Corporate governance

Corporate governance is a system of public relations regarding the management of a joint-stock company and the norms that govern these relations between the shareholders, Supervisory Board (Board of Directors), the executive body, structural units and other stakeholders.

Significance of Corporate Governance:
  • Protection of the rights of entrepreneurs (shareholders, participants)
  • More investments
  • Effective risk management
  • Reliable reporting system
Models of Corporate Governance:
  • European Model
  • Anglo-American model
  • Japanese model

In the modern world economy the two of the most widely used models of corporate governance are:
  • Anglo-American
  • European models
In the Anglo-American model, the activities of the company are based on the principles of unanimity. The main distinguishing feature of this principle is that a single body - the Board of Directors, perform the functional management, command and control functions in the companies.

The model has two-stage control functions:

a) General Meeting, b) Board of Directors. Board of Directors itself consists of two bodies. The organizational-commanding function is performed by the executive body (executive directors), and the control function is performed by independent directors.

As to the European model, it is based on the principle of duality. It means that organizational-commanding and control functions are performed by separate bodies. The model itself has two versions: German version and French version.

The French version consists of two types: 1) Classical type of governance. This type has two-stage governance in place: a) General Meeting and b) Administrative Council. The Administrative Council consists of a President who performs the organizational-commanding function and an independent director who performs the control function.

The German version has three-stage governance in place: a) General Meeting; b) Supervisory Board - performs the control function; c) Executive body – performs the organizational-commanding function. Based on the legislation of the Republic of Azerbaijan, the German version of the European Model of the corporate governance is applied in the companies in Azerbaijan.

Corporate governance mechanism of Qala Insurance OJSC is based on the Civil Code of the Republic of Azerbaijan, the Law of the Republic of Azerbaijan “On Insurance Activity” and international practice on corporate governance:

  • General Stakeholders’ Meeting, which is the supreme governing body
  • Board of Directors, which exercises general management and control over the activities of the insurer
  • Management Board, which is an executive body
  • Inspection Committee, which oversees the financial and economic activities of the insurer
  • Quality Assurance Group
  • Commissions and committees, established per the procedural regulations of the company