Corporate Governance ROSC: Detailed Country Assessment Background The Reports on the Observance of Standards and Codes (ROSC) exercise is a joint initiative of the World Bank and the IMF to develop guidelines to strengthen the international financial architecture. The corporate governance ROSC program benchmarks the laws and practices related to corporate governance against the internationally recognized standard for corporate governance -- the G20/OECD Principles of Corporate. Each corporate governance ROSC is based on a detailed questionnaire, the Detailed Country Assessment (the DCA). The Detailed Country Assessment serves as both an information collection tool to be used in the drafting of the final ROSC report, as well as a “calculator” for scoring each of the 66 OECD Principles. The DCA is organized according to the G20/OECD Principles of Corporate Governance. It consists of the following chapters: • Ensuring the Basis for an Effective Corporate Governance Framework • The Rights and Equitable Treatment of Shareholders and Key Ownership Functions • Institutional Investors, Stock Markets, and Other Intermediaries • The Role of Stakeholders in Corporate Governance • Disclosure and Transparency • The Responsibilities of the Board The questions in the DCA address both the legal framework as well as corporate governance practices. Corporate governance practices vary across international boundaries and between companies. A particular practice reflects a country’s legal, regulatory and institutional framework, as well as generally accepted standards and corporate culture. The objective of the country assessments is to capture both the formal dimension of corporate governance, and how that formal dimension works in practice. Completing the Detailed Country Assessment The DCA addresses a wide range of issues and should be answered by professionals with complementary skills, including lawyers with a good knowledge of the securities market, accountants, and market analysts/economists. The professionals should draw on their professional backgrounds and experience to explain and evaluate regulations, policies, and current practices. To incorporate the views of market participants the consultants should also seek views on the questions posed in the questionnaire of the key players in corporate governance, such as institutional investors (both domestic and foreign), securities markets regulators, stock exchange officials, government officials and members of the private sector and professional associations (e.g., accountants, directors, company secretaries). The questions are organized according to the OECD Principles and are subdivided into sections on Legal and Regulatory and Compliance and Enforcement. Some Principles (especially those which focus on institutions) do not have a one section or the other. The legal and regulatory sections are often further divided by “essential criteria” that summarize the sections of each OECD Principle. Each of the three blank boxes should be completed: • Answer. Acceptable answers in this column include “Yes”, “Partially”, and “No”. If the answer is based on survey information, a “Yes” is warranted if more than 75% of companies are complying with the specific topic. An answer of “Partially” would be correct if more than 35% of companies are complying (and less than 75%). If a question is not applicable in a country, then please indicate that this is the case and mark “N/A” in the answer box. • Source. To the extent possible, the answer to each question should include supporting references, including legal sources, surveys, or other research material which provide the basis of characterizations of current practice. • Legal Text and Data. The answer to each question should include a description of the relevant corporate governance legal / enforcement framework, or the extent to which companies are complying with legal requirements or code recommendations, depending on the question. If the relevant legal provision is short, then it should be included in the answer to the question. Otherwise, the provision can be summarized. Chapter I: Ensuring the Basis for an Effective Corporate Governance Framework -1- A. The corporate governance framework should be developed with a view to its impact on overall economic performance, market integrity and the incentives it creates for market participants and the promotion of transparent and well-functioning markets. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. The operation of the capital market is viewed as reasonably transparent. I.A.1 Does the corporate governance framework ensure high levels of disclosure and transparency? I.A.2 Is the market considered to be largely free from insider trading and self- dealing? I.A.3 Does the country rank within the 40 least corrupt countries on Transparency International's Corruption Perceptions Index? I.A.4 Is the country placed within the 75th percentile in terms of the 'control of corruption' within the context of the Worldwide Governance Indicators (WGI) Project? I.A.5 In the last 5 years, have regulators or others taken the following steps to specifically improve upon the corporate governance framework? This could include: • new or amended laws • new securities or banking regulations • updates to a corporate governance code 3. The authorities develop policy, laws, and regulations on the basis of effective consultation with stakeholders. I.A.6 Does the government provide stakeholders with effective channels to help shape new or amend existing laws and regulations? I.A.7 Do authorities provide stakeholders with an adequate* consultation period when seeking comments and feedback on corporate governance related laws, regulations and/or the country corporate governance code? -2- A. The corporate governance framework should be developed with a view to its impact on overall economic performance, market integrity and the incentives it creates for market participants and the promotion of transparent and well-functioning markets. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. The operation of the capital market is viewed as reasonably transparent. I.A.8 Do authorities publicly disclose comments and/or the amendments to the final draft law, regulation or code (e.g. on the internet)? -3- The legal and regulatory requirements that affect corporate governance practices should be consistent with the rule of law, I.B. transparent and enforceable. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. The legal and regulatory framework is well understood, reasonably foreseeable, and sufficiently enforced. I.B.1 Are corporate governance related laws and regulations, and the country corporate governance code (if existent), clearly written and well understood by market participants? I.B.2 Are public awareness and training events organized to help raise awareness and explain new legal and regulatory provisions? I.B.3 Are corporate governance laws and regulations available online? I.B.4 Are corporate governance related laws and regulations consistent with one another I.B.5 Is the country placed within the 75th percentile in terms of the 'rule of law' within the context of the Worldwide Governance Indicators Project? 3. When codes are used, their status in terms of coverage, implementation, compliance and sanctions should be efficient I.B.6 Is there a country-level corporate governance code? I.B.7 Is the country-level corporate governance code widely followed or adhered to in practice? I.B.8 Do the regulatory authorities monitor whether companies disclose their adherence to the code on a "comply or explain" basis? I.B.9 Do the regulatory authorities monitor the quality of how company disclosure related to the code? -4- The legal and regulatory requirements that affect corporate governance practices should be consistent with the rule of law, I.B. transparent and enforceable. № Question Answer Source Legal text and data i. The legal and regulatory framework: I.B.10 Does the stock exchange, regulatory authority, and/or other body produce a jurisdiction-wide report summarizing the implementation statements of companies, including the incidence of compliance? -5- I.C. The division of responsibilities among different authorities should be clearly articulated and designed to serve the public interest. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Enforcement bodies cooperate I.C.1 Has a memorandum of understanding (MoU) or similar agreement(s) been signed between the different regulatory authorities to strengthen regulatory oversight and supervision, e.g. between the securities regulator, insurance regulator, and banking supervisor? I.C.2 Do the banking supervisor and securities regulator and other enforcement bodies share information and conduct joint investigations with one another in practice, when necessary and warranted? -6- I.D. Stock market regulation should support effective corporate governance № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. IOSCO Principle 9 I.D.1 Has IOSCO Principle 9 been implemented? 2. Delegation to Self-Regulatory Organizations I.D.2 If any oversight over the corporate Not Applicable governance framework has been delegated to non-public bodies, in particular self- regulatory organizations (SRO), do these organizations work transparently and in the public interest? -7- Supervisory, regulatory and enforcement authorities should have the authority, integrity and resources to fulfil their duties in a I.E professional and objective manner. Moreover, their rulings should be timely, transparent and fully explained. № Question Answer Source Legal text and data I.E.1 Is the country placed within the 75th percentile countries in terms of 'regulatory quality' within the context of the Worldwide Governance Indicators (WGI) Project? I.E.2 Does the securities regulator have a positive reputation among key stakeholder groups? 