“Corporate governance is holding the balance between economic and social goals and between individual and communal goals. The aim is to align as nearly as possible the interests of individuals, corporations and society. The incentive to corporations is to achieve
their corporate aims and to attract investment. The incentive for states is to strengthen their economies and discourage fraud and mismanagement.”
Sir Adrian Cadbury, London, December 1992
2 PREFACE
During my study period at the Middle East Technical University in Ankara, I developed an interest in the Turkish economy and Turkey’s desire to become an European member state.
My stay in Ankara has made me interested in Turkish conglomerates and in foreign firms that start to conduct business in Turkey. Whenever I returned to Turkey I was surprised about the pace of developments of this country. I enjoyed it very much that I was given the opportunity to focus my master thesis on the country that interests me so much and this focus is one of the reasons that I kept interested in the subject until the very end.
In addition to focusing on Turkey, I also enjoyed looking at the matter at hand from an international business perspective that was formed by professors from both the Dutch University of Groningen and the Swedish University of Uppsala. Both universities have different approaches on how to teach students about international business practices and both teaching methods have broadened my perspective. I would like to thank the University of Uppsala for giving me the opportunity to study at the university.
I would also like to thank Dr. Niels Hermes for our cooperation during the writing of this thesis and for the very useful feedback that he provided me with. I would like to thank Dr.
Theo Postma and Dr. Gustav Johed for being the co-readers of my thesis.
I also would like to take the opportunity for expressing my gratitude to my family for giving me the opportunity to study both in the Netherlands and abroad. I feel lucky that I have been able to learn all the things that I have learned in the past six years and this would not have been possible without the help that I received from both of my parents.
I enjoyed studying in Groningen, Ankara and Uppsala and am now very much looking forward to starting my career and being able to benefit from all the different lessons that I have learned from people with diverse backgrounds. Considering the international perspective of this thesis, it has been a nice way to finish my studies. I hope you will enjoy reading this thesis.
Sincerely,
Linda Gorissen
3 ABSTRACT
The Capital Markets Board of Turkey has adopted the Turkish Principles on Corporate Governance in 2003 with the aim of making the Turkish market more attractive for foreign investors. This thesis is the first research to focus on the extent to which ISE-100 firms have complied with the Turkish principles, based on information as it has been provided by the firms. In addition to simply analyzing compliance, reasons for non-compliance have also been identified. The study shows that the average level of compliance with the Turkish code is only 48 percent, which is low compared to similar studies conducted in Western and Eastern European countries (average levels of compliance > 90 percent). Even if the nineteen firms that have not issued corporate governance compliance reports at all are excluded from the sample, the average level of compliance of Turkish firms is as low as 63 percent.
Whereas the Turkish Principles have been introduced to attract more foreign capital, twenty- two firms have issued corporate governance compliance reports only in the Turkish language.
Firms also explicitly question the authority of the Turkish Principles and state that they will change corporate governance practices after hard legislation has been introduced. Moreover, firms question whether the principles of the Turkish code are indeed best practices, or whether other practices are actually more beneficial for firms and express doubts about the applicability of the Turkish Principles for firms acting in the Turkish market and.
Spearman Rank Correlation Tests have been run in order to identify whether firm characteristics as size, ultimate owners, foreign ownership and main activities influenced the level of compliance. A slightly positive relation between firm-size and the average level of compliance with the Turkish Principles has been identified. No proof have been identified for a relation between the average level of compliance of the firms and any of the other firm- characteristics.
Keywords: Turkey, code, corporate governance, compliance, reasons for non-compliance.
