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Who Is the Romanian Board Really Working For? Ownership Concentration and the Reality of Related Party Transactions
As Romania navigates the 2026 reporting cycle and moves closer to OECD standards, the debate over board independence often misses the most critical factor: ownership concentration. Whether the State or a founding family, in a market where a single dominant shareholder holds the reins, corporate governance operates under a materially different job description than in Western dispersed-ownership models.
Romania is about to spend 2026 confronting an uncomfortable inventory: more than 1,500 state-owned companies, chronic losses running near 14 billion RON, and one liquidation that has dragged on for nineteen years while the state quietly paid out for pipelines that exist only on paper. The government's response, restructuring rather than rushing to list, with a pilot group of 22 companies already carrying 4.2 billion RON in public debt, is being framed as reform.
It's also a confession. Most of those boards were never built to challenge anyone. They were built to answer to one shareholder.
That's the real governance story in Romania, and it's bigger than independence ratios or compliance codes. It's ownership concentration, and it shapes what a board is for, long before anyone checks a single independence box.
Beyond Independence: Why Ownership Concentration Dictates Boardroom Behaviour
If you sit on a Romanian board, invest in one, or advise a company operating in the region, the independence conversation can be a distraction from the question that determines how the board behaves: who controls it, and how much?
A board can have a majority of independent, non-executive, perfectly credentialed directors and still function, in practice, as an instrument of whoever holds the controlling stake. Ownership structure doesn't just influence boardroom behaviour. In many Romanian companies, it determines it.
The Numbers Behind the Pattern
Romania has one of the more concentrated ownership profiles in Europe. The OECD's most recent governance data shows ownership concentration in Romanian listed companies running well above the levels typical of Western European markets, with roughly a third of listed equity held by foreign investors and a large share of the remainder concentrated in the hands of a single dominant shareholder or a small cluster of them.
The state itself is one of the largest concentrated owners in the country. As of the most recent figures, the state holds stakes in around 860 companies, more than 400 of them majority-owned. Eighteen state-controlled enterprises trade on the Bucharest Stock Exchange, concentrated heavily in energy and utilities, Romgaz, Electrica, the state's residual stake in the OMV Petrom group, alongside private family-controlled groups that dominate large parts of the wider economy.
This is not a footnote to Romanian governance. It is the governance model.
The Disclosure of Related Party Transactions (RPTs): Compliance vs. Strategy
Late Professor Andrew Kakabadse and his team’s research on Romanian listed companies consistently finds that ownership concentration is one of the strongest predictors of how a board actually behaves, stronger, in many cases, than its formal independence profile. When one shareholder holds enough power to appoint the board, remove it, or simply outvote it, the board's practical priorities shift in four predictable directions.
Protecting the dominant shareholder's interests. Boards in concentrated-ownership companies tend to orient strategic decisions around what serves the controlling owner's objectives first, with broader shareholder value treated as a secondary, usually compatible, outcome, until the two diverge.
Monitoring management on the controlling owner's behalf. In a dispersed-ownership company, the board monitors management for shareholders generally. In a concentrated-ownership company, the board often monitors management specifically for the dominant shareholder, which is a narrower and more targeted form of oversight.
Managing related-party transactions. Concentrated ownership multiplies the volume and sensitivity of transactions between the company and entities connected to the controlling shareholder, supply arrangements, financing, asset transfers. Globally, regulators have responded by tightening the rules considerably: the share of jurisdictions requiring board approval for significant related-party transactions rose from 54% in 2014 to 87% in 2024, and almost all now require immediate disclosure of material related-party deals. Romanian boards in concentrated structures sit at the centre of exactly this exposure.
Ensuring regulatory compliance. With the 2026 reporting cycle, fiscal reforms, and new capital and control-transfer rules all landing at once, compliance has become a full-time board occupation, often crowding out the strategic challenge function a board is supposed to provide.
This is a materially different job description from the Western model of a board serving dispersed shareholders with no single controlling voice. A Romanian board in a concentrated-ownership structure isn't failing to do the Western job. It's doing a different job and judging it by the wrong standard misses what's actually happening in the room.
