corporate governance overview in turkey for … kye b… · of the companies. 2014 cmb corporate...

CORPORATE GOVERNANCE

OVERVIEW OF TURKEY FOR

FOREIGN INVESTORSApril 2019

1

CORPORATE GOVERNANCE OVERVIEW OF TURKEY FOR FOREIGN

INVESTORS

Table of Contents

Overview of

Turkish Capital

Markets and Main

MacroEconomic

Indicators

03

21

11

25

16

28

18

Borsa Istanbul

Corporate

Governance Index

Mandatory &

Voluntary Reporting

Corporate

Governance

Association of

Turkey

References

Corporate

Governance in

Turkey and

Mandotary

Principles

Corporate

Governance

Rating

2Corporate Governance Overview of Turkey for Foreign Investors

OVERVIEW OF TURKISH

CAPITAL MARKETS AND

MAIN MACROECONOMIC

INDICATORS

3

OVERVIEW OF TURKISH CAPITAL MARKETS AND MAIN MACROECONOMIC INDICATORS

Main Indicators

Main Indicators 2017 2018

GDP Growth (%) 7.4 2.6

Inflation (%) 11.9 20.3

Benchmark Bond Yield (%) – 2 Year Average 11,8 18,6

Equity Market Trading Volume (TL mn) 1.442.296 1.962.673

BIST - 100 Index 115.333 91.270

Foreign Direct Investments ($ bn) 8.8 9,5

Foreign Portfolio Investments ($ bn) 24.5 (3,0)

Mergers&Acquisitions ($ bn) 7,4 9,3

IPO Size (TL bn) 1.2 8.4

Corporate Bond Issuances Size (TL bn) 129.4 179.0

# of Listed Companies (Including ETFs) 413 414



Equity Market / BIST 100 Index Trading Volume

Interest rate hikes, currency volatility and the global risk tolerance

caused the equity market trading volume to increase by 35.8% y/y.

EQUITY MARKET TRADING VOLUME (BILLIONS) BIST 100 INDEX TRADING VOLUME & CLOSE PRICES

SOURCE Borsa Istanbul, Equity Market Data Market Transactions by Members

1.6341.746

2.052 2.027

2.936

3.987

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

'13 '14 '15 '16 '17 '18

0,00

2,00

4,00

6,00

8,00

10,00

12,00

14,00

16,00

18,00

70.000

80.000

90.000

100.000

110.000

120.000

130.000

Oca

18

Şu

b 1

8

Ma

r 1

8

Nis

18

Ma

y 1

8

Haz 1

8

Te

m 1

8

Ağ

u 1

8

Eyl 1

8

Eki 1

8

Ka

s 1

8

Ara

18

İşlem Hacmi BIST100



Investor Composition Borsa Istanbul Equity Market

Foreign investors generated 30% of the trading volume of the equity

market despite they own 65% of the market capitilization.

FOREIGN TRADING SHARE IN EQUITY MARKET MARKET CAPITILIZATION OF EQUITY MARKET

SOURCE BIST Trends Report

35%

65%

Domestic

Foreign



Derivatives Market Trading Volume

Currency futures trading continued to be eye-catching at derivatives

market whereas trading volume of the market rised by 51.8% y/y.

SOURCE Borsa Istanbul, Derivatives Market Data

827 869

1.135 1.161

1.660

2.520

0

500

1.000

1.500

2.000

2.500

3.000

'13 '14 '15 '16 '17 '18

Trading Volume (TL bn)



Assets Under Management

Total pension fund size continued to grow by 15%

in 2018 against the high interest rates.

2636

4861

778830

34

38

49

5647

00

20

40

60

80

100

120

140

160

'13 '14 '15 '16 '17 '18

Pension Funds (TL bn) Mutual Funds (TL bn)



Debt Securities Issuances

The nominal size of the total issuance of debt securities in 2018

reached TL 179 bn; financial sector issuances took 92% share.

55,666,3

79,690,1

129,4

179,0

330,0 516,0

621,0

760,0

1211,0

1383,0

-

200,0

400,0

600,0

800,0

1000,0

1200,0

1400,0

1600,0

-

20,0

40,0

60,0

80,0

100,0

120,0

140,0

160,0

180,0

200,0

2013 2014 2015 2016 2017 2018

Issuance Size Number of Issuances

SOURCE Borsa Istanbul



Equity IPOs

IPO size reached TL 8.4 bn increasing by 600%

when compared to 2017.

79,8 82,6

236,0

5,1 10,2

98,052,1 33,2

145,5

76,727,4

171,5

418,1

675,1

8

15

8

1 1

22

25

16

9 9

4

23

8

-5

0

5

10

15

20

25

30

0

100

200

300

400

500

600

700

800

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

*EXCLUDING PRIVATIZATIONS


Average Size Number of IPO’s


IN TURKEY AND

MANDOTARY PRINCIPLES

11

CORPORATE GOVERNANCE IN TURKEY AND MANDOTARY PRINCIPLES

Brief History of Corporate Governance Stages in Turkey

Revision of

the principles

by CMB in

accordance with

OECD revision.