4 TABLE OF CONTENTS
1 Introduction 6
2 Theoretical framework 9
2.1. Defining Corporate Governance 9
2.2. Spreading of Codes of Corporate Governance 10
2.3. Increased Foreign Investment in Turkey 10
2.4. Corporate Governance Principles of Turkey 12
2.5. Corporate Governance Practices in Turkey 14
3 Hypotheses 17
3.1. Size 17
3.2. Ultimate Ownership – Influence of Families 17
3.3. Foreign Ownership 18
3.4. Type of activities 18
4 Methodology 19
4.1. Selection of the Sample 19
4.2. Contacting the Firms 20
4.3. Administration of Data 20
5 Analysis 22
5.1. Publication of Corporate Governance Compliance Reports 22
5.2. Compliance with Principles on Shareholders 24
5.2.1. Reasons for Non-Compliance 25
5.3. Compliance with Principles on Public Disclosure and Transparency 28
5.3.1. Reasons for Non-Compliance 29
5.4. Compliance with Principles on Stakeholders 30
5.4.1. Reasons for Non-Compliance 31
5.5. Compliance with Principles on Board of Directors 32
5.5.1. Reasons for Non-Compliance 33
5.6. Hypotheses 37
5
6 Conclusion and Discussion 40
References 44
Appendices 55
A Companies that made up the ISE-100 in 2005 (fourth quarter) 56
B Email 57
C Gathered Information from CGCRs 58
D Publication of CGCRs by ISE-100 Firms in 2005 64
E Level of Compliance of ISE-100 Firms – Shareholders 65 F Reasons for Non-Compliance of ISE-100 Firms – Shareholders 66 G Level of Compliance of ISE-100 Firms –
Public Disclosure and Transparency 68
H Reasons for Non-Compliance of ISE-100 Firms –
Public Disclosure and Transparency 69
I Level of Compliance of ISE-100 Firms – Stakeholders 70 J Reasons for Non-Compliance of ISE-100 Firms – Stakeholders 71 K Level of Compliance of ISE-100 Firms – Board of Directors 72 L Reasons for Non-Compliance of ISE-100 Firms – Board of Directors 73 M Spearman Rank Correlation Test – Level of Compliance and Size 76 N Spearman Rank Correlation Test – Level of Compliance and 76
Ultimate Ownership by Families
O Spearman Rank Correlation Test – Level of Compliance and 77 Foreign Ownership
P Spearman Rank Correlation Test – Level of Compliance and 77 Activities of the Firm
6 1 INTRODUCTION
Scholars who have conducted research in the field of corporate governance often start their articles by claiming that debacles such as Enron and WorldCom have increased the attention for good corporate governance around the world (e.g. Aguilera & Cuervo-Cazurra, 2004, Dnes, 2005). They then continue their work with investigating how codes of good corporate governance have spread around the world since the introduction of the Cadbury Report in 1992 (Cuervo-Cazurra, 2004) and whether these codes are converging as a result of globalization (see e.g. Cuervo-Cazurra, 2004 and Khanna, Kogan & Palepu, 2006). Although I find this work interesting and a contribution to current knowledge in the field of corporate governance, I also believe that there is a missing link in the reasoning that was mentioned above. That missing link is research that investigates whether firms that are subject to codes of corporate governance also actually comply with those codes.
Scholars have analyzed the compliance with codes of good corporate governance in developed countries such as for example Germany (Werder, Talaulicar & Kolat, 2005), the United Kingdom (Arcot & Bruno, 2006) and the Netherlands (Akkermans et al., 2007).
Several rating agencies are also active in studying the level of compliance of listed firms of various stock markets and publish annual rankings on this matter (e.g. S&P, ISS, CoreRatings, Deminor - http://www.ey.nl/?pag=788&nieuws_id=2022).
However, until recently, there has been little attention for the level of compliance with codes of good corporate governance of firms that are listed in transition and emerging countries.
This has interested me because of the emphasis that code-issuers of less economically developed countries put on the increased ability to attract extra capital to the country by using practices of good corporate governance (see e.g. introductions to codes of Bangladesh, Slovakia, Turkey, Ukraine – accessible through http://www.ecgi.org/codes/all_codes.php). As stated before, I also think that assessing the level of compliance in various countries will make studies on for example the spreading of codes around the world more valuable, because it will make clear to what extent certain corporate governance practices have actually spread around the world (not just spreading of codes, but also compliance with these codes).
Although it may always stay difficult to assess whether codes are followed in letter or in spirit
this research will at least make clear whether Turkish firms follow the code in letter (it will
for example make clear whether the board partially consists of independent board members).
7 Campbell, Jerzemowska and Naijman (2006) are among the few scholars that have conducted a research on compliance in a less economically developed country. They have analyzed the level of compliance of Polish firms and have also made clear what the reasons for non- compliance were in this country. In this research I would like to conduct a similar research with a sample of Turkish firms that are listed on the Istanbul Stock Exchange. The research question that will be answered in this thesis is therefore:
“To what extent have firms complied with the Turkish Governance Principles in 2005 and what have been the reasons for non- compliance?”
