Croatia's corporate governancesystem is framed by civil law with regulation for tradedcompanies in part based on London securities rules andinternational standards for accounting and auditing. Thereare two public exchanges, which both have three tiers. Themajority of companies are listed on the third tier, whichhas the lowest level of disclosure and listing requirements.The small number of companies on the first tiers has beenreduced recently through the successful takeover ofcompanies by strategic investors. The corporate governancestructure in Croatia reflects several important aspects ofthe recent history of Croatian enterprise, including: ahistory of social ownership; the transition to capitalism;the on-going legacy of privatization; recent economicdistress; and, regional conflict. Interest in corporategovernance is rising with the potential for growth in thecorporate sector being driven by privatization. Improvementin corporate governance is seen to have the potential forimproving access to capital, and promoting efficientdevelopment of the new private sector. This Report on theObservance of Standards and Codes benchmarks the Croatiancorporate governance system against the OECD Principles ofCorporate Governance, recognized as one of the corestandards underpinning international financial architecture.This ROSC highlights a number of areas where Croatia'scorporate governance system can be strengthened: These canbe grouped initially under four headings: disclosure ofownership and control; the role and effectiveness ofshareholders meetings; the business practices of supervisoryboards; and the audit practices of external auditors. Therecommendations for reform are set out briefly in Section 4and at greater length in the Annex.
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