1.1. The securities regulator has the authority and integrity to be effective. I.E.3 Does the securities regulator have the formal authority to supervise issuers? I.E.4 Does the securities regulator's authority to investigate include full access to books and records, as well as the ability to conduct off-site surveillance and on-site examinations? I.E.5 Can the securities regulator issue rules and regulations? I.E.6 Can the securities market regulator intervene on behalf of shareholders in corporate disputes? I.E.7 Can the securities regulator issue the following sanctions: I.E.8 Suspensions (both of issuers' listings and financial intermediaries licenses)? I.E.9 Material (substantial) fines? I.E.10 In practice, does the securities regulator issue sanctions when warranted? I.E.11 Is the appeals process largely free from abuses, i.e. do market participants refrain from using the appeals process to delay or prevent effective enforcement by the securities regulator? I.E.12 Are regulatory proceedings considered time and resource effective? I.E.13 Does the securities regulator have sufficient financial and human resources*, to effectively implement its mandate? I.E.14 Can the securities regulator hire, motivate, and retain qualified staff, e.g. are remuneration packages paid by the securities regulator commensurate with the private sector and/or banking supervisor? -8- Supervisory, regulatory and enforcement authorities should have the authority, integrity and resources to fulfil their duties in a I.E professional and objective manner. Moreover, their rulings should be timely, transparent and fully explained. № Question Answer Source Legal text and data I.E.15 Does the securities regulator have a training program in place to ensure that the skills of its staff are continuously updated? I.E.16 Does the securities regulator utilize a risk- based supervision approach to its oversight of issuers, i.e. have a formal strategy and plan to focus its resources on those issuers and practices that pose the greatest risk to the capital markets? The securities regulator is independent, transparent and consistent I.E.17 Does the legal and regulatory framework state that the securities regulator is independent? I.E.18 Does the securities regulator report to parliament or another body independent from the executive to ensure for regulatory independence? I.E.19 Is the head of the securities regulator appointed or approved by parliament or another body independent from the executive government? I.E.20 Does the legal and regulatory framework provide for clear criteria for the dismissal of the head and senior executives of the regulator? I.E.21 Is the securities regulator financially independent (e.g. does it receive its budget from registration and transaction fees, or fines, or from parliament, as opposed to deriving its budget from the government)? I.E.22 Is the securities regulator free from cases of conflicts of interest involving senior staff of the securities regulator? I.E.23 Does the securities regulator produce an annual report on a timely basis? I.E.24 Are rulings by the securities regulator publicly available? -9- Cross-border co-operation should be enhanced, including through bilateral and multilateral arrangements for exchange of I.F. information. № Question Answer Source Legal text and data i. The legal and regulatory framework: i. Implementation of IOSCO Cross Border Principles I.F.1 Based on the most recent, publically available assessment (or self-assessment) of the IOSCO Principles of Securities Supervision, what is the level of Implementation of IOSCO Principles 13-15 -10- Chapter II: The Rights and Equitable Treatment Of Shareholders and Key Ownership Functions -11- II. Introduction to Chapter II: The rights and equitable treatment of shareholders and key ownership functions № Question Answe Source Legal text and data r i. The legal and regulatory framework: Intro.II.1 Does the legal and regulatory framework require shares to be dematerialized? Intro.II.2 Can publicly-traded companies issue bearer shares? Intro.II.3 Is there a market for corporate control, i.e. do market-based takeovers, both friendly and hostile, take place? Intro.III.4 Are shares with variable or multiple voting rights allowed under the law? Intro.III.5 Are shares with variable voting rights used in practice? Intro.III.6 Are there any explicit limits on foreign participation in equity markets? Intro.III.7 Does the legal and regulatory framework specify whether preferred shares can be issued? -12- II.A.1 Basic shareholder rights should include the right to secure methods of ownership registration. № Question Answer Source Legal text and data i. The legal and regulatory framework: II.A.1.1 Does the legal and regulatory framework require companies--either directly or through a third party--to maintain a register of shareholders? II.A.1.2 Does the legal and regulatory framework allow shareholders or their proxies to inspect the register of shareholders to verify their ownership? II.A.1.3 Are companies (including their board members), registrars, or the central depository liable for maintaining an accurate shareholders list? ii. Enforcement and compliance: II.A.1.4 In practice, do companies--either directly or through a third party-- maintain a register of shareholders? II.A.1.5 In practice, are shareholders or their proxies able to inspect the register of shareholders to verify their ownership in a low cost and time effective manner? II.A.1.6 In practice, can shareholders hold companies, registrars, or the central depository accountable for sufficiently safeguarding their assets? -13- II.A. 2 Basic shareholder rights should include the right to: convey or transfer shares.* № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Transfer or conveyance of shares. II.A.2.1 Does the legal and regulatory framework forbid the company, e.g. through its articles of association, from restricting the transfer of shares? II.A.2.2 Does the securities depository have a positive reputation among key stakeholder groups? ii. Enforcement and compliance: II.A.2.3 Are shareholders able to freely transfer their shares in publicly listed companies? II.A.2.4 Does clearing and settlement take place in DVP (delivery versus payment)? II.A.2.5 Does clearing and settlement take place in T+3 or better? -14- Basic shareholder rights should include the right to 3) obtain relevant and material information on the corporation on a timely and II.A.3 regular basis. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Obtain relevant and material information II.A.3.1 Does the legal and regulatory framework provide shareholders the right to obtain copies of the articles of association, charter, and by-laws? II.A.3.2 Does the legal and regulatory framework provide shareholders the right to obtain the minutes of the GMS? ii. Enforcement and compliance: II.A.3.3 In practice, are shareholders able to obtain copies of the articles of association, charter, and by-laws? II.A.3.4 In practice, are shareholders able to obtain the minutes of the GMS? -15- II.A.4 Basic shareholder rights should include the right to 4) participate and vote in general shareholder meetings № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Participate and vote in the GMS. II.A.4.1 Does the legal and regulatory framework provide shareholders with the right to attend and vote at the GMS? ii. Enforcement and compliance: II.A.4.2 In practice, are shareholders able to participate in the GMS without being impeded by the company, board members, or u controlling shareholders? -16- II.A.5 Basic shareholder rights should include the right to 4) participate and vote in general shareholder meetings № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Electing and removing directors. II.A.5.1 Does the legal and regulatory framework provide shareholders with the right to vote for board members? II.A.5.2 Does the legal and regulatory framework provide shareholders with the right to remove board members, including before the end of their term? ii. Enforcement and compliance: kkII.A.5.3 In practice, are shareholders able to elect board members? II.A.5.4 In practice, are shareholders able to dismiss board members? II.A.6. Basic shareholder rights should include the right to 6) share in profits of the corporation * № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Share in profits of the corporation. II.A.6.1 Does the legal and regulatory framework provide shareholders with the right to receive declared dividends/shares in the company's profits? II.A.6.2 Are companies required to pay dividends within an appropriate (for example under six months) period as of the declaration and/or approval at the GMS? II.A.6.3 Does the legal and regulatory framework provide for the board to recommend and shareholders to approve dividends during the GMS? ii. Enforcement and compliance: II.A.6.4 In practice, do shareholders receive declared dividends from the company? -17- II.A.6.5 Do companies pay declared dividends in a timely (for example less than six months) manner? -18- Shareholders should be sufficiently informed about, and have the right to approve or participate in, decisions concerning II.B.1 fundamental corporate changes such as: 1) amendments to the statutes 1) amendments to the statutes, or articles of incorporation or similar governing documents of the company; № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. The GMS has the exclusive authority or must provide its approval to change the basic governing documents of the company. II.B.1.1 Does the legal framework require that shareholders approve changes to the company's articles of association or statutes? ii. Enforcement and compliance: II.B.1.2 In practice, are shareholders able to approve changes to the company's articles of association or statutes? -19- Shareholders should be sufficiently informed about, and have the right to approve or participate in, decisions concerning II.B.2. fundamental corporate changes such as: 2) the authorisation of additional shares № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. The GMS has the exclusive authority or must provide its approval to change the authorized capital of the company. II.B.2.1 Does the legal or regulatory framework provide shareholders with the authority to approve new share issues? II.B.2.2 Do shareholders have a pre-emptive right (or right of first refusal) to purchase shares offered by the company at the offer price? II.B.2.3 Does the management or board have less than one year (or a closed horizon) to issues (some of the) shares once the increase has been approved by shareholders? ii. Enforcement and compliance: II.B.2.4 Do companies allow shareholders to vote on whether to issue new shares? II.B.2.5 In practice, do shareholders make use of their pre-emptive right (or right of first refusal) to purchase shares offered by the company at the offer price? -20- Shareholders should be sufficiently informed about, and have the right to approve or participate in, decisions concerning II.B.3. fundamental corporate changes such as(3): Extraordinary transactions, including the transfer of all or substantially all assets, that in effect result in the sale of the company № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. The GMS has the exclusive authority or must provide its approval to extraordinary transactions. II.B.3.1 Does