I have chosen to focus on Turkey because Turkey is an emerging country that can benefit from attracting capital from foreign investors (Deichmann et al., 2003; Lenger & Taymaz, 2006). Hergüner Bilgen Özeke (2003) states that improved corporate governance practices are needed to encourage foreign investors to actually invest in Turkey. Analysis of compliance with the Turkish code of corporate governance is especially important since international rating agencies (e.g. ISS, S&P) have not yet fully analyzed the situation of corporate governance in Turkey. Corporate governance practices of some of the firms that are also part of the current sample have already been analyzed by international rating agencies (e.g.
corporate governance practices of Işbank have been analyzed by CoreRatings). However, most Turkish firms have not yet been rated by these international rating agencies.
Another reason for my focusing on Turkey is that the country is often not included in research on corporate governance in the European Union (e.g. Gregory & Simmelkjaer, 2002). It may be expected that when Turkey becomes a member of the European Union, it will be included in such research. I believe it will be interesting to be able to compare the behavior of Turkish firms over time which is why I want to focus on Turkey in its current state of candidate- member of the European Union.
I have chosen to focus on firms that have issued an English corporate governance compliance
report (CGCRs) because of an argument that has been used by the issuer of the Turkish code
of good corporate governance. The Capital Markets Boards, the issuer of the Turkish code,
has underlined that good corporate governance practices can attract more foreign capital to the
Turkish market. However, for this argument to hold, it is necessary that foreign investors can
become aware of the level of compliance of Turkish firms and are able to understand the
reasons behind non-compliance. I believe it will therefore be interesting to only include firms
8 with English CGCRs in this research and assess the level of compliance and reasons for non- compliance from the perspective of a foreign investor (by using only information that is available to these foreign investors and that they can understand).
Figure one shows how this research attributes to current knowledge in the field of corporate governance. This research will contribute to the knowledge in the field of compliance in letter (‘phase two - research’).
Figure One: Fitting the Current Research into the Corporate Governance Research Stream
Phase one Phase two Phase three Phase four (this research)
This thesis will make an academic contribution, because (to the best of my knowledge) no other research has focused on the reasons for non-compliance in Turkey before. It will also make a practical contribution since the thesis will make clear which principles need clarification from the issuer (according to firms that have to comply with this code, based on the CGCRs that they have issued). This research can help the CMB to achieve a situation of a transparent market in which foreign investors are willing to put their trust.
The outline of this thesis will be as follows; the relevant theoretical framework will be introduced in chapter two. Hypotheses that will be tested are presented in chapter three and chapter four will discuss the methodology of the research. The collected data will be analyzed in chapter five, after which the findings will be summarized and discussed in chapter six.
Spreading of corporate governance codes
around the world
Research on compliance in
letter
Research on compliance in
practice
Research on compliance
in spirit
9 2 THEORETICAL FRAMEWORK
This theoretical framework will make clear which definitions for corporate governance exist and which definition has been used in this thesis. It will elaborate on ‘phase one research’ (see figure one) and explain when codes of corporate governance were first introduced and why they have spread around the world. It will clarify why the Turkish issuer has decided to issue the Turkish Corporate Governance Principles. To conclude, the theoretical framework will provide information on the Turkish Corporate Governance Principles and present conclusions from prior research on corporate governance practices in Turkey.
2.1. Defining Corporate Governance
Scholars have used different definitions for corporate governance. Shleifer and Vishny (1997) have defined corporate governance as follows; “Corporate governance deals with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment.” However, other scholars that focus on corporate governance such as for example Aoki (2000) have a broader perspective on corporate governance and state that corporate governance “concerns the structure of rights and responsibilities among the parties with a stake in the firm".
The definition of corporate governance from Shleifer and Vishny (1997) and many other scholars (Daily, Dalton and Canella, 2003), stems from the perspective that corporate governance deals with agency problems as described by Jensen and Meckling (1976). These agency problems exist because firm-owners and firm-managers are often separate entities and have different goals. According to Jensen and Meckling (1976), firm-owners want managers to maximize shareholder wealth but self-interested managers try to extract rent from the firm and want to increase their own power (Bebchuk et al., 2002, Jiraporn & Gleason, 2007).
Agency problems are also part of the broader definition as it is for example used by Aoki (2000) but the broader definition also has attention for other stakeholders than the shareholders. In this thesis, the broader perspective on corporate governance is more applicable, since it is clear that the issuer of the Turkish code also had this perspective in mind when setting up the code (this can be seen in paragraph 2.4. where more information on the Turkish code will be given).
In this thesis, corporate governance is about the way (minority) shareholders, employees,
customers, suppliers, managers and the society in general are treated by ‘the firm’ since the
10 Turkish code pays attention to all of these interest groups. Codes of corporate governance aim to improve corporate governance practices so that none of the interest groups can benefit at the expense of other interest groups (since the different interest groups have different objectives). Codes of corporate governance for example prescribe how employees, suppliers and customers should be treated by management and clarify the rights of shareholders.
