The Redistribution of Property Rights, Corporate Governance and Company Restructuring after Privatisation"

The project covered the main issues of privatisation, corporate governance and company restructuring after privatisation in Hungary and in the Russian Republic, together with a summary of the broader picture of company-level changes in Central and Eastern Europe, discussing the issues of micro-financial restructuring in the Czech Republic, Hungary, Poland and Slovakia. The two countries selected as the focus of research can be regarded as the two most widely differing cases of the economic transformation in Central and Eastern Europe. Hungary began its transition very early in 1989, while Russia was very late in doing so. Hungary first implemented a series of institutional and systemic reforms before stabilising its public finances, while Russia has struggled with financial stabilisation for years without great success. Company restructuring and the introduction of new forms of governance only began in Russia in the mid-1990s. Hungary opted for "traditional" western methods of privatisation and invited a large amount of foreign direct investment (FDI) while in Russia the bulk of state-owned property was privatised either by free distribution or by a strange blend of ESOP-MBO schemes. FDI in Russia remained modest because of the high risk and uncertainty surrounding economic transactions there. Hungary was a forerunner in privatising public utilities, while Russia has moved cautiously in this area. The group's studies show that the Hungarian economy is now over the "transformation recession" and its economic success is largely due to its successful privatisation and to the dominant participation of foreign investors in company take-overs and in the restructuring process. The study of Russia provides a comprehensive account of the main factors in the so-far modest results in Russian privatisation and economic transformation.

Separation of Ownership from Control and Discretionary Managerial Behaviour in a Transition Economy

This study was the final stage of a four-year study of managerial behaviour and company performance in Bulgaria and examined the influence of changing ownership and control structures of companies on managerial behaviour and initiative. It provides a theoretical summary of the specific types of ownership, control, governance structures and managerial strategies in the Bulgarian transitional economy during 1992-1996. It combines two theoretical approaches, the property-rights approach to show concentrated property-rights structure and private and majority types of control as determinants of efficient enterprise risk bearing and constrained managerial discretion, and the agency theory approach to reveal the efficient role of direct non-market governance mechanisms over managers. Mr. Peev also used empirical information collected from the Central Statistical office in Bulgaria, three different enterprise investigations of corporatised state-owned enterprises between 1992 and 1994, and his own data base of privatised and private de novo industrial companies in 1996-1996. The project gives a detailed description of the main property-rights structures in Bulgaria at the present time and of the various control structures related to these. It found that there is a strong owner type of control in private and privatised firms, although, contrary to expectations, 100% state -owned enterprises tended to be characterised by a separation of ownership from control, leaving scope for managerial discretion. Mr. Peev predicts that after the forthcoming mass privatisation, many companies will acquire a dispersed ownership structure and there will be a greater separation of ownership from control and potential or inefficient managerial behaviour. The next aspect considered in detail was governance structures and the influence of the generally unstable macroeconomic environment in the country during the period in question. In examining managerial strategies, Mr. Peev divided the years since 1990 into 3 periods. Even in the first period (1990-1992) there were some signs of a more efficient role for managers and between 1992 and 1994 the picture of control structures and different managerial behaviour in state-owned companies became more diversified. Managerial strategies identified included managerial initiatives for privatisation, where managers took initiative in resolving problems of property rights and introducing restructuring measures and privatisation proposals, managerial initiatives for restructuring without privatisation, and passive adjustment and passive management, where managers seek outside services for marketing, finance management, etc. in order to adjust to the new environment. During 1995-1996 some similarities and differences between the managerial behaviour of privatised and state-owned firms emerged. Firstly, the former have undergone many changes in investment and technology, while managers of state-owned companies have changed little in this field, indicating that the private property-rights structure is more efficient for the long-term adaptation of enterprises. In the area of strategies relating to product quality, marketing, and pricing policy there was little difference between managers of private, privatised and state-owned firms. The most passive managerial behaviour was found in non-incorporated state-owned firms, although these have only an insignificant stake in the economy.

The Constitutional-Judicial Control of the Legislative and Executive Powers in Central and Eastern European Countries

