Corporate Governance Take-Home Exam
Compare Turkish Corporate Governance system with the systems in USA, Japan and EU. 1. Who is in charge?
2. Board structure, independence of members of the board, board committees 3. Board and executive remunerations
4. Shareholders rights and ownership rights
5. Related party transactions
6. Ownership structures
The OECD sets general principles about corporate governance; nevertheless, in different companies corporate governance is not handled in the precisely same. Mainly, there are two dominant approaches among advanced industrial countries which are Anglo-American Approach and Stakeholder Approach.
Anglo-American type of corporate governance, which is also called “shareholder system”, is primarily used in the United States and, with modifications, in the United Kingdom and Ireland. In this approach maximizing shareholder value and look after and shareholder interests, seeking profitability and efficiency is the most important issues. The other is the stakeholder system which also has been called as the “communitarian” governance system. This mode mainly prevails in Germany, France and most emerging economies. This approach is more interested in looking after all stakeholder and public interests. They are less concerned than Anglo-American Approach about short term profit; they look for long term growth and stability. One of our main issues is where Turkey stands between them. Presence of the single tier-board structure or two-tier board structure is one of the main differences between two approaches. In single-tier board system which belongs to the Anglo-American approach, executive and nonexecutive directors sit together. In the US corporate governance system, executives report to the non-executives regarding the day to day business of the company. Chairman works closely with CEO and there are board committees for audit, remuneration and nomination. In addition, there is not a size requirement for the number of board of directors and also the members of the board are elected by the general assembly of the shareholders for a period of three years. On the other hand, in the two-tier board system, which is common in especially Germany, supervisory board consists of non-executives and a lower level management board consists of full-time managing directors. When we look at the Turkish board structure; although German legislation is more influential on Turkish Law in general view, Swiss effect is observed on the structure according to the experts. So in Turkey, there is one-tier board structure; the board of directors of Turkish companies is mainly composed of the major shareholders. Additionaly, the members of the board are elected for three years at the most like the US system. The total number of the board members is between 5 and 14. One-tier board structure is more common in majority of countries. However Japan has a different approach, their structure is called hybrid multiple option. They have two different models such as “Company with Statutory Auditors” model and “Company with Committees” model. In “Company with Statutory Auditors” model, there must be at least one executive director and may be non-executive directors as well. Where this model is adopted, there is a separate organ of the company called the “statutory auditors” (Kansayaku), which has the function of auditing the execution of duties by the directors. In “Company with Committees” model, the company must establish three committees (nomination, audit and remuneration committees), with each committee composed of three or more directors, and a majority must be outside directors according to the Corporate Governance Factbook 2014.
As the Corporate Governance Factbook 2014 says, board independence usually requires that a sufficient number of board members need to be independent. Almost in all countries, a requirement or recommendation has introduced with a...
References: Lecture Notes & Slides
In the Corporate Governance Factbook, February 2014
Corporate Governance In Turkey In The Light Of The Major Systems, Ali Köşklü
Corporate Governance Principles (Capital Markets Board Of Turkey / CMB), June 2003
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