2.2. Spreading of Codes of Corporate Governance
Scholars have paid attention to the spreading of codes around the world and have come to the conclusion that the first codes of corporate governance have been issued in the 1970s in the United States (Aguilera & Cuervo-Cazurra, 2004). Although other countries such as Ireland and Hong Kong have also issued codes after the first codes were introduced in the US, scholars have stated that especially the Report With Code of Best Practice – Cadbury Report that has been issued in the UK in 1992 has “served as a flagship” (Aguilera & Cuervo- Cazurra, 2004, Enrione, Mazza & Zerboni, 2006). Cadbury-requirements on for example the amount of independent directors in the board and separation of the chairman- and general manager-position (Stiles & Taylor, 1993) are also stated in the Turkish Corporate Governance Principles. According to Enrione, Mazza & Zerboni (2006), the Cadbury-report has presented a code rhetoric that has been followed by code-issuers from all over the world. They noticed that more codes have been issued worldwide after the Cadbury-report was presented in 1992.
Scholars also underline that the attention that policy-makers, scholars and the public have for corporate governance has increased since several scandals took place in the late 1990s and early 2000s (Aguilera & Cuervo-Cazurra, 2004, Enrione, Mazza & Zerboni, 2006). Scandals around for example Enron, Ahold, Parmalat and Worldcom have led shareholders to lose money and trust, employees to lose their jobs and has even led the famous accountancy-firm Andersen to go out of business. For the public and scholars alike, the scandals made clear that the system of corporate governance practices was not functioning in an optimal manner (Dnes, 2005).
2.3. Increased Foreign Investment in Turkey
The fact that more codes have been issued after several scandals took place can be explained
since codes of corporate governance try to improve corporate governance practices within
countries (Enrione, Mazza & Zerboni, 2006). However, in addition to issuing codes for
efficiency reasons, issuers also issue codes for legitimacy reasons (Aguilera & Cuervo-
11 Cazurra, 2004). If codes are issued for legitimacy reasons, codes are issued to prove that certain national markets are committed to accountability and integrity (Enrione, Mazza &
Zerboni, 2006). The issuing of codes for legitimacy reasons is understandable since countries with good corporate governance practices attract more foreign investors (Levine, 1999, Sadka, 2004). The Capital Markets Board of Turkey explicitly states in the introduction to the Corporate Governance Principles of Turkey that the code should help Turkey to compete with other countries in the global financial market. This statement shows that legitimacy-reasons have played a role in the adoption of the Turkish code of corporate governance.
Turkey is an emerging market and the Turkish economy grows faster than the economies of more developed countries (Aksu & Kosedag, 2006). A Progress Report on Turkey (Commission of the European Communities, 2006) states that foreign direct investment in Turkey has more than doubled in the year 2005. As can be seen in table one, Turkey is not able to attract as much FDI as Western European countries with similar amounts of inhabitants. However, table two does show that the growth in FDI has been much more stable for Turkey than for Western European countries. Turkey has been able to realize a growth of FDI of at least 37.5 percent annually for the period 2001 – 2005 whereas some Western European countries even experienced negative growth rates of FDI in the same period.
The same line of reasoning holds when comparing Turkey to countries that have become European members states in 2005 or to other candidate members; Turkey has never experienced negative growth rates of FDI in the period 2001 – 2005 whereas other countries have experienced such periods. In absolute amounts, Turkey has already attracted more FDI in 2005 than Poland, Hungary, Bulgaria and Romania (see table one).