This project looked at the nature, contents, methods, means and legal and political effects of the influence that constitutional courts exercise upon the legislative and executive powers in the newly established democracies of Central and Eastern Europe. The basic hypothesis was that these courts work to provide a limitation of political power within the framework of the principal constitutional values and that they force the legislature and executive to exercise their powers and duties in strict accordance with the constitution. Following a study of the documentary sources, including primarily the relevant constitutional and statutory provisions and decisions of constitutional courts, Mr. Cvetkovski prepared a questionnaire on various aspects of the topics researched and sent it to the respective constitutional courts. A series of direct interviews with court officials in six of the ten countries then served to clarify a large number of questions relating to differences in procedures etc. that arose from the questionnaires. As a final stage, the findings were compared with those described in recent publications on constitutional control in general and in Central and Eastern Europe in particular. The study began by considering the constitutional and political environment of the constitutional courts' activities in controlling legislative and executive powers, which in all countries studied are based on the principles of the rule of law and the separation of powers. All courts are separate bodies with special status in terms of constitutional law and are independent of other political and judicial institutions. The range of matters within their jurisdiction is set by the constitution of the country in question but in all cases can be exercised only with the framework of procedural rules. This gives considerable significance to the question of who sets these rules and different countries have dealt with it in different ways. In some there is a special constitutional law with the same legal force as the constitution itself (Croatia), the majority of countries allow for regulation by an ordinary law, Macedonia gives the court the autonomy to create and change its own rules of procedure, while in Hungary the parliament fixes the rules on procedure at the suggestion of the constitutional court. The question of the appointment of constitutional judges was also considered and of the mechanisms for ensuring their impartiality and immunity. In the area of the courts' scope for providing normative control, considerable differences were found between the different countries. In some cases the courts' jurisdiction is limited to the normative acts of the respective parliaments, and there is generally no provision for challenging unconstitutional omissions by legislation and the executive. There are, however, some situations in which they may indirectly evaluate the constitutionality of legislative omissions, as when the constitution contains provision for a time limit on enacting legislation, when the parliament has made an omission in drafting a law which violates the constitutional provisions, or when a law grants favours to certain groups while excluding others, thereby violating the equal protection clause of the constitution. The control of constitutionality of normative acts can be either preventive or repressive, depending on whether it is implemented before or after the promulgation of the law or other enactment being challenged. In most countries in the region the constitutional courts provide only repressive control, although in Hungary and Poland the courts are competent to perform both preventive and repressive norm control, while in Romania the court's jurisdiction is limited to preventive norm control. Most countries are wary of vesting constitutional courts with preventive norm control because of the danger of their becoming too involved in the day-to-day political debate, but Mr. Cvetkovski points out certain advantages of such control. If combined with a short time limit it can provide early clarification of a constitutional issue, secondly it avoids the problems arising if a law that has been in force for some years is declared to be unconstitutional, and thirdly it may help preserve the prestige of the legislation. Its disadvantages include the difficulty of ascertaining the actual and potential consequences of a norm without the empirical experience of the administration and enforcement of the law, the desirability of a certain distance from the day-to-day arguments surrounding the political process of legislation, the possible effects of changing social and economic conditions, and the danger of placing obstacles in the way of rapid reactions to acute situations. In the case of repressive norm control, this can be either abstract or concrete. The former is initiated by the supreme state organs in order to protect abstract constitutional order and the latter is initiated by ordinary courts, administrative authorities or by individuals. Constitutional courts cannot directly oblige the legislature and executive to pass a new law and this remains a matter of legislative and executive political responsibility. In the case of Poland, the parliament even has the power to dismiss a constitutional court decision by a special majority of votes, which means that the last word lies with the legislature. As the current constitutions of Central and Eastern European countries are newly adopted and differ significantly from the previous ones, the courts' interpretative functions should ensure a degree of unification in the application of the constitution. Some countries (Bulgaria, Hungary, Poland, Slovakia and Russia) provide for the constitutional courts' decisions to have a binding role on the constitutions. While their decisions inevitably have an influence on the actions of public bodies, they do not set criteria for political behaviour, which depends rather on the overall political culture and traditions of the society. All constitutions except that of Belarus, provide for the courts to have jurisdiction over conflicts arising from the distribution of responsibilities between different organs and levels in the country, as well for impeachment procedures against the head of state, and for determining the constitutionality of political parties (except in Belarus, Hungary, Russia and Slovakia). All the constitutions studied guarantee individual rights and freedoms and most courts have jurisdiction over complaints of violation of these rights by the constitution. All courts also have some jurisdiction over international agreements and treaties, either directly (Belarus, Bulgaria and Hungary) before the treaty is ratified, or indirectly (Croatia, Czech Republic, Macedonia, Romania, Russia and Yugoslavia). In each country the question of who may initiate proceedings of norm control is of central importance and is usually regulated by the constitution itself. There are three main possibilities: statutory organs, normal courts and private individuals and the limitations on each of these is discussed in the report. Most courts are limited in their rights to institute ex officio a full-scale review of a point of law, and such rights as they do have rarely been used. In most countries courts' decisions do not have any binding force but must be approved by parliament or impose on parliament the obligation to bring the relevant law into conformity within a certain period. As a result, the courts' position is generally weaker than in other countries in Europe, with parliament remaining the supreme body. In the case of preventive norm control a finding of unconstitutionality may act to suspend the law and or to refer it back to the legislature, where in countries such as Romania it may even be overturned by a two-thirds majority. In repressive norm control a finding of unconstitutionality generally serves to take the relevant law out of legal force from the day of publication of the decision or from another date fixed by the court. If the law is annulled retrospectively this may or may not bring decisions of criminal courts under review, depending on the provisions laid down in the relevant constitution. In cases relating to conflicts of competencies the courts' decisions tend to be declaratory and so have a binding effect inter partes. In the case of a review of an individual act, decisions generally become effective primarily inter partes but is the individual act has been based on an unconstitutional generally binding normative act of the legislature or executive, the findings has quasi-legal effect as it automatically initiates special proceedings in which the law or other regulation is to be annulled or abrogated with effect erga omnes. This wards off further application of the law and thus further violations of individual constitutional rights, but also discourages further constitutional complaints against the same law. Thus the success of one individual's complaint extends to everyone else whose rights have equally been or might have been violated by the respective law. As the body whose act is repealed is obliged to adopt another act and in doing so is bound by the legal position of the constitutional court on the violation of constitutionally guaranteed freedoms and rights of the complainant, in this situation the decision of the constitutional court has the force of a precedent.

