Corporate Governance in Greece

Abstract

The era of huge profits has gone for most businesses therefore companies nowadays should not waste resources. Within this context, the adoption of effective corporate governance codes is not a luxury, but a challenge and necessity. Corporate governance and internal audit functions within Greek enterprises are imposed by the Greek laws for publicly listed enterprises. In this paper, we examine the current status of the implied corporate governance code in Greece compared with those of South Africa (King Report) and United Kingdom (Combined Code). Both codes are considered as advanced to issues related to corporate governance and internal controls.

The first edition of King Code was published in 1994. The novelty of the corporate governance of South Africa was the issues of sustainable development. In contrast with other editions of King Report, King III Report is obligatory for all the companies of South Africa. The United Kingdom is a country with a free market economic system, which does not wish intervention by the state. The Combined Code is a predominant corporate governance code in the UK as has adopted many provisions from the previous UK corporate codes. The Financial Reporting Council (FRC) is now responsible to update the Combined Corporate Code.

After analyzing the relevant literature review, as well as the details of the codes we are analyzing whether any provisions of the above corporate codes could be implemented in the Greek publicly listed enterprises. The importance of the provisions of the international governance codes is then evaluated by members of the boards of directors and the relevant audit committees, as well as Internal and External Auditors on a small sample basis.

Specifically, our research is based on a case study analysis of six publicly listed enterprises. Three of them are traded in the high capitalization index of the Athens Stock Exchange, while the remaining three are traded in the medium – low capitalization index. Our main research objective is to examine the extent of international corporate governance codes impact in the local laws and regulations, as well as adopted best practices. Also, our secondary research objective is to evaluate the extent of the impact of corporate governance best practices among large and medium-low size publicly listed enterprises. Each selected enterprise represents a different industry.

Appendix

	Greece	South Africa	United Kingdom	Conclusions (Differences-Similarities)
1.Board of directors and members
Composition and size	1. The board of directors should be composed by non executive directors at least of 1/3 of its members. (Two members should be independent). The existence of independent members isn’t necessary if they participate as members- representatives of minority shareholders. (L. 3016/2002)	1. The board should comprise a balance of power, with a majority of non-executive directors. The majority of non-executive directors should be independent	1. The board should be consisted of executive and non-executive directors. Except for smaller companies, at least half the board, excluding chairman, should comprise non-executive directors determined by the board to be independent	1. The non executive directors are the 1/3 of the board members. Nevertheless, SEV considers that the majority of the board should be independent members
				2. Same size
		2. Directors should be appointed by a formal process	2. The board should identify in each annual report each non-executive director
	2. The board of directors should be composed predominantly of non-Executive members. At least two directors of them should be independent. Excluding small businesses. (SEV 2010)	3. Sufficient size	3. Sufficient size
	3. The 1/3 of the board of directors should consist of independent non-executive members. (SEV 2010)
	3. Sufficient size. (L. 3016/2002)
	4. 7–15 members (SEV 2010)
Duties	Should target to improve the long-term value of enterprise	1.Be responsible for the strategic direction of the company and for control of the company	1. Set the company’s strategic aims	Stakeholder-inclusive approach of governance hasn’t been adopted by Greece until now
		2.Set the values of company (code of conduct)	2. Ensure company’s obligations are met
		3.Ensure that the company’s management operates under the principles	3. Monitor internal controls
		4. Stakeholder-inclusive approach of governance
2. Audit committee & internal auditing
Responsibility of internal auditing	1.Supervise the internal rules of the company	1. Should ensure the effectiveness of internal controls	1. The board is responsible for ensuring an effective risk based internal audit	South Africa has shown increased interest in internal auditing. Greece has adopted the traditional approach
	2. Indicates cases of conflict of interests
			2. Internal audit should follow a risk based approach
	3. Inform the Board once a quarter on internal control issues
			3. A written assessment of controls and risk management should be submitted to board
	4. Provide relevant information when the board asks it. (L. 3016/2002)
			4. Internal audit is a part of strategic design
Members of audit committee	At least three members. Two of which should be independent and non executive. (L.3693/2008)	At least three members. All the members should be independent and non executive	At least three members or in smaller companies, at least two, but independent, non executive	Many similarities between Greece, South Africa and the United Kingdom
Responsibility of audit committee	Is responsible for overseeing internal audit	Is responsible for overseeing internal audit	Is responsible for overseeing internal audit	Same authorities
Issues of sustainable development	No mention	No mention	The internal auditing function should review issues related to the issues of sustainable development	Greece has not contexts relating to issues of sustainable development
Presence of chief of internal auditing function at management’s meetings	No mention	Reference	No mention	No mention in Greece
3. Remunerations
Level of remunerations	1. The remuneration policy is decided by the board. (L. 3016/2002)	1. Combination rewards between individual and corporate performance	1. Combination Rewards between individual and corporate performance	Issues of remuneration policy are decided by remuneration committee in the United Kingdom and South Africa. In contrast, the board decides in Greece
	2. The remuneration policy should be decided by a relevant remuneration committee (SEV 2010)	2. The remuneration committee should set the remuneration policy	2. The remuneration committee. Should set the remuneration policy
		3. The remuneration policy should address base pay and bonuses, employee contracts, severance and retirement’s benefits and share-based and other long-term incentives	3. Long-term benefits, e.g. shares, call options
		4. Non-executive fees comprise a base fee as well as an attendance fee per meeting
4. Investor relations
Communication with shareholders	The financial statements should disclose the composition and the operation of board and the others committees of the company. (L. 3873/2010)	1. Clear and understandable language	1. The chairman of the board should discuss with the major shareholders about governance and strategy	Greece is making efforts on enhancing information for shareholders, according to international standards
		2. Companies should explain if refuse to accept proposals which are in accordance with law about Promotion and Access to information	2. The board should state in the annual report the steps taken so as to ensure non-executive members of the board have knowledge of the company
General assembly of shareholders	1. The shareholder has the right not only to vote without physical presence, but from a distance as well. (L. 3884/2010)	The board should encourage stakeholders to attend AGM’S	1. The company should propose a separate resolution on each substantially separate issue	Greece adopts provisions so as to enhance participation of shareholders in general assembly
			2. The company should arrange for the notice of the AGM and related papers at least 20 working days before the meetings
	2. The company should arrange for the notice of the AGM and related papers at least 20 working days before the meetings. (SEV 2010)
Minority shareholders	No mention	The code states the board should ensure the minority interests	No mention	No mention in Greece
5. Other issues
Obligation of firms for the adoption of corporate governance codes	1. The previous laws were not referred to corporate governance codes	Comply or explain	Comply or explain	Greece adopted the international practices by L. 3884/2010
	2. Companies should select a corporate governance code and to explain why if they have not implemented some contexts. (L. 3884/2010)