Table 1: Foreign Direct Investment in 2001 – 2005
Country
FDI 2001 (in billions of
US $)
FDI 2002 (in billions of
US $)
FDI 2003 (in billions of
US $)
FDI 2004 (in billions of
US $)
FDI 2005 (in billions of US
$)
Number of inhabitants in 2005 (in millions of
people) Western European
Countries
France 22.6 49.0 42.5 31.4 63.6 60,561.2
Germany 29.4 53.5 29.2 -15.1 32.7 82,500.8
Italy 5.1 14.6 16.4 16.8 20.0 58,462.4
United Kingdom 40.3 24.0 16.8 56.2 164.5 60,034.5
Eastern European
Countries
Poland 3.7 4.1 4.6 12.9 7.7 38,173.8
Hungary 3.2 3.0 2.1 4.7 6.7 10,097 .5
Czech Republic 2.1 8.5 2.1 5.0 11.0 10,220.6
12
Country
FDI 2001 (in billions of
US $)
FDI 2002 (in billions of
US $)
FDI 2003 (in billions of
US $)
FDI 2004 (in billions of
US $)
FDI 2005 (in billions of US
$)
Number of inhabitants in 2005 (in millions of
people) Candidate
Members States
Bulgaria 0.3 0.9 2.1 3.4 2.2 7761.1
Romania 0.7 1.1 2.2. 6.5 6.4 21,658.5
Turkey 0.8 1.1 1.8 2.8 9.7 71,609.0
Source: UNCTAD (2007) and European Communities (2006)
Table 2: Growth in Foreign Direct Investment 2001 – 2005
Country
Growth FDI 2001 - 2002
Growth FDI 2002 - 2003
Growth FDI 2003 - 2004
Growth FDI 2004 - 2005
Number of inhabitants in 2005 (in millions of
people) Western European
Countries
France 116.8 -13,3% -26,1 102,5% 60,561.2
Germany 182.0% -45,4% -151,7% 316.6% 82,500.8
Italy 186.3% 12.3% 2.4% 19.1% 58,462.4
United Kingdom -40,4% -30,0% 234.5% 192.7% 60,034.5
Eastern European
Countries
Poland 10.8% 12.2% 180.4% -40,3% 38,173.8
Hungary -6,2% -30,0% 123.8% 42.6% 10,097 .5
Czech Republic 304.8% -75,3% 138.1% 120% 10,220.6
Candidate Members
States
Bulgaria 200,0% 133.3% 61.9% -35,3% 7761.1
Romania 57.1% 100,0% 195.4% -1,5% 21,658.5
Turkey 37.5% 63.6% 55.6% 246.4% 71,609.0
Source: UNCTAD (2007) and European Communities (2006)
The European Investment Bank and the European Investment Fund state that they have increased their investments in Turkey in 2006 and that investments in Turkey have accelerated since the start of the EU accession talks (EIB/EIF, 2006). The statement from the Turkish issuer about Turkey’s competition with other countries on the global financial market shows that Turkey wishes to attract even more foreign capital. This is understandable since Turkey will need foreign capital to sustain its current high level of growth (Aksu & Kosedag, 2006).
2.4. Corporate Governance Principles of Turkey
The Capital Markets Board (CMB) of Turkey has issued the Corporate Governance Principles
of Turkey in June 2003. The principles have been revised in 2005 to take account of the
changes in the OECD-guideline in 2004 (OECD, 2006).
13 The CMB has decided by decision 48/1588 on December 10
th2004, that firms that are quoted on the ISE have to publish a Corporate Governance Compliance Report from 2005 onwards (Investment Advisory Council for Turkey, 2006). The outline for Corporate Governance Compliance Reports prescribes for which principles firms should disclose whether they have complied with the principles and if they have not complied, what their reasons have been for non-compliance (not all the principles that are mentioned in the Turkish code are also mentioned in this outline for Corporate Governance Compliance Reports). If a firm fails to issue a Corporate Governance Compliance Report that provides information on all the principles that are mentioned in the outline for Corporate Governance Compliance Reports, it faces legal sanctions from the CMB (Okkan, 2006).
Because the CMB has issued an outline for a Corporate Governance Compliance Reports, Turkish firms should explicitly state whether they comply or do not comply with the principles. This is different in other countries which also apply the comply-or-explain requirement; in these countries firms should only state cases of non-compliance and have no obligation to report on compliance (Akkermans et al., 2007).
The Corporate Governance Principles of Turkey contain twenty-seven principles in four sections (Capital Market Boards, 2003). The first principle states that firms should issue a Corporate Governance Compliance Report and the other twenty-six principles are divided into four sections:
1. Shareholders (Six principles on a shareholders relations unit, shareholders’ right to information, the general assembly, voting rights and minority rights, dividend rights and transferability of shares).
2. Public disclosure and transparency (Five principles on disclosure policy, material disclosures, firm-website , disclosure of ultimate owners and disclosure of insiders).
3. Stakeholders (Five principles on informing stakeholders, participation of stakeholders in management, human resources policy, relations with clients and suppliers and social responsibility).
