ArticlesCorporate Governance: The improvements attempted and their consequences

In an earlier article we approached the concept and content of Corporate Governance, in the light (in particular) of the relevant (Greek) Code. Also, the effect of Corporate Governance on competitiveness and growth. The parliamentary procedure for a very important, relevant, legislation is currently underway. It refers to companies listed on a regulated market.

The bill under vote will replace the corresponding, in force today, Law 3016/2002. The total replacement of the latter was deemed necessary. Of course, a series of questions arise. The most important of these: Will this law have positive consequences for the companies it concerns? And, if so, how? Is there a risk that it will prove another (legal) burden on businesses? How does it “affect” all SAs?

Let’s try to approach them.


How will a bill concerning listed SAs ultimately affect them all?

The Greek Code of Corporate Governance was drafted and implemented in a different (business, financial, legal, etc.) environment. Under the force and perspective (in particular) of Law 3016/2002.

The legislation under vote will be (let us have no doubt) the basis for the reform of the aforementioned Code. The latter, despite its non-compulsory nature, concerns all Greek SAs.

We are already well aware that prospective creditors (including banks) are showing increased interest in corporate governance. This interest increases repidly when it comes to investors and prospective investors. The decision to (or not to) finance or invest depending on the existence (or, respectively, non-existence) of satisfactory corporate governance is not farfetched (nor does it impress us). After all, who would feel safe to finance or invest in a company that operates without rules? In a company that would, as usual, be based on the “ruling of one man”?

So there can be no doubt that this legislation concerns, more or less, all companies – especially SAs.


The main goal, the necessity of enactment and the aspirations of the bill on Corporate Governance

The explanatory memorandum of the bill, currently under preparation, gives us valuable information regarding the purpose and aspirations of its authors.

Its main goal seems to be to update the institutional framework of corporate governance of certain SAs. Those, in particular, who have shares (or other securities – eg bonds) listed on a regulated market in Greece.

The reform of the existing institutional framework proved necessary for two reasons:

(a) The first (probably the most important) is related to the need to harmonize the rules regarding corporate governance with current, relevant, trends and practices.

(b) The second reason has to do with changes in the legal and regulatory framework governing the operation of these companies. Changes that have taken place at global, European and national levels. Regarding, in particular, the (national) legislative environment: On the one hand, almost two decades have passed since the implementation of the current law on corporate governance (Law 3016/2002). On the other hand, an important legislation has been in force for the past eighteen months: Law 4548/2108, which governs the operation of SAs. A law that contains (scattered) provisions for corporate governance.

And now let’s come to the goals of this legislation.

The aim of the introduced provisions is the (adapted) strengthening of the corporate governance structures and procedures of SAs. It is also known that the modern capital market has higher relevant requirements.

At the same time, efforts are made to ensure the operational and decisive autonomy of the company. An autonomy under the control, in any case, of corporate law. As well as of the capital market legislation.

Lastly: Over the years a great wealth of issues has been dealt with by legal theory and jurisprudence. The bill under adoption aims to clarify some of them. And to also remove pending relevant concerns (such as, for example, the role of non-executive members of the board).


In brief…

In the above context, a detailed set of provisions governing the operation of the board of directors of listed companies is introduced.

Article 44 of Law 4449/2017 established the Audit Committee – a committee with increased (and particularly important) responsibilities. The legislation under vote preserves its existence and operation. In addition, two new committees of the Board of Directors are established. The Remuneration Committee and the Nomination Committee. The purpose of these committees is to:

(a) Ensure in-depth processing of remuneration issues (by non-executive board members)

(b) The nomination of candidates for the Board of Directors who are then submitted to the Board of Directors for approval; and

(c) The effective and rational compliance of the company with the current legal framework.

The organizational structures of the company are (at the same time-substantially) upgraded. The authors of this legislation did not intend to introduce horizontal provisions. There was an effort for these provisions to adapt to the size and complexity of the activities of each company. The intention is for the provisions and the related obligations to remain proportionate and effective.

