• The Key Behind Turkey's Corporate Governance Success
  • October 31, 2013
  • Law Firm: HERDEM Attorneys At Law - Istanbul Office
  • Initiatives of the Capital Markets Board

    Turkey already has a strong regulatory framework for corporate governance. The reforms that have been carried out in line with the IMF's recommendations and the establishment of strict auditing and accounting standards by the Capital Markets Board (CMB) are major milestones for better corporate governance in the Turkish companies. CMB's later requirements from the Turkish companies strengthened the oversight functions of the company boards. However, what is crucial for the CMB reforms is that the new rules are, in contra distinction to the previous ones which were non-binding, compulsory and the companies are obliged to comply with them. Especially the compliance report that the companies have to issue with regard to the corporate governance principles is a huge step forward for the Turkish companies towards better corporate governance.

    CMB and Stakeholders

    CMB is also providing the necessary legal framework for the stakeholders to access to an extensive information about the firms. According to the CMB regulation which obliges the companies to issue a compliance report in line with the Corporate Governance Principles that were adopted by this body, the stakeholders have to be informed regarding the company policies and procedures that will affect the protection of the stakeholders' rights and the mechanism that will provide the stakeholders the opportunity to participate in to the company's management shall be developed. The compliance report has also a separate section where it should be stated if a unit managing the relations with the stakeholders is established inside the company or not. If such a unit has already been established, the names and tasks of the staff shall be disclosed as well as the number of explanations that has been given by this unit to the stakeholders. If such a unit has not been established yet, the reasons of such failure shall be stated. The report shall also includes the efforts that have so far been spent for the compliance with the aforementioned corporate governance principles.  If a given firm fails to comply with the corporate governance principles adopted by the CMB, it has to state the reasons behind the non-compliance in the compliance report.

    CBM and Transparency

    CMB's efforts to improve corporate governance standards in Turkey is not only confined to better auditing and accounting standards. It imposes higher transparency standards on companies as well. The body has not only decided to inform the investors about the fiscal status of the companies but also has taken the decision to scrutinize the salaries of the CEO's who are working for the companies enlisted in the Turkish Exchange Market and fine the companies in case they fail to disclose the necessary information to the authorities.

    In line with the CMB regulation the compliance report shall include a section dealing with the conveying of information about the firm to the public. The compliance report obliges the firm to disclose the names and the tasks of the people in charge of such information policy vis-a-vis the public. The report also requires the companies to state if they have their own web sites or not, if not to state the reasons of its non-existence.  The list of the people whose activities might be considered as insider trading shall be disclosed to the public and if the list has already been shared with the public , it also has to be stated in the compliance report as well.  If the list of names has not been disclosed to the public yet, the reasons for this non-compliance with the CMB regulation shall be stated. Finally the compliance report obliges the companies to openly state if the mission objectives and the vision of the company has been disclosed to the public and if the board members agree with such mission objectives and the vision envisaged for the company, if such mission objectives and the vision and the board members outlook vis-a-vis these objectives and vision has not yet been revealed to the public, the reasons for this failure to comply with the CMB compliance report shall be stated.