Fiduciary Duty and the Minority Shareholder Gap
The structural risk in this model is what happens to shareholders who aren't the controlling one. Romania has no single, dedicated body of law protecting minority shareholders. Protection is assembled instead from contractual arrangements, scattered statutory rights, and general civil law doctrines that long predate modern investment structures.
Even mechanisms that look protective on paper can be harder to enforce than they appear. A tag-along right, the standard protection letting a minority investor sell alongside the majority on the same terms, has to be fitted into older legal concepts that limit how easily it can be enforced against a third-party buyer. Minority shareholders can negotiate veto rights by agreement, and statutory information and inspection rights exist. But the system rewards minority investors who draft carefully and have the leverage to negotiate hard. It does very little for those who don't.
State Ownership Adds Another Layer
State-owned and state-influenced companies complicate the picture further. Electrica is formally categorised in official filings as a management consultancy business, yet it functions as a key player in electricity distribution, with the state holding just under 49% and no other large block holder, enough, in practice, for the state to control outcomes without a formal majority. Rompetrol presents the inverse case: the state's holding is smaller than that of its Kazakh co-shareholder, illustrating how concentration, not nominal majority ownership, drives control.
For boards in this category, the controlling shareholder isn't pursuing profit alone, it's balancing public policy objectives that can shift with the political cycle. That's a governance variable no independence requirement was designed to manage.
What the Research Shows
The evidence on whether concentration helps or hurts performance is more decisive than the independence debate. Studies across emerging markets, including comparable post-transition economies, find a statistically significant negative relationship between ownership concentration and firm performance once concentration moves beyond a moderate level. The mechanism is straightforward: weaker protection for minority shareholders and a board oriented toward one stakeholder's interests both erode the broader checks that tend to produce better long-run decisions.
Concentration isn't inherently destructive, a committed, long-horizon controlling shareholder can be a stabilising force a dispersed-ownership board never has. The risk is structural, not moral: when one voice can dominate the board, the system's checks weaken regardless of anyone's individual intentions.
Board Evaluation: Measuring What Matters in Concentrated Structures
Assessing a Romanian board on independence ratios alone measures the wrong variable. The more useful questions are: who controls appointments and removals? How are related-party transactions surfaced, scrutinised, and disclosed? Does the audit committee have real teeth, or formal status? And when the controlling shareholder's interest and the minority's interest diverge, is there a mechanism that forces the difference into the open, or does it just quietly resolve itself in the usual direction?
The Takeaway
Romania's governance reform agenda is rightly focused on independence and disclosure. But the deeper determinant of how a board behaves isn't who sits on it, it's who can remove them. Until ownership concentration is treated as a governance variable, rather than background context, boardroom reform will keep measuring the wrong thing.
FAQs
1. What is ownership concentration in corporate governance?
Ownership concentration refers to a structure where one shareholder, or a small group of shareholders, holds enough voting power to influence or control company decisions. In Romania, this often means that boards are not only accountable to shareholders in general, but are shaped by the priorities of a dominant owner, such as the state, a founding family, or a strategic investor.
2. Why does ownership concentration matter for Romanian boards?
Ownership concentration matters because it can determine how a board behaves in practice. Even when a board includes independent directors, the shareholder who controls appointments, removals, and voting outcomes may still influence the board’s agenda. This makes ownership structure a key governance variable, not just background context.
3. How are related party transactions linked to ownership concentration?
Related party transactions become more sensitive in concentrated ownership structures because the controlling shareholder may have business interests connected to the company. These transactions can include asset transfers, financing arrangements, supply contracts, or services involving entities related to the dominant owner. The governance risk increases when such transactions are not properly reviewed, approved, or disclosed.
4. What should boards disclose about related party transactions?
Boards should disclose material related party transactions clearly, including the parties involved, the nature of the relationship, the value of the transaction, and whether the terms are fair to the company and its shareholders. In concentrated ownership environments, disclosure should not be treated as a compliance formality, but as a mechanism for protecting trust, transparency, and minority shareholder interests.
5. How should investors evaluate board effectiveness in Romania?
Investors should look beyond the number of independent directors and assess who actually controls the board. Key questions include who appoints and removes directors, how related party transactions are reviewed, whether the audit committee has real authority, and whether minority shareholders have meaningful protection when their interests diverge from those of the controlling shareholder
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