in the rise of economic nationalism in several Member States. 13 At the same time, the enlargement of the European Union has seen the accession of new Member States with an increasingly neoliberal regulatory framework, partly through the conditionality of European Union (see Vliegenthart and Horn 2007). It remains to be seen how the marketization of corporate control is proceeding within the context of the enlarged market.…”

“…The 2004 enlargement, as well as the prospect of further widening of the Single Market, poses important empirical questions about the regulation of corporate governance regulation in Central Eastern Europe, also warranting further investigation of the dynamics between the regulatory system emerging in the post-socialist countries and the 'old' Member States (cf. Vliegenthart and Horn 2007;Vliegenthart and Overbeek 2008). At the same time, moving beyond a focus centred on the EU or OECD area is crucial to understand the rise of multinational corporations from the Global South, in particular India, China and Brazil.…”

European Union financial integration, a geography perspective

“…Large universal banks used the reinvigorated capital markets for takeovers, preparing to come out on top in what consultants called “the global end game in banking” (Van Meeteren & Bassens, ), resulting in Europeanization through consolidation (Mulder & Westerhuis, ). Many West‐European banks, particularly those with saturated home markets, started expanding in the “emerging markets” of post‐socialist Europe (Smith, ), especially where eventual EU membership was anticipated (Jöns, ; Karreman, ; Lindstrom & Piroska, ; Vliegenthart & Horn, ). Resultantly, East‐European banking sectors became predominantly foreign owned (Epstein, ).…”

“…Nevertheless, difference in Europe persisted. The new member states had not participated in the policy process (Quaglia, ; Vliegenthart & Horn, ) and their financial sectors had fallen prey to majorities of foreign owners. Geographies of banking practices (Hardie & Howarth, ) and mortgages (Aalbers, ) remained differentiated across the continent.…”

The Transnationalization of Economies, States, and Civil Societies

“…But what is more, the reshaping of postsocialist institutions as part of the enlargement process also gently pushes the postsocialist states into a more marketized socioeconomic order in which the rights of transnational capital are widened, whereas at the same time the region is subordinated to the discipline of the market (Vliegenthart and Horn 2007). In this respect it fits into the transnationalization tendencies discussed in Section 3.2, where I have pointed out that transnational influence has been aimed at safeguarding the rights of transnational capitals, whereas it simultaneously seeks to strengthen the regulatory framework under which transnational capital can operate.…”