New law targets widespread changes on corporate governance

Greece is preparing widespread changes to corporate governance laws in a bid to boost market efficiency and the strengthening of its  credibility.

Prime Minister Kyriakos Mitsotakis met with Finance Minister Christos Staikouras and the head of the Capital Market Commission Vassiliki Lazarakou on Monday where they discussed new legislation on corporate governance that will be submitted to parliament early next year.

The recently appointed head of the Capital Market Commission has scanned the market for problems and weaknesses while putting together a reform plan that will be soon put up for public debate. 

The basic pillars of the new plan are:

• Stronger internal checks. This is a key instrument regarding the operation of a company as it is the first audit mechanism to spot possible problems. With the new law, staff members that will make up the internal audit process will need to have undergone specific training and have considerable experience.
• More efficient composition of board members. The goal of the commission is to introduce specific and strict criteria on conditions that need to be met by board members for them to be considered independent. The big change is that one-third of board members will need to be completely independent. According to the plan, there will be laws securing the presence of independent members at board meetings. As noted by the capital markets watchdog, a large number of independent members doe not participate, or avoid, taking part in board meetings.
• Creating and strengthening the audit committee for salaries and candidates. Independent members must participate in these committees to secure its impartiality and efficiency.
• Procedures to replace board members. According to data collected by the Capital Market Commission, there are numerous problems in the way that board members are replaced, relating to both executive and non-executive members. The commission's plan will set up rules and procedures on this.
• Upgrade to operational rules for listed companies. The target is to boost transparency and the rights of minority shareholders.
• Improved transparency on the way funds are used that have been raised from capital markets.
• Revision of penalties. With the changes, there will be penalties on all provisions to ensure that a specific and strict framework is applied.

Efficient corporate governance and the implementation of proper rules on this are of crucial importance for markets and their credibility. If a company sticks to these rules, then there is a considerably lower risk of scandals emerging, such as the case of Folli Follie where economic data was fiddled with, hurting the credibility of the domestic capital market.

YANNIS PAPADOGIANNIS