2005

Basic corporate

principles

have become

mandatory for

listed companies.

2012

Scope of the

mandatory

principles

were enlarged

considering the

market and free

float capitilization

of the companies.

2014

CMB Corporate

Governance

Principles

published in

a ‘Comply or

Explain’ scope.

2003

NGOs’ efforts

to raise public

awareness on

corporate culture

and governance

in Turkey.

2002



Shareholders

Main corporate information such as ownersip struture, privileged shares, voting rights, information on board member candidates and the agenda, should be disclosed at least 21 days before the AGM.

The chairman of the meeting shall be attentive in the general assembly meeting that the agenda items should be expressed in an objective and detailed manner with a clear and comprehensible method. Shareholders should be provided with equal opportunities to express their opinions, and raise questions.

Conflict of interest caused by a transaction

(between the one has control power or management liability of the company and a third party) which isin the field of activity of the corporation or subsidiaries should be presented to the AGM.

A certain amount of related party transactions should be disclosed to public.



Board of Directors - I

In case it has been resolved that the chairman of the board of directors and the chief executive officer/general manager would be the same person, this situation shall be disclosed to public.

A majority of the members of the board of directors shall consist of members who do not have an executive duty.

The number of independent board members cannot be less than one third of the total number of board of directors. In calculation of the number of independent board members, fractions shall be considered as the following whole number. In any case, the number of independent board member shall not be less than two.

The term of office of the independent members of the board of directors shall be up to three years and it shall be possible to nominated as a candidate and elected again.



Board of Directors - II

Audit Committee, Corporate Governance Committe and Risk Committes, NominationCommitee and Compensation Committe have to be formed by the Board of Directors. Corporate Governance Committee may fulfill the duty of the Nomination Committee and Compensation Commitee due to the structure of the Bord of Directors.

Duties, working principles and the members of

the committee shall be determined by the board of directors and disclosed to public.

The Chairman of each committee shall be elected from among the independent members ofthe board of directors.

Chief executive officer/general manager shall not have a duty in the committees


CORPORATE

GOVERNANCE

RATING

16

CORPORATE GOVERNANCE RATING

Corporate Governance Rating

Rating process mainly built on CMB Corporate Governance Principles and ratings should be done by rating agencies allowed by CMB

Rating weights of each main section;

Ratings received by listed companies should be disclosed to public

Board of Directors;

35

Shareholders; 25

Public Disclosure and Transperancy;

25

Stakeholders; 15


BORSA ISTANBUL

CORPORATE

GOVERNANCE INDEX

18

BORSA ISTANBUL CORPORATE GOVERNENCE INDEX

Main factors that affect the development and return of the index;

Incentive measures should be taken for the listed companies by the regulators to be traded at the index.

Not only listed companies but also institutional investors should be encouraged to invest in the index.

Marketing strategy should be improved to increase awareness of the index by foreign investors.

Companies should be constantly traded at the index.

Leading companies of Borsa Istanbul in terms of reputation, daily trading volume and market capitilizaiton should also be convinced to be traded at the index

Borsa Istanbul Corporate Governance Index

Listed companies with a corporate governance rating of minimum 7 over 10 as a whole and minimum of 6.5for each main section would be selected to be traded at XKURY.

As of March 2019, there are 47 companies at XKURY.

Borsa Istanbul Corporate Governance Index (XKURY) started to be calculated 2007 aiming to measure the price and return performances of the index companies.


XKURY RELATIVE PERFORMANCE TO BIST 100 BIST 100 PERFORMANCE

Borsa Istanbul Corporate Governance Index

96

97

98

99

100

101

102

103

104

105

106

XKURY/XU100 Base=100

60.000,00

70.000,00

80.000,00

90.000,00

100.000,00

110.000,00

120.000,00

130.000,00

2.0

1.2

018

2.0

2.2

018

2.0

3.2

018

2.0

4.2

018

2.0

5.2

018

2.0

6.2

018

2.0

7.2

018

2.0

8.2

018

2.0

9.2

018

2.1

0.2

018

2.1

1.2

018

2.1

2.2

018

XU100

BORSA ISTANBUL CORPORATE GOVERNENCE INDEX


MANDATORY AND

VOLUNTARY REPORTING

21

MANDATORY & VOLUNTARY REPORTING

Mandatory Reporting

DISCLOSURE OF ANNUAL FINANCIAL REPORTS* TO PUBLIC

Entities the securities of which are

traded in an exchange and/or

in other organized marketplaces are

required to disclose to public their

annual financial reports and

their independent audit reports

relating thereto, as specified

in the regulations of the Board pertaining

to independent audit

Within 60 days following the end of

their accounting periods, in absence of

the obligation to prepare consolidated

financial statements

Within 70 days following the end of

their accounting periods, in presence of

the obligation to prepare consolidated

financial statement

*Turkish financial reporting system is fully complied with the IFRS

Financial Reports: Financial Statements, Annaul Interim Reports and Responsibility Reports