The goal, in any case, is the consolidation by SAs of good and effective governance practices. And to also strengthen the confidence of shareholders (or potential shareholders) in them.


“The law is moving in the right direction”, but the burden?

Quite recently (on 11.6.20) an event of the Hellenic American Chamber took place. Its theme: “Corporate Governance, a new reality during and after the era of the pandemic “.

Among the participants was the CEO of the Hellenic Petroleum Group (ELPE) Andreas Siamisis. The position he took: “the bill is undoubtedly moving in the right direction…”.

It is important that a listed company adopted this position.

But there is, without a doubt, another parameter: that of the charge. It would be worthwhile, in fact, to investigate whether regulations like those introduced through this bill will prove to be appropriate for all listed companies. And, finally, the cost / benefit ratio…

The parameter of the significant burden has already been underlined, ever since the stage of the consultation of the bill, by the Association of Listed Companies.

According to the long-standing position of the Association of Listed Companies, issues regarding corporate governance should be regulated by provisions of non-binding law, in order to allow for the possibility of deviations.

This position, after all, builds on the two basic principles of corporate governance systems worldwide. One could say, on its cornerstones. Namely: (a) the prediction of the possibility of deviations following “comply or explain” explanations and (b) the prediction of flexibility and configuration of the adjustments based on the principle of proportionality.

According to the Association of Listed Companies, therefore, the increase of liabilities without deviations, imposed by the law to be voted, is a significant burden on listed companies. A burden that may lead to their exit from the Greek Stock Exchange, and, in general, to the avoidance of entry into it.

At the same time, the Association of Listed Companies has highlighted further black spots in the bill. As a result, it argues that the new law (with the proposed provisions as they are today) fails in its goal, as: It does not promote the reorganization of the Greek capital market -and certainly not the competitiveness of Greek companies.


“We should not only change the law but also our culture on these issues…”

On the other hand, Ms. Vasiliki Lazarakou-chairwoman of the Hellenic Capital Market Commission, while also participating in the aforementioned event of the Hellenic American Chamber, seemed positively in favor of this bill.

It is important, in fact, to note that she praised, in her specific capacity, its ability to promote development. The relevant argument had three pillars: Corporate Governance (a) is one of the most important tools for the smooth operation of a company, (b) upgrades the organization and management of a company and, most importantly, (c) makes the company more attractive to investors.


Corporate governance and the impact on competitiveness and access to investment capital

It is not surprising that the bill on Corporate Governance has given rise to controversy and provided a platform for a constructive dialogue.

In any case, however, and despite the position anyone took, it is worth focusing on the most important, in our opinion, statement in Ms. Lazarakou’s speech. She pointed out, in particular, that “we should not only change the law but also our culture on these issues.”

Who, then, could disagree with this particular admission-encouragement? Our corporate governance culture does not, in fact, serve the principles and values ​​that are accepted (at an international, European and / or national level). Nor, of course, does it serve the principles, goals and aspirations of the bill under vote. And if some defend the specific principles and values, it does not mean that we have adopted the relevant culture. When we succeed in this, just know: We will have moved in the direction of increasing the competitiveness of our companies and facilitating their access to investment funds.

Besides, good corporate governance (along with organization and transparency) have been recorded as necessary prerequisites by (among others) the CEO of the Athens Stock Exchange, Mr. Socrates Lazaridis, for raising investment funds. A step in this direction is, also, the Roots program, to which a previous article of ours, already mentioned above, refers.

The Roots program exactly confirms the emergence of corporate governance as one of the pillars of growth. In addition, unlisted companies “immersed” in good business practices gain easier access to investment funds.

“So by changing our culture” in the direction of good business practices (among which corporate governance plays a dominant role) we provide “good services” to our companies. We make them more attractive. We assist in their development.

And if we move in this direction, we, without a doubt, assist with the development of national economy.


Stavros Koumentakis
Managing Partner


Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

Stavros Koumentakis
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