The necessity of sound corporate governance was conceived in the nineties. Corporate governance principles aim to support the transparency and efficiency of the market and to support the rule of law. In particular, they are concerned with the definition and enforcement of shareholder rights and the role of owners, thus further harmonising the interests of the company with its investors’ and its environment’s. The effective corporate governance promotes the increasing of the company’s value and the effective representation of the shareholders and other stakeholders.

The corporate governance primarily includes:

• careful management of the company (drafting and implementation of strategy);
  

• financial planning and execution of it;
  

• controlling of the company’s internal processes;
  

• issues of business ethics;
  

• transparent operation of the company;
  

• principles and procedures regarding the disclosure and corporate social responsibilites.

In mid-2002, the Budapest Stock Exchange began working out its Corporate Governance Recommendations for companies listed on the stock exchange. When compiling the recommendations, the suggestions were formulated taking account of the most commonly used international principles, of experiences gathered in Hungary, and of the characteristics of the domestic market. In its meeting of December 8, 2003, the Board of Directors of the Budapest Stock Exchange approved BSE’s former Corporate Governance Recommendations, published in February 2004. In October 2004, The Board – in accordance with the practice followed by several countries – set up the Exchange’s Corporate Governance Committee with the aim of controlling the further development of the Recommendations taking into account professional demands, EU provisions of law in preparation and general international tendencies, as well as representing professional viewpoints in the further development of corporate law. Through the work of the Committee, the Exchange wished to ensure that – while preserving the Exchange’s initiative – representatives of the professional public could participate in decision-making regarding the Recommendations in an organised way. Members of the Committee include representatives of Issuers, regulatory authorities, as well as independent market experts and lawyers.

This version of the Corporate Governance Recommendations replaces the Stock Exchange's earlier Corporate Governance Recommendations, published in February 2004. The recommendations were prepared by the Corporate Governance Committee of the Budapest Stock Exchange led by Mr Gábor Gadó.

The Recommendations are considered to be an addition to relevant Hungarian legislation (predominantly Act IV of 2006 on business associations, hereinafter Company Act), primarily for listed, public limited companies registered in Hungary. On no account shall recommendations included in the Recommendations be regarded as recommendations contrary to the provisions of law. The Recommendations contain recommendations, suggestions and related explanations. Those issues regulated by law are not covered by the Recommendations. However, relevant provisions of law must also be considered when evaluating the corporate governance policy of listed companies registered in Hungary. The Recommendations - as expressed by the title - make suggestions relating to recommended, applicable practices. Alignment and compliance with the recommendations are recommended but not mandatory for companies listed on the stock exchange.

One of the innovations of the Company Act is that public limited companies have the opportunity to establish a one-tier (Anglo-Saxon) board structure, where there is no Supervisory Board operating, and the board called the Board of Directors executes the management and monitoring functions at the same time (unitary board structure). Hereinafter, when the Recommendations refer to the “Managing Body” of listed companies they do so meaning the Management Board or Board of Directors, as appropriate, and in those cases where the peculiarities of the law require that a distinction be made between the Management Board and the Board of Directors, one is made. Based on the above, recommendations or suggestions relating to the Supervisory Board are only relevant in the case of the dual board structure.