Corporate governance represents a set of rules, principles, and relationships that regulate the way companies are managed and how their operations are controlled. Its essence lies in balancing the interests of various stakeholders – owners, management, employees, creditors, and the state. In modern economies, it plays a key role in strengthening investor confidence, increasing business transparency, and improving the efficiency of capital markets.
In Serbia, the concept of corporate governance has undergone significant evolution over the past two decades, shifting from a formal legal obligation to a system of values and practices that contribute to the long-term sustainability and competitiveness of companies.
Legal Framework of Corporate Governance in Serbia
The legal system of the Republic of Serbia provides a set of regulations that together form the foundation of corporate governance. At the core lies the Law on Companies, which defines corporate governing bodies, the rights and obligations of company members, decision-making procedures, and the protection of minority shareholders. In addition, the Law on the Capital Market, the Law on Accounting, and the Law on Auditing play key roles, as they regulate transparency, reporting, and oversight of corporate operations. For this reason, corporate law attorneys are an indispensable part of all complex business processes.
Serbia has largely harmonized its framework with international standards, particularly with the OECD Principles of Corporate Governance and the European Union’s recommendations. Furthermore, the Corporate Governance Code of the Serbian Chamber of Commerce provides guidance on best practices based on the “comply or explain” principle, meaning that companies should implement recommended standards or publicly explain deviations.
This approach enables flexibility while encouraging accountability, as the public and investors are able to assess the quality of governance in each individual company.
Since 2023, a significant step forward has been the adoption of the Law on Management of Companies of State Ownership, aimed at aligning state-owned enterprises with corporate principles applied in the private sector — through the professionalization of management bodies, clearly defined responsibilities, and stricter oversight mechanisms. This creates a framework in which transparency, cost control, and management accountability become obligations rather than recommendations.
Institutional and Regulatory Mechanisms
Within Serbia’s corporate governance system, important roles are played by the Securities Commission, the National Bank of Serbia (particularly in the banking sector), as well as independent auditors and internal audit committees.
The banking sector stands out for its high level of regulation — the National Bank of Serbia has prescribed strict standards regarding board composition, risk management, and conflict-of-interest prevention. This practice may serve as a model for other sectors of the economy.
Beyond formal regulation, effective corporate governance also relies on internal control mechanisms: supervisory boards, internal audit systems, codes of ethics, and anti-abuse policies. For publicly listed companies, mandatory disclosure of financial and non-financial reports further enhances transparency and accountability to the public.
Best Practices and Implementation Challenges
Over the past decade, a noticeable shift has occurred in understanding the importance of sound corporate governance. Many companies — particularly those with foreign ownership or stock-exchange presence — apply international governance standards and develop policies on ethics, transparency, and social responsibility.
Positive examples include regular sustainability reporting, independent board members, and active shareholder participation in decision-making.
However, challenges remain. Practice shows a gap between formal compliance and real-world implementation. Some governing bodies function more as formalities than as active drivers of oversight and strategy. In privately held companies with concentrated ownership, decision-making is often centralized in one person, reducing the effectiveness of control mechanisms.
Likewise, minority shareholder protection, conflict-of-interest prevention, and management accountability remain areas requiring improvement — particularly through strengthening supervisory bodies and enhancing judicial efficiency.
Specifics of State-Owned and Public Enterprises
State-owned and public enterprises represent a unique challenge as they combine economic and social goals. The new legal framework introduces the professionalization of corporate governance and reporting obligations aligned with OECD standards.
In practice, this means more transparent selection of board members, clearly defined performance criteria, and greater oversight of public spending.
Although reforms are being implemented gradually, improvements are already visible, including greater accountability and reduced political influence in certain areas.
Role of the Capital Market and Investors
The development of the capital market directly influences the quality of corporate governance. According to research by the EBRD and local experts, companies that rely on capital-market financing exhibit higher transparency and better alignment with international standards.
The role of institutional investors, such as pension funds and investment companies, is becoming increasingly important, as they demand detailed information, responsible management, and professionally structured boards.
Conclusion
Corporate governance in Serbia today stands at the crossroads between normative regulation and full practical maturity. All key elements of a modern system are in place — legislative framework, best-practice codes, and institutions supervising implementation. Yet, the main challenge remains the consistent application of these principles in daily business operations, especially within small and medium-sized enterprises and the public sector.
Further progress depends on a combination of regulatory measures and a cultural shift — growing awareness that good governance is not merely a legal requirement, but an investment in long-term stability, trust, and sustainable economic growth in Serbia.