As for the latest developments in Turkey in terms of corporate
governance: Corporate governance principles were first published in July
2003, then revised in February 2005 as a voluntary application by the
Capital Markets Board. Though applying the principles is voluntary, it
is compulsory to announce the level of adaptation to the principles in
annual reports. The Istanbul Stock Exchange formed a corporate
governance index which will cover the firms that get six over 10 from
the independent corporate governance rating agencies. As soon as five
firms apply to the exchange, the index will be calculated and announced.
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Dr. Ali Kucukcolak, Director, Research Department, Istanbul Stock
Exchange
Levent Ozer, Expert, Research Department, Istanbul Stock Exchange
Exhibit 1: Independence of the Top Management
Companies Intermediaries Total Comp. Int. Total
+ - + - + +% +% +%
Separation of the 31 212 12 103 43 12,8 10,4 12,0
Roles of the
Chairman and the
CEO
Re-Election of 150 93 106 9 256 61,7 92,2 71,5
Board Members
Responsibilities 137 106 68 47 205 56,4 59,1 57,3
of the Board
Members in
Related Comp.
Other 101 142 71 44 172 41,6 61,7 48,0
Responsibilities
of the Board
Members in the
Comp.
Kinship Among 65 178 44 71 109 26,9 38,3 30,5
Board Members
Responsibilities 59 184 21 94 80 24,3 18,3 22,3
of the General
Manager in
Related
Companies of
the Same Group
Kinship Between 14 229 21 94 35 5,8 18,3 9,8
General Manager
and Board
Members
Exhibit 2: Companies' Inspection Units and Auditors
Companies Intermediaries Total
+ - + - +
Auditors Appoinied on Temporary 23 220 26 89 49
Basis for Solving Specific
Issues
Inter Company Complaints Against 20 223 8 107 28
the Decision of Board Members
Inter-Company Inspection Unit 55 188 88 27 143
Share Ownership of the Legal 22 221 11 104 33
Auditors
Responsibilities of Legal Auditors 103 140 45 70 148
in Related Companies and
Participations
Share Ownership of Legal Auditors 16 227 2 113 18
in Related Companies and
Participations
Employment of non-Turkish Citizen 4 239 2 113 6
Legal Auditors
Invitation to an Extraordinary 3 240 3 112 6
General Assembly Meeting by the
Legal Auditors in the Last 3
Years
Legal Auditors' Right to File a 1 242 1 114 2
Lawsuit Against Board Members in
the Last 3 Years
General Assembly's Approval of 139 104 80 35 219
Legal Auditors' Financial Rights
Comp Int. Total
+% +% +%
Auditors Appoinied on Temporary
Basis for Solving Specific 9,5 22,6 13,7
Issues
Inter Company Complaints Against
the Decision of Board Members 8,2 7,0 7,8
Inter-Company Inspection Unit
Share Ownership of the Legal 22,6 76,5 39,9
Auditors 9,1 9,6 9,2
Responsibilities of Legal Auditors
in Related Companies and 42,4 39,1 41,3
Participations
Share Ownership of Legal Auditors
in Related Companies and 6,6 1,7 5,0
Participations
Employment of non-Turkish Citizen
Legal Auditors 1,6 1,7 1,7
Invitation to an Extraordinary
General Assembly Meeting by the 1,2 2,6 1,7
Legal Auditors in the Last 3
Years
Legal Auditors' Right to File a
Lawsuit Against Board Members in 0,4 0,9 0,6
the Last 3 Years
General Assembly's Approval of
Legal Auditors' Financial Rights 57,2 69,6 61,2
Exhibit 3: Selected Studies on Corporate Governance and Performance
Study Measuring Performance criteria
Bhagat & Black (1997) Independent directors and A wide variety of
900 U.S firms stock price and
accounting measures
Bhagat and Black 928 large US public Accounting data: stock
(1999) companies, various price data
subperiods 1985-95; share
ownership data
Bhagat, Carey & Elson 1993 ownership info for Accounting data
(1999) 4874 directors: CEO
turnover
Carleton, Nelson & 62 negotiated targetings CAR & accounting
Weisbach (1998) by TIAA-CREF measures
Chung & Pruitt 404 firms/CEOs Tobin's Q
Millstein & MacAvoy Corporations considered Economic profit
(1997) well-governed by CalPERS
and presence / absence of
a professional board
Corporate governance Economic profit,
grades and absence of a excess returns, the
professional board residual after cost of
capital has been
substracted from
returns
Meta analysis: a) board Both accounting and
composition b) leadership market indicators
structure and financial
performance
Dalton, Daily, Meta analysis: number of Multiple indicators
Ellstrand & Johnson directors and financial (accounting and
(1999) performance market)
Yermack (1996) 452 large firms, board Tobin's Q, ROA & ratio
structure, compensation of capital
and governance structure expenditures to sales
Study Findings
Bhagat & Black (1997) No consistent evidence that number of independent
directors affects future firm performance
Bhagat and Black No convincing evidence that greater independence
(1999) results from higher performance
Bhagat, Carey & Elson Significant correlation between stock owned by
(1999) outside directors and performance
Carleton, Nelson & By issue: board diversity (negative CAR)
Weisbach (1998)
Chung & Pruitt Both CEO ownership and CEO compensation are very
positively correlated with Tobin's Q
Millstein & MacAvoy Substantial and significant correlation between
(1997) active indepen-dent board and superior corporate
performance
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