Voluntary Reporting

Voluntary

Reporting

Sustainability

Report

Integrated

Reporting

Social

Responsibility

Report



Ethics and Compliance

The most important authority regarding ethics in terms

of public sector is Council of Ethics for Public Officials

(Kamu Etik Kurulu) in Turkey., established in 2004. The

Council is commissioned to determine the principles of

ethical conduct that the public officials had to comply

with and observing the implementation.

Ethics and Compliance Manager Professional Standards

have been prepared by a committee established within

TEID (Ethics and Reputation Society) and approved by

the Mesleki Yeterlilik Kurumu (MYK)

For detailed information: http://teid.org/eng/

Turkey became contracting party to many international

agreements of the main organizations like United

Nations, the OECD, the European Union and has

internalized the large part of these arrangements.

According to the results of the OECD’s regular

inspections on legislative alignment and implementation

in Turkey. in May 2017, the main criticisms can be listed

as follows;

Lack of examples of punishment based on the provisions

in the legislation;

Regulatory deficiencies related to whistleblowing and

repentance;

Lack of sanctions for legal persons (both in terms of

regulation and implementation);

Lack of coordination and communication between

institutions.


http://teid.org/eng/


ASSOCIATION OF TURKEY

25

CORPORATE GOVERNANCE ASSOCIATION OF TURKEY

About Corporate Governance Association of Turkey (TKYD)

Founded in 2003,

Corporate Governance

Association of Turkey

(TKYD) is a non-profit

organization aiming to

develop and promote

adherence to corporate

governance standards and

guidelines in Turkey.

TKYD is signatory to

UNGC and a member of

ICGN, Founding member of

ERTA Turkey and

Borsa Istanbul

Sustainability Platform



Vision, Mission and Target

Mission

Leading, guiding

and supporting

the adoption and

implementation

of corporate

governance

principles in

Turkey and region.

Vision

To be the point

of reference for

all those seeking

expert guidance

on corporate

governence.

Target

Our country’s

corporations are

became to have

high performance,

competitive,

international

management

principles and

create the most

value-added

corporations for

their shareholders.


REFERENCES

28

REFERENCES

Material Capital Market Regulations for Listed Companies

Corporate Governance

http://www.cmb.gov.tr/SiteApps/Teblig/File/479

Material Events Disclosure


Significant Transactions and Retirement Right


Squeeze out and Right to Sell Shares

http://mevzuat.spk.gov.tr/

Financial Reporting


Rating


Dividend


Insider Trading and Market Abuse


Electronic General Shareholders Meeting












REFERENCES

Related Websites

SPK Capital Markets Board of Turkey

http://www.cmb.gov.tr/

Borsa Istanbul

https://www.borsaistanbul.com/en/home-page

MKK Central Securities Depository of Turkey

https://www.mkk.com.tr/en/

Takas İstanbul (Custody)

https://www.takasbank.com.tr/en

BDDK Banking Regulation and Supervision Agency

https://www.bddk.org.tr/Home

TCMB The Central Bank of the Republic of Turkey

https://www.tcmb.gov.tr/

TSPB Turkish Capital Markets Association

https://www.tspb.org.tr/en/

TBB The Banks Association of Turkey

https://www.tbb.org.tr/en/home

TKYD Corporate Governance Association of Turkey

http://www.tkyd.org/tr/default.html

Corporate Governance Ratings

http://www.tkyd.org/tr/tkyd-kurumsal-yonetim-

komisyonlar-calisma-gruplari-sermaye-piyasasi-calisma-

grubu-ve-bist-kurumsal-yonetim-endeksi-kurumsal-

yonetim-endeksi-tum-firmalar.html


http://www.cmb.gov.tr/

http://www.borsaistanbul.com/en/home-page

http://www.mkk.com.tr/en/

http://www.takasbank.com.tr/en

http://www.bddk.org.tr/Home

http://www.tcmb.gov.tr/

http://www.tspb.org.tr/en/

http://www.tbb.org.tr/en/home

http://www.tkyd.org/tr/default.html

http://www.tkyd.org/tr/tkyd-kurumsal-yonetim-komisyonlar-calisma-gruplari-sermaye-piyasasi-calisma-grubu-ve-bist-kurumsal-yonetim-endeksi-kurumsal-yonetim-endeksi-tum-firmalar.html


Gayrettepe Mahallesi, Yıldızposta Caddesi

No: 6 Akın Sitesi 1. Blok K: 7 Kat:7 Beşiktaş-İstanbul

T +90 212 347 62 00 F +90 212 347 62 01

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