the legal and regulatory framework provide shareholders with the right to approve extraordinary transactions, equivalent to transfers of all assets and/or sale of the company? ii. Enforcement and compliance: II.B.3.2 Does the board or management submit extraordinary transactions for shareholder approval? -21- Shareholders should be furnished with sufficient and timely information concerning the date, location and agenda of general II.C.1. meetings, as well as full and timely information regarding the issues to be decided at the meeting. № Question Answer Source Legal text and data i. The legal and regulatory framework: II.C.1.1 Does the legal and regulatory framework require or encourage companies to provide sufficient (for example 21 days) notice of the GMS before the meeting date? II.C.1.2 Does the legal and regulatory framework require companies to provide shareholders with the GMS agenda along with the GMS notice? II.C.1.3 Does the legal and regulatory framework require companies to provide shareholders with details (for example qualifications, curriculum vita) of the candidates to the board along with the GMS notice? II.C.1.4 Does the legal and regulatory framework require companies to provide shareholders with information on the rules, including voting procedures that govern the GMS? ii. Enforcement and compliance: II.C.1.5 In practice, do shareholders receive appropriate (for example 21 days) notice of the GMS before the meeting date? II.C.1.6 In practice, are shareholders provided with details (e.g. qualifications, curriculum vitea) of the candidates to the board along with the GMS notice? II.C.1.7 In practice, are shareholders provided with information on the rules, including voting procedures that govern the GMS? -22- Processes and procedures for general shareholder meetings should allow for equitable treatment of all shareholders. Company II.C.2. procedures should not make it unduly difficult or expensive to cast votes. № Question Answer Source Legal text and data i. The legal and regulatory framework: EC1: The corporate governance framework requires or encourages companies to: (a) facilitate voting by minimising the costs involved to shareholders; II.C.2.1 Do companies encourage voting by organizing their GMS in easy to reach locations, allowing proxy voting to take place, and otherwise minimizing costs for shareholders? EC2: The corporate governance framework requires or encourages companies to: (b) use voting methods at shareholder meetings that ensure the equitable treatment of shareholders. III.C.2. Does the corporate governance framework 2 require or encourage confidential and secure methods for voting at the GMS, in particular alternatives to show of hands voting for sensitive issues (e.g. when electing directors)? EC3: The corporate governance framework requires or encourages companies to: (c) make voting results available to shareholders on a reliable and timely basis. III.C.2. Does the corporate governance framework 3 require or encourage timely dissemination of the full voting results (either during or immediately following the GMS)? ii. Enforcement and compliance: II.C.2.4 In practice, do a significant number of minority shareholders actually participate in the GMS? II.C.2.5 In practice, do companies disseminate voting results on a timely basis (either during or immediately following the GMS)? II.C.2.6 Do companies ensure that an independent counting commission or other body counts votes at the GMS? -23- Shareholders should have the opportunity to ask questions to the board, including questions relating to the annual external II.C.3 audit, to place items on the agenda of general meetings, and to propose resolutions, subject to reasonable limitations. № Question Answe Source Legal text and data r i. The legal and regulatory framework: 1. Companies are to propose resolutions to the GMS agenda and facilitate shareholders asking questions to the board. II.C.3.1 Do shareholders have the right to ask questions without meeting unreasonable pre-conditions such as providing written notice in advance or meeting minimum shareholding requirements? II.C.3.2 Does the corporate governance framework require or encourage boards to answer shareholder questions? II.C.3.3 Do shareholders have the right to amend, alter, or add items to the GMS agenda? ii. Enforcement and compliance: II.C.3.4 In practice, are shareholders able to ask questions without meeting unreasonable pre-conditions such as providing written notice in advance or meeting minimum shareholding requirements? II.C.3.5 In practice, are minority shareholders able to amend, alter, or add items to the GMS agenda? -24- Effective shareholder participation in key corporate governance decisions, such as the nomination and election of board members, should be facilitated. Shareholders should be able to make their views known, including through votes at shareholder meetings, II.C.4 on the remuneration of board members and/or key executives, as applicable. The equity component of compensation schemes for board members and employees should be subject to shareholder approval. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Companies should facilitate the effective participation of shareholders in nominating and electing board members. II.C.4.1 Does the corporate governance framework encourage or allow non-controlling or minority shareholders to effectively elect board members, for example, through proportional representation or cumulative voting? II.C.4.2 Does the corporate governance framework encourage (non-controlling) shareholders to nominate candidates for election to the board? 2. Companies should provide shareholders with a say on board remuneration policies and approval on approve equity-based pay. II.C.4.3 Does the corporate governance framework require or encourage shareholders to express their opinion on the remuneration policies for executive directors and senior executives? II.C.4.4 Does the corporate governance framework require or encourage shareholders to approve the remuneration policies for non- executive directors? II.C.4.5 Does the legal and regulatory framework allow shareholders to approve stock options, share grants, or share participation programs by board members and senior executives? ii. Enforcement and compliance: II.C.4.6 In practice, are non-controlling or minority shareholders able to nominate candidates to the board of directors? II.C.4.7 In practice, are non-controlling or minority shareholders able to elect candidates to the board of directors? II.C.4.8 In practice, are shareholders able to express their opinion on the compensation policies for executive directors and senior executives? -25- II.C.4.9 In practice, are shareholders able to approve stock options, share grants, or share participation programs by board members and senior executives (when these are issued)? -26- Shareholders should be able to vote in person or in absentia, and equal effect should be given to votes whether cast in person or II.C.5. in absentia. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. The corporate governance framework permits shareholders to vote in absentia. II.C.5.1 Does the legal framework allow shareholders to appoint a proxy to represent them in the GMS? II.C.5.2 Does the legal framework allow shareholders to vote by postal mail or electronically? ii. Enforcement and compliance: II.C.5.3 Are shareholders practically able to make use of proxy voting? II.C.5.4 Is postal or electronic voting widely used in practice? -27- II.C.6. Impediments to cross border voting should be eliminated № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Foreign shareholders exercise of voting rights. II.C.6.1 Under the law, do foreign shareholders have the same rights as domestic shareholders? II.C.6.2 When shares of foreign investors are held by (a chain of) intermediaries, does the legal framework clearly specify who is entitled to control the exercise of voting rights attached to those shares? II.C.6.3 Does the corporate governance framework require or encourage companies to provide sufficient (for example 21 days) notice of the GMS to enable foreign investors to vote? II.C.6.4 Are companies required or encouraged to facilitate foreign investors to vote through electronic or proxy voting? ii. Enforcement and compliance: II.C.6.5 In practice, are there any problems in identifying who is entitled to control the exercise of voting rights attached to those shares? II.C.6.6 In practice, do foreign shareholders receive sufficient notice and relevant information on the GMS in a timely manner? II.C.6.7 In practice, do foreign shareholders use their voting rights? -28- Shareholders, including institutional shareholders, should be allowed to consult with each other on issues concerning their basic II.D. shareholder rights as defined in the Principles, subject to exceptions to prevent abuse. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. The corporate governance framework has rules for proxy solicitation that allow shareholders to consult with each other. II.D.1 Does the corporate governance framework allow and even encourage institutional investors and other shareholders to consult with each other on the selection of board members and other matters without being hindered by rules on proxy solicitation or similar requirements? II.D.2 Does the corporate governance framework allow shareholders to obtain the shareholders list in a timely manner (for example 21 days) before the GMS, allowing them to coordinate voting in the GMS? ii. Enforcement and compliance: II.D.3 In practice, do shareholders coordinate before the GMS, e.g., when electing directors? -29- Within any series of a class, all shares should carry the same rights. All investors should be able to obtain information about the II.E.1. rights attached to all series and classes of shares before they purchase. Any changes in economic or voting rights should be subject to approval by those classes of shares which are negatively affected. № Question Answer Source Legal text and data i. The legal and regulatory framework: II.E.1.1 Is there an explicit requirement or recommendation that all shares of a given series or class carry the same rights? II.E.1.2 Does the corporate governance framework require or encourage that changes to voting rights of a series or class of shares needs to be approved by the impacted shares at a GMS? II.E.1.3 Does the corporate governance framework require companies to disclose information about the company’s series or classes of shares on a timely basis to prospective investors (in particular through the prospectus or online)? ii. Enforcement and compliance: II.E.1.4 When and if the rights of certain series or class of shares have been changed, have the impacted shareholders approved the changes and otherwise had their rights respected? II.E.1.5 In practice, can investors easily learn about the rights attached to a series or class of shares (e.g. through company websites or reports or the stock exchange or regulator website?) -30- II.E.2 The disclosure of capital structures and control arrangements should be required. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. The corporate governance framework requires the disclosure of all capital structures. II.E.2.1 Does the corporate governance framework require companies to disclose 'mechanisms for disproportionate control' to shareholders on a continuous basis? Notes: “Mechanisms for disproportionate control” include “(a) voting caps, (b) voting rights including multiple voting rights, and (c) golden shares. The answer is “yes” if the mechanism is not allowed or not possible under the law. II.E.2.2 Does the corporate governance framework require or encourage companies to disclose the structure of company groups and the nature of material intra-group relations? II.E.2.3 Does the corporate governance framework require or encourage companies to disclose shareholder agreements covering, inter alia, lock-ins, voting, board member selection, rights of first refusal, and block voting? ii. Enforcement and compliance: II.E.2.4 In practice, do companies disclose 'mechanisms for disproportionate control' to shareholders on a continuous basis? II.E.2.5 In practice, do companies disclose the structure of company groups and the nature of material intra-group relations? II.E.2.6 In practice, do companies disclose shareholder agreements? -31- II.F.1 Conflicts of interest inherent in related-party transactions should be addressed. № Question Answer Source Legal text and data i. The legal and regulatory framework: EC1: Related party transactions are clearly and broadly defined II.F.1.1 Does the legal and regulatory framework provide a definition of related parties? If yes, please provide the definition. II.F.1.2 Is the definition considered to be sufficient to capture the relevant related party transactions? II.F.1.3 Does the corporate governance framework contain explicit provisions requiring the board to monitor, manage and approve related party transactions? II.F.1.4 Does the legal or regulatory framework require or encourage related party transactions to be conducted in such a way as to ensure fair and arm’s length conditions and/or market based pricing and terms? II.F.1.5 Are shareholders required to approve extraordinary transactions with related-parties (e.g. transactions where board approval cannot be reached, or that meet minimum thresholds in terms of assets)? ii. Enforcement and Compliance II.F.1.6 In practice, do boards approve material related party transactions? II.F.1.7 In practice, are related party transactions conducted on an arms0-length basis, based on market prices and terms? II.F.1.8 In practice, do shareholders approve extraordinary transactions with related-parties? -32- Members of the board and key executives should be required to disclose to the board whether they, directly, indirectly or on II.F.2 behalf of third parties, have a material interest in any transaction or matter directly affecting the corporation. № Question Answer Source Legal text and data i. The legal and regulatory framework: EC1: Directors and key executives are to disclose their material interests affecting the company. II.F.2.1 Does a board member or senior manager have to inform the board if they have a direct interest in a potential transaction of the company? If yes, please indicate what mandatory disclosures regarding the conflict of interest must be made (e.g. general disclosure of the conflict of interest without any specifics or Full disclosure of all material facts) II.F.2.2 Does this also include transactions involving the interested party's indirect interests? EC2. The board is responsible for effectively monitoring and managing the activities of board members and key executives who have an interest in a contract, transaction or other matters affecting the company. II.F.2.3 Does the corporate governance framework specify that the board is responsible for monitoring and managing conflicts of interest? II.F.2.4 Does the corporate governance framework require or encourage conflicted board members to recuse themselves from voting when conflicted? II.F.2.5 Are there specific restrictions on board members and senior managers to prevent conflicts of interest? ii. Enforcement and compliance: II.F.2.6 In practice, do board members regularly inform the board about their business, financial, and other interests? II.F.2.7 In practice, do board members abstain from participating in the board discussion on a particular agenda item when they are conflicted? II.F.2.8 In practice, do board members abstain from voting on a particular agenda item when they are conflicted? -33- Minority shareholders should be protected from abusive actions by, or in the interest of, controlling shareholders acting either II.G directly or indirectly, and should have effective means of redress. Abusive self-dealing should be prohibited. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. The corporate governance framework provides ex-ante mechanisms and ex-post sanctions to protect minority shareholders. II.G.1 Does the country score an eight or above on the Doing Business Protecting Investors "Extent of Director Liability Index"? II.G.2 What is the Doing Business Protecting Investors "Ease of Shareholder Suits Index"? II.G.3 Is there a (or several) regulatory authority (ies) responsible for enforcing the Company Law, Banking Law, Securities Market Law, and Listing Rules? II.G.4 Does the corporate governance framework require a qualified or super- majority vote (e.g. 2/3 or 3/4) by shareholders at the GMS for important decisions? II.G.5 Can (non-controlling) shareholders call for an extraordinary shareholder meeting? II.G.6 Can shareholders call for an inspection or special audit of the company and/or its records or books? II.G.7 Does the legal or regulatory framework provide shareholders with withdrawal rights, i.e. the right to sell their shares back to the company under specific circumstances? II.G.8 Does the legal and regulatory framework provide shareholders with the right to sue the company, its board members, or managers? II.G.9 Does the legal and reulatory framework provide shareholders with the right to sue the company's board members or managers on behalf of the company (so- called derivative suit)? II.G.10 Does the legal and regulatory framework authorize the regulatory authority or other public body to sue board members or managers on behalf of shareholders? II.G.11 Does the corporate governance framework allow for controlling shareholders to be held accountable -34- through concepts as shadow directors or piercing the corporate veil? II.G.12 Can shareholders bring an action against a company when the company behaves in a way that is prejudicial or unfair to the interests of the shareholder? II.G.13 Can a shareholder lawsuit or regulatory action stop or reverse a decision of the GMS, board, or management? ii. Enforcement and compliance: II.G.14 In practice, do (es) the relevant regulatory authority (ies) enforce non- compliance with minority shareholder rights provisions contained in the, inter alia, Company Law, Banking Law, Securities Market Law, and Listing Rules? II.G.15 In practice, do decisions taken by the board or management (in the area of shareholder rights and or corporate governance) get suspended or reversed following successful shareholder cases? II.G.16 In practice, do shareholders vote according to qualified or super-majority thresholds (e.g. 2/3 or 3/4) at the GMS for important decisions? II.G.17 In practice, do (non-controlling) shareholders call for extraordinary shareholder meetings? II.G.18 In practice, do (non-controlling) shareholders call for an inspection or special audit of the company and/or its records or books? II.G.19 In practice, do (non-controlling) shareholders make use of their withdrawal rights (in so far as these are granted by law)? II.G.20 In practice, do (non-controlling) shareholders successfully sue the company, its board members or managers? II.G.21 In practice, do (non-controlling) shareholders sue the company's board members or managers on behalf of the company (so-called derivative suits)? II.G.22 In practice, do (non-controlling) shareholders sue controlling shareholders through concepts as shadow directors or piercing the corporate veil? -35- II.G.23 In practice, does the regulatory authority or other public body sue board members or managers on behalf of shareholders? II.G.24 In response to shareholder complaints, does the regulatory authority or other public body in practice take actions besides going to court to protect shareholder rights, for example, issuing warning letters or fines? II.G.25 In practice, have shareholder lawsuits or regulatory actions stopped or reversed a decision of the GMS, board, or management? -36- The rules and procedures governing the acquisition of corporate control in the capital markets, and extraordinary transactions such as mergers, and sales of substantial portions of corporate assets, should be clearly articulated and disclosed so that II.H.1. investors understand their rights and recourse. Transactions should occur at transparent prices and under fair conditions that protect the rights of all shareholders according to their class. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. There are requirements for timely disclosure to shareholders and the regulator of a substantial acquisition of shares. II.H.1.1 Does law or regulation require shareholders to disclose when they cross certain ownership thresholds (e.g. 5%, 10%, 25%, 50%, etc.)? II.H.1.2 Is this disclosure required to be made within two business days of the change in ownership or control? II.H.1.3 Does the legal and regulatory framework require this disclosure to be made to the market either directly by the company or acquiring shareholder, or indirectly through the regulator? II.H.1.4 Does the legal or regulatory framework require a group of individuals that tries to spread the ownership percentage among friendly parties to avoid declaring or making a tender offer to declare their intentions (also referred to as acting in concert)? 