CORPORATE GOVERNANCE PRINCIPLES & BEST PRACTICES Dr. Andreas G. - - PowerPoint PPT Presentation
CORPORATE GOVERNANCE PRINCIPLES & BEST PRACTICES Dr. Andreas G. Koutoupis CMIIA, CIA, CICA, CCSA, Associate Professor of Financial Accounting & Auditing University of Thessaly 1 Con onten tents ts A.1 Corporate governance
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➢ The Shleifer and Vishny (1997) report on their research that a very important
part addressed by the CG is how the various business sponsors will ensure that they will get the return for the investments they have made.
➢ The La Porta (2000) argues that CG has to do with the mechanisms that are
responsible for the protection of outside investors (creditors and shareholders) against any irregularities of the Interior, which is the Management and managers.
➢ According to the Greek relevant Laws and Regulations, Corporate Governance
is defined as all practices applied by an undertaking to ensure the protection of its shareholders and of all those who have legitimate interests in the company and ensure the operation and business performance to a satisfactory level.
➢ The OECD (1999) and the Cadbury Committee define the concept of Corporate
Governance as a system that enables companies to be controlled and monitored.
➢ A commonly accepted definition has as follows: The term Corporate Governance
is a comprehensive system of rights, procedures and controls, established internally and externally to the company's management, in order to protect the interests of the stakeholders.
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❖ Τhe Anglo-Saxon or external (shareholder-based system).
Its basic characteristics are the existence of large and highly liquid capital markets, short-term investment horizon and large dispersion in the equity of companies and an active market in corporate control (hostile takeovers).
❖ Τhe European or domestic (stakeholder-based system).
Its basic characteristics are existence of small and illiquid capital markets, capital markets with long-term investment horizon, a high concentration of share ownershipor voting rights, aggressive acquisitions are limited and long- term relationships between partners and Administration are usual.
➢ The global wave of privatization ➢ Pension funds and active investors ➢ Mergers and Acquisitions ➢ Deregulation and integration of primary market ➢ The Need of Institutional Investors ➢ Conflicts of Interest
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Criteria for strong Corporate Governance:
➢ Application procedures for assessing the
board and its members
➢ Participation of non-executive and
independent members to the Board
➢ The remuneration of non-executive and
independent members of the Board
➢ Functioning and Independence of Board
Committees
➢ Size of Group Executives ➢ Separation of roles of Chairman / Chief
Executive Officer (CEO)
➢ Frequency of board meetings ➢ Adequacy of the audit committee members ➢ Reputation of the external auditors ➢ Separate meetings of non-executive and
independent board members
➢ Social Corporate Responsibility
Generally, the commonly accepted principles of corporate governance include:
➢ Rights and equitable treatment of
shareholders.
➢ Interests of other participants -
stakeholders - associated (stakeholders) with the company (suppliers, lenders, regulators, customers, etc.).
➢ Role and Responsibility of the
Board.
➢ Integrity and ethical behavior. ➢ Disclosure and transparency.
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In April 1999, the OECD published its Principles of CG.The Securities and Exchange Commission recommended the Committee on CG in Greece, which adopted in 1999 a text entitled “Principles of CG in Greece: Recommendations for strengthening the effectiveness and Competitive Transformation”. In 2000, the Securities and Exchange Commission, with the Decision 5/204/2000
determines that every company must have a Service of Shareholders. In 2001, the Athens Stock Exchange (ASE) and the Federation of Greek Industries proceeded to the issue of a Code of Principles of CG. In August 2001, the ASE predetermined quality criteria for Publicly traded companies, which were based on the principles of CG. In 2002 passed the Law 3016/17.5.02 entitled ‘CG Issues of Payroll & other devices’.
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❖ Law 2190/1920, which is amended by several provisions of the above EU-
inspired laws) contains the basic rules of governance.
❖ Law 2533/1985 (regarding the transparency of company operations), requires
all Listed Companies to publish half-yearly and quarterly financial statements.
❖ Law 3016/2002 “Corporate Governance, payroll issues and other provisions”
(Government Gazette 110/17.05.2002), as amended by Article 26 of Law 3091/2002 (Official Gazette, 330/24.12.2002).
❖ Law 3693/2008 requires the establishment of audit committees, as well as
important disclosure requirements with regard to ownership and governance of a company.
❖ Law 3873/2010, serves as a reminder of the need for the CG Code of Best
Practice.
❖ Law 3884/2010 is relating to rights of shareholders and additional corporate
disclosure obligations to shareholders in preparation of the General Assembly.
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In January 2011, “the Code“ was completed and published by the Hellenic Federation of Greek Enterprises. Its main objective is the training and guidance of the Board members of Greek companies in matters of good governance practices, as well as the creation of an accessible and understandable reporting system for listed companies. The Code is addressed to the Greek public limited companies based in Greece, but can be useful tool in unlisted companies as well. It contains 2 types of provisions: "general principles", addressed to all companies, listed or not, and “specific practices”, which involve only in listed companies. The Code follows the approach of compliance or explain approach. The Code will be regularly reviewed and updated to reflect developments in both the best practices and the regulatory framework and in line with the needs of the Greek business world. The first review of implementation of the Code is expected to be in 2012.
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Based on the above mentioned regulations and Best Practices and after a pilot survey we applied to 3 Greek listed manufacturing companies (Petros Petropoulos S.A., Mytilineos S.A. & YALCO S.A. – S.D. Konstantinou and Son S.A.). , during which we interviewed with their internal auditors, as well as with 3 potential investors interested in their stocks, mainly friends of mine, we have reached to the following important criteria for the assessment of CG quality within any enterprise:
the Board of Directors – Remuneration Committee
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FULFILMENT (1) PROPOSE D WEIGHTI NG (2) PERSON AL WEIGHT ING (3) PROPOSE D RATING
(4)=(1)*(2)
PERSON AL RATING
(5)=(1)*(3
INFOR MATI ON
CRITERIA
NO
PARTLY
0,5 YES 1
P I
10% Shareholders -Investor Relations Existence and promotion of a continuous and satisfactory communication with shareholders
Χ
10% 10% The Board of Directors ensures the proper conduct and use of GA of shareholders in order to safeguard the rights of shareholders
Χ
20% 20% Equal treatment of shareholders is ensured by the Management
Χ
10% 5% Existence of effective Shareholder Service, which is responsible for direct and equal information of shareholders and their service on the exercise of their rights
Χ
20% 20% Existence of effective Corporate Communications Office
Χ
20% 20% Ensure Transparency and Disclosure
Χ
1O% 5% Effective communication with investors
X
10% 10% 100% 100% 90% 0% 10
Based on investigations that have been carried out so far, it is
The possibility of comparative and longitudinal assessments of
The assessment of corporate governance can only be one more
Corporate Governance is an investment and a development tool as
It is concluded that Greek CG regulations and best practices seem to
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For the proper implementation of Corporate Governance in an
Regarding the Greek reality, corporate governance is still in its
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