A Sociological Study of the Political Subsystem in Yugoslavia

In this critical analysis of sociological studies of the political subsystem in Yugoslavia since the fall of communism Mr. Ilic examined the work of the majority of leading researchers of politics in the country between 1990 and 1996. Where the question of continuity was important, he also looked at previous research by the writers in question. His aim was to demonstrate the overall extent of existing research and at the same time to identify its limits and the social conditions which defined it. Particular areas examined included the problems of defining basic concepts and selecting the theoretically most relevant indicators; the sources of data including the types of authentic materials exploited; problems of research work (contacts, field control, etc.); problems of analysisl and finally the problems arising from different relations with the people who commission the research. In the first stage of the research, looking at methods of defining key terms, special attention was paid to the analysis of the most frequently used terms such as democracy, totalitarianism, the political left and right, and populism. Numerous weaknesses were noted in the analytic application of these terms. In studies of the possibilities of creating a democratic political system in Serbia and its possible forms (democracy of the majority or consensual democracy), the profound social division of Serbian society was neglected. The left-right distinction tends to be identified with the government-opposition relation, in the way of practical politics. The idea of populism was used to pass responsibility for the policy of war from the manipulator to the manipulated, while the concept of totalitarianism is used in a rather old-fashioned way, with echoes of the cold war. In general, the terminology used in the majority of recent research on the political subsystem in Yugoslavia is characterised by a special ideological style and by practical political material, rather than by developed theoretical effort. The second section of analysis considered the wider theoretical background of the research and focused on studies of the processes of transformation and transition in Yugoslav society, particularly the work of Mladen Lazic and Silvano Bolcic, who he sees as representing the most important and influential contemporary Yugoslav sociologists. Here Mr. Ilic showed that the meaning of empirical data is closely connected with the stratification schemes towards which they are oriented, so that the same data can have different meanings in shown through different schemes. He went on to show the observed theoretical frames in the context of wider ideological understanding of the authors' ideas and research. Here the emphasis was on the formalistic character of such notions as command economy and command work which were used in analysing the functioning and the collapse of communist society, although Mr. Ilic passed favourable judgement on the Lazic's critique of political over-determination in its various attempts to explain the disintegration of the communist political (sub)system. The next stage of the analysis was devoted to the problem of empirical identification of the observed phenomena. Here again the notions of the political left and right were of key importance. He sees two specific problems in using these notion in talking about Yugoslavia, the first being that the process of transition in the FR Yugoslavia has hardly begun. The communist government has in effect remained in power continuously since 1945, despite the introduction of a multi-party system in 1990. The process of privatisation of public property was interrupted at a very early stage and the results of this are evident on the structural level in the continuous weakening of the social status of the middle class and on the political level because the social structure and dominant form of property direct the majority of votes towards to communists in power. This has been combined with strong chauvinist confusion associated with the wars in Croatia and Bosnia, and these ideas were incorporated by all the relevant Yugoslav political parties, making it more difficult to differentiate between them empirically. In this context he quotes the situation of the stream of political scientists who emerged in the Faculty of Political Science in Belgrade. During the time of the one-party regime, this faculty functioned as ideological support for official communist policy and its teachers were unable to develop views which differed from the official line, but rather treated all contrasting ideas in the same way, neglecting their differences. Following the introduction of a multi-party system, these authors changed their idea of a public enemy, but still retained an undifferentiated and theoretically undeveloped approach to the issue of the identification of political ideas. The fourth section of the work looked at problems of explanation in studying the political subsystem and the attempts at an adequate causal explanation of the triumph of Slobodan Milosevic's communists at four subsequent elections was identified as the key methodological problem. The main problem Mr. Ilic isolated here was the neglect of structural factors in explaining the voters' choice. He then went on to look at the way empirical evidence is collected and studied, pointing out many mistakes in planning and determining the samples used in surveys as well as in the scientifically incorrect use of results. He found these weaknesses particularly noticeable in the works of representatives of the so-called nationalistic orientation in Yugoslav sociology of politics, and he pointed out the practical political abuses which these methodological weaknesses made possible. He also identified similar types of mistakes in research by Serbian political parties made on the basis of party documentation and using methods of content analysis. He found various none-sided applications of survey data and looked at attempts to apply other sources of data (statistics, official party documents, various research results). Mr. Ilic concluded that there are two main sets of characteristics in modern Yugoslav sociological studies of political subsystems. There are a considerable number of surveys with ambitious aspirations to explain political phenomena, but at the same time there is a clear lack of a developed sociological theory of political (sub)systems. He feels that, in the absence of such theory, most researcher are over-ready to accept the theoretical solutions found for interpretation of political phenomena in other countries. He sees a need for a stronger methodological bases for future research, either 1) in complementary usage of different sources and ways of collecting data, or 2) in including more of a historical dimension in different attempts to explain the political subsystem in Yugoslavia.

