Romania, along with other members of the transition economies of Central and Eastern Europe (CEE), has adopted a so-called ‘hybrid corporate governance model’, which draws inspiration from both the insider-oriented system as exemplified in Germany, and the outsider-oriented system as exemplified in the UK. The paper aims to assess the corporate governance framework in Romania through national level comparison with the German corporate governance framework. At the same time, the research approach relies on cross-case analysis, drawing data primarily from the annual reports of two companies from the pharmaceutical industry from Germany and Romania. The study focuses on particular corporate governance issues like corporate compliance, corporate transparency, role and duties of Board of Directors, and compensation. The findings of the research allow us to conclude that companies from transition economies of CEE, like Romania, require the practice of sound corporate governance to ensure more efficient disclosure practices.

The process of joining the European Union (EU) came along with tough macroeconomic conditions for the Central and East European (CEE) countries. The adherence to the EU did not replace these burdens from CEE economies; moreover, they continued to struggle with issues concerning high rates of unemployment, great budget deficits, high external rates, narrow-based economic structure, large informal economic sectors, poor corporate efficiencies and productivities and lack of appropriate legal and financial infrastructures (Yeoh, 2007).

After some resounding bad strategic decisions, it seems that the foreign investors have learned their lesson and think twice before they decide a large merger or spectacular acquisition in CEE. They do this by assessing the structure and pattern of corporate governance frameworks of emerging economies like those of the CEE countries. In such a case, it would be not only advisable, but also necessary for CEE to keep up with the best practices in corporate governance if they want to benefit from the foreign investments.

The ability to attract foreign investments is not the single reason for which countries that are facing ‘transition’ have to comply with corporate governance frameworks. Privatization of firms, which were earlier in the hands of state, has raised corporate governance. Further, the allocation of capital has also become a much more complex process due to liberalization, technological progress and opening of the financial markets (Bobirca and Miclaus, 2007). All these have made corporate governance more important and more difficult to achieve.

These past developments created an acute need for corporate governance rules in CEE, which led, in the end, to the adoption of corporate governance codes within all the CEE countries. These set of rules and regulations look alike for a majority of the CEE, as they describe comprehensive standards of good governance, like, for example, the protection of minority shareholders; issues of disclosure and transparency; constitution of boards, compensation issues, etc. (Puffer and McCarthy, 2003). Yet, the corporate governance practices tend to be very different from one country to another, especially among the developed and transition economies in Europe, with some specific features for CEE economies.

Corporate Governance Journal, Corporate Governance Reforms, Financial Disclosures, Indian Companies, Financial Sector Reforms, Globalization, Information Asymmetries, Indian Corporate Morality, Market Mechanism, International Financial Reporting Standards, IFRS, Indian Accounting Standards, Economic Development, Financial Accounting Systems, Corporate Control Mechanisms.