2. The market for corporate control is well defined and ensures that shareholders are treated fairly. II.H.1.5 Is an acquirer seeking to take control of a company required to make an offer to all shareholders if s/he makes a significant acquisition of shares or crosses a certain threshold (a so-called tender offer)? II.H.1.6 Is the acquirer required to offer a fair price to those shareholders? II.H.1.7 Does the offer have to be for all outstanding shares (as opposed to allowing the acquirer to limit the number or amount of shares s/he will buy)? II.H.1.8 Do the rules governing the tender offer ensure that shareholders are informed of the offer in a timely manner so that they may take adv of it? II.H.1.9 Does the legal or regulatory framework define thresholds (e.g. 92% or 95%) at which minority shareholders may require the majority owner to purchase their shares (a sell-out right)? II.H.1.10 Does the legal or regulatory framework define thresholds (e.g. 92% or 95%) at which the outstanding shareholders can be squeezed out by the majority owner (a squeeze-out right)? -37- II.H.1.11 Does the legal or regulatory framework require shareholders to approve mergers? II.H.1.12 Does the corporate governance framework require that the plans and financing of the transaction are clearly known to both the shareholders of the offering enterprise as well as to those of the target company? ii. Enforcement and compliance: II.H.1.13 In practice, do shareholders publicly disclose their ownership when they cross certain thresholds (e.g. 5, 10, 25%, 50%, etc)? II.H.1.14 In practice, are cases of acting in concert disclosed by shareholders? II.H.1.15 In practice, are tender offers made to minority shareholders during changes in control? II.H.1.16 In practice, does the acquirer offer a fair price to shareholders within the framework of a tender offer? II.H.1.17 When the legal and regulatory framework calls for sell-out rights, are minority shareholders able to make use of this right in practice? II.H.1.18 In practice, does the acquirer clearly disclose the plans and financing of the transaction to both the shareholders of the offering enterprise as well as to those of the target company? -38- II.H.2. Anti-take-over devices should not be used to shield management and the board from accountability.* № Question Answer Source Legal text and data i. The legal and regulatory framework: II.H.2.1 If "anti-takeover" mechanisms are allowed, are companies required or encouraged to publicly disclose these? II.H.2.2 If "anti-takeover" mechanisms are allowed, does the legal and regulatory framework require or encourage for them to be approved at the GMS? ii. Enforcement and compliance: II.H.2.3 In practice, do companies publicly disclose “anti-takeover" mechanisms (in so far as these are permissible)? II.H.2.4 In practice, do boards present “anti- takeover" mechanisms (in so far as these are permissible) for shareholder approval during the GMS? -39- Chapter III: Institutional Investors, Stock Markets, and Other Intermediaries -40- Institutional investors acting in a fiduciary capacity should disclose their corporate governance and voting policies with respect to III.A. their investments, including the procedures that they have in place for deciding on the use of their voting rights. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Voting by institutional investors. III.A.1 Does the legal and regulatory framework allow investors to freely trade shares in advance of a corporate action / GMS, i.e. prevent share blocking? III.A.2 Does the legal and regulatory system, including court rulings, clearly recognise the duty of institutional investors acting in a fiduciary capacity to consider whether and under what conditions they should exercise the voting rights attaching to the shares held on behalf of their clients? III.A.3 Does the corporate governance framework require or encourage the disclosure of voting policies?b III.A.4 Does the corporate governance framework require or encourage that, where an institution has a declared policy to vote, of actual voting records? ii. Enforcement and compliance: III.A.5 In practice, are institutional investors able to freely trade shares in advance of a corporation action or GMS? III.A.6 Do institutional investors participate and vote in the GMS? III.A.7 Do institutional investors publicly disclose their voting? III.A.8 Do institutional investors publicly disclose their voting policies? -41- III.B. Votes should be cast by custodians or nominees in a manner agreed upon with the beneficial owner of the shares.* № Question Answer i. The legal and regulatory framework: 1. Beneficial owners are able to direct their custodian on how to vote, and custodians are to develop voting policies. III.B.1 Are custodians required to inform beneficiaries about upcoming GMSs and pass along relevant information? III.B.2 (If shares are held on behalf of shareholders by custodians) Does the legal and regulatory framework sufficiently protect the rights of shareholders by requiring custodians to safeguard customers’ assets? III.B.3 Does the legal framework (or private contracts) establish that the custodian or nominee will not cast the votes on the securities unless they have received specific instructions to do so? II.B.4 Does the legal or regulatory framework require that depository receipt holders can issue binding instructions on how to vote their shares? ii. Enforcement and compliance: III.B.5 In practice, do the custodians inform their customers (beneficial owners), including foreign beneficiaries, about the GMS agenda and other relevant information? III.B.6 Do the principal custodians inform the beneficiaries on how they voted in practice? -42- Institutional investors acting in a fiduciary capacity should disclose how they manage material conflicts of interest that may III.C. affect the exercise of key ownership rights regarding their investments. № Question Answer Source Legal text and data i. The legal and regulatory framework: EC1 a and b: Institutional investors are to develop and disclose a policy for dealing with conflicts of interest. III.C.1 Does the legal or regulatory framework require or encourage institutional investors acting in a fiduciary capacity to develop a policy for dealing with conflicts of interest that may affect their decision-making as regards the exercise of their ownership rights? III.C.2 Does legal or regulatory framework require or encourage institutional investors to publicly disclose such policy? EC1c. Institutional investors are to develop and disclose the fee structures of asset management service providers? III.C.3 Does the legal or regulatory framework require or encourage institutional investors acting in a fiduciary capacity to disclose their fee structures for asset management and other intermediary services (including for private equity and hedge funds)? ii. Enforcement and compliance: III.C.4 Do institutional investors publicly disclose their policies on conflicts of interest? III.C.5 Do institutional investors disclose asset fee structures? -43- The corporate governance framework should require that proxy advisors, analysts, brokers, rating agencies and others that III.D. provide analysis or advice relevant to decisions by investors, disclose and minimise conflicts of interest that might compromise the integrity of their analysis or advice. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Institutional investors are to develop and disclose a policy for dealing with conflicts of interest. III.D.1 Does the corporate governance framework require or encourage those in the business of providing analysis or advice that is relevant to decisions by investors (e.g. analysts, brokers, rating agencies) to disclose conflicts of interest and how they are managed? III.D.2 Does the corporate governance framework require or encourage providers of proxy advisory services to disclose publicly and/or to investor clients the process and methodology that underpin their recommendations? ii. Enforcement and compliance: III.D.3 Do advice providers publicly disclose their conflicts of interest? III.D.4 Do proxy advisory firms publically disclose their methodologies? -44- III.E. Insider trading and market manipulation should be prohibited and the applicable rules enforced. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Insider trading and market manipulation is prohibited. III.E.1 Is there a law or regulation that prohibits, limits, or regulates trading by company insiders? 2. The continuous collection and analysis of trading data and timely reporting by insiders of securities transactions is provided. III.E.2 Are there closed or restricted periods during which board members and executives are restricted or not entitled to deal in company shares? III.E.3 Does the legal and regulatory framework require trading by insiders to be publicly disclosed in a timely manner, for example on the company's or stock exchange's website? III.E.4 Does the corporate governance framework require the stock exchange or securities regulator to collect and analyze trading data? ii. Enforcement and compliance: III.E.5 Has the relevant authority ever brought charges against a company insider or market intermediary for insider trading, market manipulation, or abusive self-dealing? III.E.6 Do company insiders disclose ownership and trading in company shares? III.E.7 Are market participants confident that insider trading is rare? -45- For companies who are listed in a jurisdiction other than their jurisdiction of incorporation, the applicable corporate governance III.F. laws and regulations should be clearly disclosed. In the case of cross listings, the criteria and procedure for recognising the listing requirements of the primary listing should be transparent and documented. № Question Answer Source Legal text and data i. The legal and regulatory framework: EC1: Companies must disclose which jurisdiction’s rules apply III.F.1 Does the corporate governance framework require companies to clearly disclose which jurisdiction’s corporate governance rules are applicable? EC2: Regulation requires stock exchanges to disclose which rules and procedures apply in case of cross listing III.F.2 Does the corporate governance framework require stock markets to clearly disclose the rules and procedures that apply to cross- listings and related exceptions from local corporate governance rules? ii. Enforcement and compliance: III.F.3 In practice, do companies disclose which b jurisdiction’s corporate governance rules are applicable? -46- III.G Stock markets should provide fair and efficient price discovery as a means to help promote effective corporate governance. № Question Answer Source Legal text and data i. The legal and regulatory framework: EC1: Statutory and regulatory provisions prohibit market manipulation III.G.1 Does the legal and regulatory framework effectively regulate market manipulation? EC2: IOSCO Principle 35 is respected III.G.3 Is IOSCO Principle 35 fully implemented in the jurisdiction? III.G.4 Is there effective enforcement of market manipulation regulations? -47- Chapter IV: Equitable Treatment of Stakeholders -48- i. The legal and regulatory framework: Intro.IV.1 Does the corporate governance framework require employees or their representatives to sit on boards? Intro.IV.2 Do employees generally own shares in the companies they work for? Intro.IV.3 Do companies establish pension funds for their employees? Intro.IV.4 Who is responsible for regulating such company level pension funds? Intro.IV.5 Do the largest listed companies adhere to recognized standards on corporate social responsibility, e.g. as defined by the UN Global Compact or Global Reporting Initiative? Intro.IV.6 Have business organizations adopted codes to encourage corporate social responsibility? -49- Chapter IV: The Role of Stakeholders in Corporate Governance. IV.A. The rights of stakeholders that are established by law or through mutual agreements are to be respected.