Corporate Governance and Compliance in Turkey
The Turkish Commercial Code (TCC), which came into effect in July 2012, sets new standards for the establishment and governance of commercial companies, as well as principles that comply with international corporate governance and auditing standards. In addition to the TCC, other laws, communiqués, and principles governing corporate rules and practice include:
- Law No. 6335, amending the TCC
- The Capital Markets Law
- The Corporate Governance Communique
These regulations provide a framework for companies in Turkey to operate within, ensuring transparency, accountability, and good governance practices.
Board of Directors
The Board of Directors is responsible for overseeing the company’s operations and making strategic decisions. Members of the Board are elected by shareholders and must act in the best interests of the company. Each board member may be found liable based on the degree of their negligence.
Ownership Structure
Turkish companies are characterized by highly concentrated and centralized ownership structures, with families holding majority control. Separation of ownership and control is achieved through pyramidal or complex ownership structures. Controlling shareholders do not have specific duties to the company or non-controlling shareholders but must exercise their rights in good faith.
Shareholder Activism
Shareholder activism focuses on issues such as:
- Appointment of independent board members
- Dividend distributions (rare among Turkish listed companies)
- Transparency in related-party transactions through monitoring, reporting, and audits
These efforts aim to promote good governance practices and ensure that companies operate in the best interests of all stakeholders.
Regulatory Environment
The Capital Markets Board is responsible for overseeing the implementation of corporate governance principles. Public supervision and enforcement are essential tools for promoting good governance practices among Turkish companies. However, there may be a moral hazard on the part of minority shareholders who have little or no incentive to take an active stance.
Conclusion
Corporate governance in Turkey is characterized by highly concentrated ownership structures, complex regulatory environments, and limited shareholder activism. Despite these challenges, efforts are being made to promote good governance practices among Turkish companies. The regulatory environment continues to evolve, with a focus on promoting transparency, accountability, and good governance practices.