The Corporate Governance Code for Polish Listed Companies
Gdansk Institute for Market Economics Papers
39 Pages Posted: 11 Feb 2003
Date Written: June 2002
The draft Code - being presented - is an example of a bottom-up self-regulatory process, that addresses the problem of loosing confidence faced by the Polish capital market. The problem was caused by numerous cases of minorities' rights violations, ranging from transfer pricing and insider trading, to tunnelling and blocking effective exercise of corporate rights. It is now a common view among the domeastic and international capital market community that regaining market confidence requires better protection of minority shareholders' rights. This will in turn contribute to a more effective and dynamic capital market, which the Polish economy needs. The draft Code, therefore, adopts the perspective of minority shareholders; at the same time it reflects cognisance of the fact that proper company development can only happen in the context of due balance of, and respect for, the rights of all stakeholders engaged in its operations, including controlling shareholders. The draft Code principles and provisions address problems associated with both ownership structures dominated by a controlling shareholder (which is most common structure among Polish public companies) as well as dispersed shareholder base. It stresses the need of a stronger supervisory board vis-a-vis the dominant shareholder and the management. Thus it is recommended that at least two members of the supervisory board be independent and elected without any decisive influence of the controlling shareholder. The draft Code also advocates more transparency in access to information through corporate websites, increased credibility of audits and restricted availability of anti-take-over defences. The Code is based on a diagnosis of the most evident weaknesses of the corporate governance system in Poland. This analysis covered such issues as: the extent and sources of ownership and control concentration, control separation devices, cases of most evident shareholder right abuses, checks and balances between company governance bodies, disclosures to shareholders. Some examples of good corporate governance practices were found in Polish corporations, including independent board members and internal regulations addressing insider trading. All these cases were analysed and reflected in the provisions of the Code. In its philosophy and particular solutions proposed, the draft Code adopts or refers to many principles, recommendations and codes of good practice issued in other countries or by international organisations. The most important benchmarks used were: the OECD Principles of Corporate Governance, British corporate governance codes - mainly Cadbury (the prototype for many national codes) and Hampel, the EASD Corporate Governance Principles, as well as the recommendations and guidelines issued by Euroshareholders. Implementation of the Code should be achieved by the way of including relevant provisions in the company's articles of association. The Code requires that companies report on compliance with its recommendations or on the reasons for non-compliance. The Warsaw Stock Exchange is empowered to put this obligation as a formal requirement for company share listing. Independently, to promote the implementation of the Code, the Polish Corporate Governance Forum - in co-operation with the Association of Individual Shareholders - intends to publish annually a corporate governance rating, with the Code serving as a benchmark. The first rating has already been published.
Keywords: corporate governance, code of conduct, good practice
JEL Classification: G34
Suggested Citation: Suggested Citation