Liberal Nationalism: A Historical and Critical Analysis of Conceptions

At the end of the 20th century we live in a pluralist world in which national and ethnic identities play an appreciable role, sometimes provoking serious conflicts. Nationalist values seem to pose a serious challenge to liberal ones, particularly in the post-communist countries. Malinova asked whether liberalism must necessarily be contrasted with nationalism. Although nationalist issues has never been a major concern for liberal thinkers, in many countries they have had to take such issues into consideration and a form of 'liberalism nationalism' has its place in the history of political ideas. Some of the thinkers who tried to develop such an idea were liberals in the strict sense of the word and others were not, but all of them tried to elaborate a concept of nationalism that respected the rights of individuals and precluded discrimination on ethnic grounds. Malinova studied the history of the conceptualisation of nations and nationalism in the writings, of J.S. Mill, J.E.E. Acton, G. Mazzini, V. Soloviev, B. Chicherin, P. Struve, P. Miljoukov and T.G. Masaryk. Although it cannot be said that these theories form a coherent tradition, certain common elements of the different approaches can be identified. Malinova analysed the way that liberal nationalists interpreted the phenomenon of the nation and its rights in different historical contexts, reviewed the structure of their arguments and tried to evaluate this theoretical experience from the perspective of the contemporary debate on the problems of liberal nationalism and multiculturalism and recent debates on 'the national idea' in Russia.

Legality and Human Rights: Administrative Justice in Russia 1862-1917

The question of how far pre-revolutionary Russia was from the ideal of a lawful state has received little academic attention, particularly as relates to the legal regulation of relations between person, society and state within the state administration. Pravilova explored the methods of settling disputes between individuals and the administration, and the emergence of legal controls of the administration, analysed projects for the organisation of administrative justice and studied the particular nature of concepts from Russian administrative justice. The idea of an organisation of special bodies examining complaints by private persons against the actions of officials and state bureaucratic organs first appeared in the early 1860s. In the 1870s-1890s various projects for the reform of administrative justice (reorganisation of the Senate and local administrative institutions) were proposed by the Ministries of Justice and Finance, but none of these was put into practice, largely due to resistance from the bureaucracy. At the same time, however, the rapid development of private enterprise, the activities of the zemstvo and self-government produced new norms and mechanisms for the regulation of authorities and social relations. Despite the lack of institutional conditions, the Senate did consider complaints from private persons against illegal actions by administrative officials, playing a role similar to that of the supreme administrative courts in France and Germany. The spread of concepts of a 'lawful state' aroused support for a system of administrative justice and the establishment of administrative tribunals was seen as a condition of legality and a guarantee of human rights. The government was forced to understand that measures to maintain legality were vital to preserve the stability of the system of state power, but plans for liberal reforms were pushed into the background by constitutional reforms. The idea of guarantees of human rights in relations with the authorities was in contradiction with the idea of the monarchy and it was only when the Provisional Government took power in 1917 that the liberal programme of legal reforms had any chance of being put into practice. A law passed in June 1917 ordained the organisation of local administrative justice bodies, but its implementation was hampered by the war, the shortage of qualified judges and the existing absolute legal illiteracy, and the few administrative courts that were set up were soon abolished by the new Soviet authorities. Pravilova concluded that the establishment of a lawful state in pre-revolutionary Russia was prevented by a number of factors, particularly the autocratic nature of the supreme authority, which was incompatible with the idea of administrative justice as a guarantee of the rights of citizens in their relations with the state.