Nov. 2014—Many Serbian companies suffer from weak corporate governance, where the owner, who is also often the company’s CEO, relies primarily on intuition to run the business. As a result, a large number of Serbian “early stage” companies are not able to succeed in the critical first years of doing business.

Even companies that manage to operate for many years eventually fail because of poor management. As part of its efforts to improve business conditions in Serbia, USAID recently led efforts to develop guidelines for running Serbian companies.

USAID, along with the Serbian Chamber of Commerce and Industry, pooled together a number of experts, business entities, associations and other relevant stakeholders to draft and promote the new guidelines, or Codex on Corporate Governance. USAID provided financial and technical support, and the codex was published in October 2012.

The new codex is a “soft” regulation, meaning the principles are not binding, but are recommendations only. It integrates best international and local practices in corporate governance and company law to help Serbian companies improve governance standards, including membership rights, responsibilities of directors, disclosure and transparency, risk management, corporate social responsibility and fair business partnership. It provides advice for small and medium-sized enterprises and family companies, which are the predominant forms of business entities in Serbia, and addresses the needs of the larger and state-owned companies as well.

Serbian companies are already reaping the benefits offered by the new codex. So far, 32 companies have notified the Chamber of Commerce that they are applying the codex and seven companies have enacted their own codices of corporate governance.

One example is Naftna industrija Srbije (NIS). Presenting at a conference held by the Chamber of Commerce and Industry in Serbia, Mirjana Stanojević, head of corporate affairs at NIS, said, "Corporate governance is more than just compliance—it defines corporate culture." She added that transparency was a major concern for NIS, and that sound corporate governance was a priority.

By following the new Codex on Corporate Governance, Serbia’s ranking in the World Economic Forum’s Global Competitiveness Index is expected to improve in the areas of ethical behavior of firms, efficiency of corporate boards, protection of interests of minority shareholders, and reliability of professional management. In the World Bank’s Doing Business Report, the codex is expected to improve scores for protecting investors and enforcing contracts.

As Serbia improves its world rankings, it can expect to see more investments, improved access to finance, additional employment opportunities and greater business success. Creation of the codex was part of the USAID Business Enabling Project, a five-year initiative to improve Serbia’s economy that began in 2011.

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