Corporate governance refers to all the principles and regulations that a company adopts in order to ensure its performance, the interests of its shareholders as well as the interests of its stakeholders. Recognizing the importance of corporate governance principles and the benefits that result from their implementation, every listed company is now required to follow the international practice and seek the systematic application of corporate governance principles in the company’s operations.
The basic principles for ensuring the adoption of a healthy corporate governance system are the following:
1) Ensuring transparency and effective control over the management of the company
2) Communication of the management with the stakeholders of the company
3) Ensuring the efficiency and the implementation of the company’s strategy
The three main foundations for applying corporate governance rules and practices concern the role of the Board of Directors, the executive management, the auditing procedures and the protection of the shareholders’ rights, while ensuring the enhancement of transparency and the disclosure of information.
In Greece, on 17-07-2020, the Greek Parliament passed a new law, no. 4706/2020. This law incorporates long awaited European legislation and establishes new regulations for the restructuring and modernization of corporate governance rules which applies to all public limited companies listed in Greece. It introduces a stricter framework by making the existence of a Corporate Governance Code mandatory, requiring that this Code is drawn by an external and approved entity, it strengthens the role of the Internal Audit Committee and establishes a set of provisions for the effective treatment of conflicts of interest between the company’s shareholders and its management.
• The Law requires each company to adopt a Suitability Policy, made available on the company’s website, setting the eligibility criteria for the appointment of the BoD members. This Policy must contain information relevant to a set of criteria used for the appointment, replacement and assessment of BoD members. Sufficient gender representation and diversity (mandatory quota of 25%) is also a legal requirement.
• The Law establishes and enhances the participation of independent non-executive members in the BoD providing that the Chairman of the BoD is non-executive (or at least the vice-president of the company).
• A Remuneration Committee and a Nomination Committee, (with the possibility to be merged into one committee) need to be introduced;
• The Law provides for the adoption of a Corporate Governance Code & a Regulation of Operation issued by an external and renowned company. This Regulation of Operation needs to be published on the company’s website. The company also needs to acquire a certification issued by a CPA or an audit firm certifying that it has an updated Regulation of Operation;
• The new Law strengthens shareholder protection by enforcing the establishment of a Shareholder Service Unit with the company.
Τhe Hellenic Capital Market Commission (HCMC) is the supervisory authority on matters of compliance of listed companies with the new legal framework. In that capacity, the HCMC is anticipated to publish guidelines to ensure the appropriate implementation of the Law.
Law 4706/2020, enters into force on 17-7-2021, therefore a limited period of time is given to the companies in order to comply, hence it is very important to take all the necessary steps to abide with the new legal framework. Non-compliance with the aforementioned provisions is likely to impose heavy sanctions both on the company and BoD members individually that mount up to Euro 3.000.000 and in any case up to 5% of the company’s turnover.