4. Board of directors (Ten principles on the structure of the board of directors, qualifications
of board members, mission/vision and strategic goals of the company, internal control and
risk management mechanisms, authorities and responsibilities of board members,
activities of the board of directors, ethical rules, transactions of board members with the
company and competition of board members with the company, board committees and
remuneration of board members)
14 Principles of the sections one, two and four aim to solve agency problems that exist between managers and shareholders as described in paragraph 2.1. Principles in section three are part of the broader definition on corporate governance as it has for example been used by Aoki (2000). The fact that the code contains principles on how stakeholders should be treated, shows that the Turkish issuer has a perspective on corporate governance that is broader than solely the relationship between managers and shareholders.
2.5. Corporate Governance Practices in Turkey
Scholars have already conducted some research on corporate governance structures in Turkey.
Aksu & Kosedag (2006) state that Turkey is a country with concentrated family ownership.
This is in line with findings from Yurtoglu (2000) who has conducted a research with firms that are listed on the Istanbul Stock Exchange and found that most listed firms are owned and controlled by families. The findings from Yurtoglu (2000) are consistent with findings from La Porta et al. (1999) who have found that in most countries firms are owned and controlled by families. The findings from La Porta et al. (1999) contradict the generally accepted image from Berle and Means (1932) who stated that the widely held corporation was the most common organization structure. La Porta et al. (1999) found that the image from Berle and Means (1932) in fact only held for firms from the United States and the United Kingdom.
Turkey was not included in the sample of La Porta et al. (1999) but does support the conclusion of the scholars.
Considering that most Turkish firms are not widely held, Aksu & Kosedag (2006) state that the main agency conflict in Turkeys is about expropriation of minority shareholders. Orbay &
Yurtoglu (2006) come up with a similar view; they describe Turkey as a country with a weak corporate governance regime and underline the presence of high family ownership concentration, pyramids, business groups and divergence between cash-flow and voting rights. Tuzcu & Fikirkoca (2005) have tried to fit the Turkish corporate governance system with either the Continental European system or the Anglo-Saxon system as described by Hall
& Soskice (2001) but have concluded that the Turkish system has characteristics of both systems and can not be grouped with either of them. Berglöf and Pajuste (2005) came to a similar conclusion for Central and Eastern European countries. The study of Tuzcu &
Fikirkoca (2005) has tried to group the Turkish system with either the Anglo-Saxon or the
Continental European corporate governance system by questioning top managers of ISE-100
firms about the corporate governance practices. This study has shown that the Turkish
15 corporate governance system has similarities with the Anglo-Saxon model since shareholders are considered as a very important interest group. The Turkish corporate governance system does however not provide much attention to the position of minority shareholders, which is not in line with the Anglo-Saxon approach. The Turkish system also shows similarities with the Continental European model since corporate responsibility is considered as very important. However, considering that the actions of the top managers do not always support the importance of various groups of stakeholders, Tuzcu & Fikirkoca (2005) state that the Turkish system can not be considered as a country with a Continental European corporate governance system either. Tuzcu & Fikirkoca (2005) state that the managers of the ISE-100 firms are in practice only concerned with the position of one stakeholder group (besides the shareholders) and this stakeholder group consists of the employees of the firm.
As can be seen above, scholars have already made some general remarks on corporate governance practices in Turkey. However, less research has been conducted on these Turkish corporate governance practices on a more micro-level. To the best of my knowledge, no academic research has been conducted on compliance of firms with the Turkish code of corporate governance. The only information that can be found on compliance with the Turkish code has been published by Iyi Şirket, a Turkish firm that offers among others corporate governance advice (see www.iyisirket.com). Iyi Şirket has published the following compliance-information for firms that constituted the Istanbul Stock Exchange 100-index in 2005:
Table 3: Compliance of ISE-100 firms in 2005
Principle Amount of companies that
comply (out of 100)
Board has independent board members 25
Board has 1/3 independent board members 7
Firm has corporate governance committee 32
Firm has shareholder relations unit 16
Firm has information disclosure policy 31
Firm has privileged voting rights 16
Firm has privileged dividend rights 16
Firm has privileged nomination rights 57
Firm publishes bylaws on website 86
Firm publishes annual report on website 87
Firm publishes information on general assembly on website 69
16
Firm gives enough information on website 34
Firm gives average information on website 36
Firm does not inform public well on website 30
Firm discloses information on board members 41
Firm prepares an adequate annual report 20
Firm has ethical rules 68
Firm discloses ethical rules 40
Firm has detailed responsibilities and responsibilities in bylaws 38 Firm have defined percentage of minority rights as 5 % in company’s bylaws 8
Firm has founded secretary 38
Firm has audit committee 86
Audit committee has independent chairman 16
Firm disclosed social responsibility and environment policies 93
