The analysis of Corporate Governance Code reports shows the need to amend the law
According to the Financial Supervision Authority, the issue of the transparency of the managers of exchange companies and independent supervisory board members must be regulated with law. Such a conclusion results from the analysis of the Corporate Governance Code reports submitted by issuers for 2008, which the Financial Supervision Authority conducted this year.
The Corporate Governance Code is a collection of behavioural standards for publicly traded companies, which should contribute to the better and more transparent organisation of the management and control of a company.
“Although the market has generally accepted the Code, there is a lack of total satisfaction regarding the comprehensibility of fees, and the issues of transparency and the independence of supervisory board members” said Kilvar Kessler, Member of the Management Board of the Authority. According to the Financial Supervision Authority, the regulation of these fields needs a more thorough discussion.
As of 2006, the Corporate Governance Code applies to the companies listed on the Tallinn Stock Exchange. The Code is aimed at making the Estonian securities market more transparent and the management of publicly traded companies more comprehensible for investors. The overview by the Financial Supervision Authority of the reports on the adherence to the Corporate Governance Code in 2008 (also in 2006 and 2007), and the Code in full, are available on the website. The overview has been compiled by Leena-Maarja Parts, Ralf Järvamägi, Kristjan-Erik Suurväli and Kilvar Kessler.
The principles described in the Corporate Governance Code are of an advisory nature for the issuer and every issuer decides on their own whether or not they adopt these principles as a basis for the organisation of management. Adherence to the Corporate Governance Code is based on the principle of “follow or explain”. This means that adherence to the provisions of the Corporate Governance Code is not mandatory for listed companies. However, it is mandatory to disclose once a year whether the Code is followed, and if not, reasons must be given for why and in which part it is not done.
The Financial Supervision Authority sees that listed companies would prepare an annual report on the adherence to the Corporate Governance Code and the Authority also clearly reacts to the presentation of false circumstances in the reports. The Financial Supervision Authority does not assess whether the management model selected by a listed company is appropriate. This is done by investors and shareholders.
The Corporate Governance Code has been implemented as the advisory guidelines of the Financial Supervision Authority. The report on the Corporate Governance Code and information on adherence thereto must be disclosed by the rules of Tallinn Stock Exchange as well. The stock exchange checks adherence to the disclosure requirements. Tallinn Stock Exchange also cooperates with the Financial Supervision Authority at explaining the Code and, if necessary, trains issuers at relevant round tables.