* Where stakeholder interests are protected by law, stakeholders should have the opportunity to obtain effective redress for IV.B. violation of their rights.* № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. The corporate governance framework provides for the enforcement of established legal rights for stakeholders. IV.A.1 Does the legal and regulatory framework require boards to ensure that those rights of and obligations to stakeholders as specified in the laws and regulations are complied with? ii. Enforcement and compliance: IV.A.2 Do companies comply with agreements they have made with employees? IV.A.3 Do companies comply with legal requirements regarding - and agreements they have made with - other stakeholders? IV.A.4 In practice, do stakeholder groups (e.g. employees, creditors, etc.) effectively seek legal redress through courts? IV.A.5 Can boards, board members, and/or senior managers be held liable for violating the rights of an employee, creditor, or other stakeholder (for example, as specified in the labor law)? -50- Chapter IV: The Role of Stakeholders in Corporate Governance. IV.C. Mechanisms for employee participation should be permitted to develop. № Question Answer Source Legal text and data i. The legal and regulatory framework: EC 1. The corporate governance framework permits the development of different forms of employee participation. IV.C.1 Does the legal and regulatory framework permit (or at least not expressly prohibit or inhibit) companies to link employee remuneration to company performance, e.g. through profit sharing or performance bonuses? IV.C.2 Does the legal and regulatory framework permit (or at least not expressly prohibit or inhibit) companies to incentivize their employees through stock awards, including stock options? IV.C.3 Does the legal and regulatory framework encourage other forms of employee participation, e.g. work councils or board membership? 2. Company-based pension funds are to be overseen by independent trustees tasked to manage the fund for all beneficiaries. IV.C.4 Does the legal and regulatory framework require or encourage company-based pension funds to have trustees that are independent from management? ii. Enforcement and compliance: IV.C.5 In practice, do companies link employee remuneration to company performance, e.g. through profit sharing or performance bonuses? IV.C.6 In practice, do the trustees of company- based pension funds act in the interest of the pensioners? -51- g Chapter IV: The Role of Stakeholders in Corporate Governance. Where stakeholders participate in the corporate governance process, they should have access to relevant, sufficient and reliable IV.D. information on a timely and regular basis. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Stakeholders are to be provided with reliable information to facilitate their participation in the governance process. IV.D.1 Does the corporate governance framework require or encourage stakeholders to be informed by the company regarding major decisions affecting them? ii. Enforcement and compliance: IV.D.2 In practice, do companies communicate with employees, creditors, or the community regarding major company events? -52- Chapter IV: The Role of Stakeholders in Corporate Governance. Stakeholders, including individual employees and their representative bodies, should be able to freely communicate their IV.E. concerns about illegal or unethical practices to the board and to the competent public authorities and their rights should not be compromised for doing this. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Companies are to adopt whistle-blowing policies. IV.E.1 Does the corporate governance framework require or encourage companies to develop policies that protect employees that report wrongdoing to the board or another authority inside the company (so-called whistle- blowing procedures)? IV.E.2 Are there laws or regulations that protect employees that reveal unethical or illegal behaviour by the company to authorities outside the company? ii. Enforcement and compliance: IV.E.3 In practice, do employees make use of company-level "whistle-blowing" policies and procedures? IV.E.4 Do legal authorities protect whistle-blower from retaliation in practice? -53- Chapter IV: The Role of Stakeholders in Corporate Governance. The corporate governance framework should be complemented by an effective, efficient insolvency framework and by effective IV.F. enforcement of creditor rights. № Question Answer Source Legal text and data i. The legal and regulatory framework: EC 1. The insolvency system clearly defines the rights of different classes of creditors; and does not involve excessive delays. IV.F.1 Does the country score an eight or above on the Doing Business Creditor Rights "Strength of Legal Rights" Index? IV.F.2 Does the insolvency system provide creditors with a constructive role in restructuring decisions to be taken by the insolvent company? IV.F.3 Does the legal framework for insolvency facilitate voluntary restructuring of h liabilities? ii. Enforcement and compliance: IV.F.4 Do creditors participate in the restructuring of insolvent companies in practice? IV.F.5 In practice, are formal bankruptcy procedures ever used? IV.F.6 Does a typical bankruptcy case spend less than three years in court? -54- Chapter V: Transparency and Disclosure -55- Chapter V. on Disclosure and Transparency V.A.1. Disclosure should include, but not be limited to, material information on: 1. The financial and operating results of the company. V.A.2. Disclosure should include 2. Company objectives and non-financial information. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Listed companies are to provide a full set of annual audited financial statements to shareholders. V.A.1.1 Are companies required to provide shareholders with annual financial statements? V.A.1.2 Does the legal and regulatory framework specify that financial statements include notes comprising a summary of accounting policies and other explanatory notes? V.A.1.3 Are companies required to provide shareholders with consolidated financial statements, if necessary? 2. Listed companies are to provide shareholders with a management discussion and analysis on an annual basis. V.A.1.4 Are companies required to provide a written discussion of the company's financial statements and trends that may affect the company's future performance in the annual report? ii. Enforcement and compliance: V.A.1.5 In practice, do companies disclose their annual financial statements to their shareholders? V.A.1.6 In practice, are annual financial statements audited by an external auditor? V.A.1.7 Do holding structures and groups fully disclose their consolidated accounts in practice? V.A.1.8 In practice, do annual reports contain a discussion of the company's financial statements and trends that may affect the company's future performance? -56- Chapter V. on Disclosure and Transparency V.A.3. Major share ownership, including beneficial owners, and voting rights. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Substantial direct and indirect ownership interests are to be disclosed on an ongoing basis, but at least annually. V.A.3.1 Are companies required to publicly disclose their ownership structure? V.A.3.2 Is the securities regulator (or other public institution) required to publicly disclose ownership information, e.g. on its website? V.A.3.3 Does the legal and regulatory framework ensure that indirect (e.g. beneficial ownership) ownership is publicly disclosed? ii. Enforcement and compliance: V.A.3.4 In practice, do companies publicly disclose their direct ownership structure? V.A.3.5 In practice, do companies publicly disclose indirect (e.g. beneficial ownership) ownership information? V.A.3.6 In practice, are the regulatory authorities able to determine the beneficial owners of a company? V.A.3.7 In practice, does the securities regulator (or other public institution) publicly disclose ownership information, e.g. on its website? -57- Chapter V. on Disclosure and Transparency V.A.4. Disclosure should include 4. Remuneration of members of the board and key executives. № Question Answer Source Legal text and data i. The legal and regulatory framework: 3. Full and timely disclosure about the remuneration of board members and key executives is to be made. V.A.4.1 Are companies required or encouraged to disclose the remuneration of its board members and key executives on an aggregate basis? V.A.4.2 Are companies required or encouraged to disclose the remuneration of its board members and key executives on an individual basis? V.A.4.3 Are companies required or encouraged to disclose the link between remuneration and company performance? V.A.4.4 Are companies required or encouraged to disclose their remuneration policy? ii. Enforcement and compliance: V.A.4.5 In practice, do companies disclose the remuneration of its board members and key executives on an aggregate basis? V.A.4.6 In practice, do companies disclose the remuneration of its board members and key executives on an individual basis? V.A.4.7 In practice, do companies disclose the link between remuneration and company performance? V.A.4.8 In Practice, do companies disclose their remuneration policies? -58- Chapter V. on Disclosure and Transparency Disclosure should include 5. information about board members, including their qualifications, the selection process, other V.A.5. company directorships and whether they are regarded as independent by the board. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Full disclosure is to be made about directors and their qualifications; other directorships; independence; etc. V.A.5.1 Are companies required or encouraged to disclose information about board members’ qualifications? V.A.5.2 Are companies required or encouraged to disclose the selection process of board members? V.A.5.3 Are companies required or encouraged to disclose to shareholders whether individual board members are considered to be independent? V.A.5.4 Are companies required or encouraged to disclose to shareholders the criteria it uses to define an independent director (or refer to the definition of an independent director in the national corporate governance code)? 2. Board members and key executives are to disclose their ownership stake and any transactions in company securities. V.A.5.5 Are board members and key executives required to disclose transactions in the company’s securities on a timely basis, including transactions by their close family members or associates? V.A.5.6 Are board members and key executives required to publicly disclose their direct or indirect (e.g. through family members) shareholdings in the company? ii. Enforcement and compliance: V.A.5.7 In practice, do companies disclose information about board members’ qualifications? V.A.5.8 In practice, do companies disclose to shareholders whether individual board members are considered to be independent? V.A.5.9 In practice, do companies disclose to shareholders the criteria it uses to define an independent director (or refer to the definition of an independent director in the national corporate governance code)? -59- V.A.5.10 In practice, do board members and key executives disclose transactions in the company’s securities on a timely basis, including transactions by their close family members or associates? V.A.5.11 In practice, do board members and key executives publicly disclose their direct or indirect (e.g. through family members) shareholdings in the company? -60- Chapter V. on Disclosure and Transparency V.A.6. Disclosure should include information on 6.Related party transactions. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. The corporate governance framework requires timely, comprehensive and public disclosure of related party transactions. V.A.6.1 Are companies required to disclose information on related party transactions? If yes, how are the disclosures made (e.g. annual report, stock exchange website) V.A.6.2 Are companies required to disclose all of the following items on related party transactions: (i) the type of transactions; (ii) names of the related parties involved; (iii) amount of the transactions; and (iv) other details of the transaction(s) including, whether it was at market price. ii. Enforcement and compliance: V.A.6.3 In practice, do companies disclose information on related party transactions? V.A.6.4 In practice, do companies disclose all of the following items on related party transactions: (i) the type of transactions; (ii) names of the related parties involved; (iii) amount of the transactions; and (iv) other details of the transaction(s) including, whether it was at market price. -61- Chapter V. on Disclosure and Transparency V.A.7. Disclosure should include material information on 7. foreseeable risk factors.* № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Companies should disclose reasonably foreseeable material risks, and risk management policies and procedures. V.A.7.1 Are companies required or encouraged to publicly disclose their policies on risk management and internal controls in their annual report? V.A.7.2 Are companies required or encouraged to publicly disclose material foreseeable risk factors, in the annual report? ii. Enforcement and compliance: V.A.7.3 In practice, do companies publicly disclose their risk management policies and outlines of their risk procedures in their annual report? V.A.7.4 In practice, do publicly listed companies publicly disclose material foreseeable risk factors in their annual report? -62- Chapter V. on Disclosure and Transparency V.A.8. 8. Issues regarding employees and other stakeholders. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Companies are to disclose information on key issues relevant to stakeholders that may materially affect their performance. V.A.8.1 Are companies required or encouraged to disclose material issues regarding their employees? V.A.8.2 Are companies required or encouraged to disclose material issues regarding creditors? V.A.8.3 Are companies required or encouraged to disclose material issues regarding its environmental impact? ii. Enforcement and compliance: V.A.8.4 In practice, do companies disclose material issues regarding their employees? V.A.8.5 In practice, do companies disclose material issues regarding creditors? V.A.8.6 In practice, do companies disclose material issues regarding its environmental impact? V.A.8.7 In practice, do companies include corporate social responsibility (CSR) statements in their annual reports or on their websites? -63- Chapter V. on Disclosure and Transparency Disclosure should include material information on: 9. Governance structures and policies, including the content of any corporate V.A.9. governance code or policy and the process by which it is implemented. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Companies are to publish, at least annually, a corporate governance report. V.A.9.1 Are companies required or encouraged to disclose its governance structures? V.A.9.2 Are companies required or encouraged to regularly disclose their compliance with the national code of corporate governance? V.A.9.3 Are companies required or encouraged to explain areas of non-compliance with the national code of corporate governance? ii. Enforcement and compliance: ii. Enforcement V.A.9.4 In practice, do companies disclose their governance structures? V.A.9.5 In practice, do companies disclose their compliance with a national code of corporate governance (insofar as one has been issued on a comply-or-explain basis)? V.A.9.6 In practice, do companies explain areas of non-compliance with the national code of corporate governance (insofar as one has been issued on a comply-or-explain basis)? -64- Chapter V. on Disclosure and Transparency B. Information should be prepared and disclosed in accordance with high quality standards of accounting and financial and V.B. non-financial reporting. № Question Answer Source Legal text and data i. The corporate governance framework, compliance, and enforcement V.B.1 Are company financial statements required to be prepared using International Financial Reporting Standards (IFRS) or standards of comparable quality? V.B.2 In practice, do companies prepare their financial statements using International Financial Reporting Standards (IFRS) or standards of comparable quality? V.B.3 Does the securities regulator or stock exchange or other body have the authority to monitor and enforce compliance with national accounting standards? V.B.4 Does the securities regulator or stock exchange conduct a qualitative review of company disclosure in this area? -65- Chapter V. on Disclosure and Transparency An annual audit should be conducted by an independent, competent and qualified, auditor in accordance with high-quality V.C. auditing standards in order to provide an external and objective assurance to the board and shareholders that the financial statements fairly represent the financial position and performance of the company in all material respects. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Companies are to have an independent annual audit conducted in-line with internationally recognized auditing standards. V.C.1 Are companies required to have their annual financial statements audited by an external auditor? V.C.2 Are the external auditors required to conduct their audits in accordance with a national code of ethics equivalent to IFAC's Code of Ethics for Professional Standards issued by the International Ethics Standards Board for Accountants (IESBA)? V.C.3 Does the legal and regulatory framework require the external auditor to be independent from the company? V.C.4 Does the corporate governance framework require or encourage the rotation of the lead audit or engagement partner? V.C.5 Does the corporate governance framework require or encourage the board of directors or its audit committee to report to shareholders that the external auditor was independent, qualified, and acted with care? 2. Auditors are to be licensed or de-licensed according to specific qualification and competency criteria, and ongoing training. V.C.6 Are audit firms and/or audit partners required to be licensed by a government authority (e.g. securities regulator) or professional association of accounts and auditors? V.C.7 Are auditors involved in auditing banks required to obtain a special certification from the central bank? V.C.8 Are external auditors required to pass continuous professional education programs to ensure that their qualifications and competencies are kept up-to-date? 3. The organization that enforces audit standards is independent; and has appropriate responsibilities and resources. V.C.9 Does the corporate governance framework call for an organization that is responsible for enforcing audit standards? -66- V.C.10 Does the corporate governance framework call for this organization to be independent of (or subject to the oversight of a body that is independent of) the audit profession? ii. Enforcement and compliance: V.C.11 In practice, are company annual financial statements audited by an external auditor? V.C.12 In practice, are the external auditors independent from the companies they audit? V.C.13 In practice, is the lead audit or engagement partner rotated on a periodic basis? V.C.14 In practice, do external auditors pass continuous professional education programs that ensure that their qualifications and competencies are kept up-to-date? V.C.15 In practice, is the organization that is responsible for enforcing audit standards independent of (or subject to the oversight of a body that is independent of) the audit profession? V.C.16 In practice, does the organization that is responsible for enforcing audit standards have the authority and resources to carry- out its mandate? V.C.17 In practice, does the organization that is responsible for enforcing audit standards fine, suspend, and/or de-license auditors when warranted? V.C.18 In practice, does the board of directors or its audit committee report to shareholders that the external auditor was independent, qualified, and acted with care in performing their audit? -67- Chapter V. on Disclosure and Transparency External auditors should be accountable to the shareholders and owe a duty to the company to exercise due professional care in V.D. the conduct of the audit. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. The external auditor is to be accountable to the company’s shareholders. V.D.1 Does the corporate governance framework require shareholders to approve the election and dismissal of the external auditor? V.D.2 Is the external auditor required to report to the board's independent audit committee or independent members of the board? V.D.3 Does the corporate governance framework provide for sanctions, penalties, and/or liabilities for external auditors who fail to perform their audit functions with due professional care? ii. Enforcement and compliance: V.D.4 In practice, do shareholders elect and dismiss the external auditor? V.D.5 In practice, does the external auditor report to the board's independent audit committee or independent members of the board? V.D.6 Do shareholders have effective remedial mechanisms against audit firms and/org partners when harmed by inadequate auditing practices? -68- Chapter V. on Disclosure and Transparency V.E. Channels for disseminating information should provide for equal, timely and cost-efficient access to relevant information by users. № Question Answer Source Legal text and data 1. Selective disclosure by companies, board members, and insiders of material non-public information is to be prevented. V.E.1 Does the corporate governance framework prohibit selective disclosures by publicly listed companies, their board members and other insiders, of material non-public information? 2. Companies are to make timely disclosure of material information V.E.2 Does the corporate governance framework require publicly listed companies to disclose material information on an ongoing and non-selective basis? 3. Companies are to make all information easily accessible to investors and potential investors on a cost-efficient basis. V.E.3 Does the corporate governance framework require or encourage companies to file their financial and non-financial information with the securities market regulator or stock exchange, which is then made publicly available? V.E.4 Does the corporate governance framework require or encourage companies to disclose material information on their own website? ii. Enforcement and compliance: V.E.5 In practice, do publicly listed companies, their board members and other insiders, refrain from selectively disclosing material non-public information? V.E.6 In practice, do publicly listed companies disclose material information on an ongoing and non-selective basis? V.E.7 In practice, do companies file their financial and non-financial information with the securities market regulator, stock exchange, and/or registrar, which is then made publicly available? V.E.8 In practice, do companies disclose material information on the internet? -69- Chapter VI: The Responsibilities of the Board -70- b VI. Introduction to Chapter VI. The Responsibilities of the Board № Question Answer Source Legal text and data i. The legal and regulatory framework: Intro.VI.1 Does the majority owner typically also serve as board chairman or CEO (or both)? Intro.VI.2 Does the corporate governance framework require or encourage companies to provide for liability insurance to their board members and officers? Intro.VI.3 Does the legal and regulatory framework call for a one-or two-tiered board of directors? Intro.VI.4 Are there statutory or regulatory requirements to set up a committee of shareholders (or representatives of shareholders) to oversee the governing bodies, such as a fiscal board or revision commission? Intro.VI.5 Is there a legal requirement for a minimum and maximum number of directors? Intro.VI.6 On average, how many directors sit on the board of a company? Intro.VI.7 Does the corporate governance framework require or encourage a term or an age limit for directors? Intro.VI.8 Can the re-election of board members be staggered over time? Intro.VI.9 Does the legal and regulatory framework prescribe boards to meet a minimum number of times per year? Intro.VI.1 In practice, how often do boards meet per year? 0 Intro.VI.1 Does the legal and regulatory framework forbid or discourage 1 legal persons from sitting on the board? Intro.VI.1 Are there any "fit and proper" criteria applied by financial 2 sector regulators to board members? -71- Board members should act on a fully informed basis, in good faith, with due diligence and care, and in the best interest of the VI.A. company and the shareholders. № Question Answer Source Legal text and data i. The legal and regulatory framework: EC 1. The corporate governance framework defines the duty of loyalty. VI.A.1 Are board members required to act in the interest of the company and shareholders, i.e. have a 'duty of loyalty'? VI.A.2 Does the corporate governance framework define the duty of loyalty? VI.A.3 When operating in a subsidiary of a holding company (or dependent company within a group of companies), does the corporate governance framework require or encourage board members to act in the best interest of the company in which they are operating in (as opposed to the controlling company)? EC 2. The corporate governance framework defines the duty of care. VI.A.4 Does the legal and regulatory framework call for board members and senior executives to show prudence, use good judgment, act honestly, and otherwise comply with a "duty of care"? VI.A.5 Does the corporate governance framework define the duty of care? VI.A.6 Does the corporate governance framework include a “business judgment rule,” which protects board decisions if they are made on an informed and disinterested basis? ii. Enforcement and compliance: In practice, do board members act in the VI.A.7 interest of the company and shareholders, i.e. have a 'duty of loyalty'? In practice, do board members show prudence, use good judgment, act honestly, VI.A.8 and otherwise act according to a "duty of care"? Are board members formally and explicitly informed of their duties of loyalty and care, VI.A.9 e.g., as part of their induction training or letter of appointment to the board? -72- VI.B. Where board decisions may affect different shareholder groups differently, the board should treat all shareholders fairly № Question Answer Source Legal text and data i. The legal and regulatory framework: EC 1. Board members refrain from acting in a way that is oppressive or unfairly prejudicial to any group of shareholders. VI.B.1 Does the corporate governance framework require or encourage board members to treat all shareholders fairly, i.e. to put the interest of all shareholders above particular owners or group of shareholders, including those that may have chosen them for the board? ii. Enforcement and compliance: VI.B.2 Are board members generally thought to take decisions in the interest of the company and all shareholders, including minorities? -73- VI.C. C. The board should apply high ethical standards. It should take into account the interests of stakeholders. № Question Answer Source Legal text and data i. The legal and regulatory framework: EC 1. The corporate governance framework requires or encourages companies to develop a code of ethical behaviour. VI.C.1 Are companies required or encouraged to have a code of ethics? VI.C.2 Are boards required or encouraged to oversee management's compliance with relevant laws and regulations, as well as internal policies and procedures? VI.C.3 Are boards required or encouraged to take the interests of stakeholders into account in making corporate decisions? ii. Enforcement and compliance: VI.C.4 In practice, have companies adopted a code of ethics? VI.C.5 In practice, do boards ensure for compliance with laws and regulations, as well as internal policies and procedures? -74- The board should fulfil certain key functions, including: 1) Reviewing and guiding corporate strategy, major plans of action, risk VI.D.1. management policies and procedures, annual budgets and business plans; setting performance objectives; monitoring implementation and corporate performance; and overseeing major capital expenditures, acquisitions and divestitures. № Question Answer Source Legal text and data i. The legal and regulatory framework: EC 1. The corporate governance framework specifies clearly the key functions of the board. VI.D.1.1 Does the corporate governance framework recognize the board’s main role of providing strategic guidance to and oversight over management? VI.D.1.2 Is the board of directors required or encouraged to: VI.D.1.2.1 Review and approve corporate strategy (as opposed to developing strategy, which is a management function)? VI.D.1.2.2 Monitor management performance? VI.D.1.2.3 Develop a risk policy and oversee the development of a risk management function? VI.D.1.2.4 Review and approve the company’s annual budgets and business plans (as opposed to developing these, which is a management function)? VI.D.1.2.5 Set performance objectives and key performance indicators? VI.D.1.2.6 Review and approve major capital expenditures, acquisitions and divestitures? ii. Enforcement and compliance: VI.D.1.3 In practice, do boards fulfil their main role of providing strategic guidance to and oversight over management? VI.D.1.5 In practice, do boards have a risk policy in place? VI.D.1.6 In practice, do boards review and approve the company’s annual budgets and business plans? VI.D.1.7 In practice, do boards formally set company objectives and monitor key performance indicators? -75- VI.D.1.8 In practice, do boards review and approve major capital expenditures, acquisitions and divestitures? -76- The board should fulfil certain key functions, including 2) Monitoring the effectiveness of the company’s governance practices VI.D.2. and making changes as needed. № Question Answer Source Legal text and data i. The legal and regulatory framework: EC 1. The board is to take responsibility for corporate governance practices. VI.D.2.1 Are boards required or encouraged to take responsibility for the corporate governance practices in the company? VI.D.2.2 Are boards required or encouraged to ensure that the company complies with the country (or their own) corporate governance code? VI.D.2.3 Are boards required or encouraged to establish the position of a company secretary to support the board in monitoring the effectiveness of the company's governance practices? ii. Enforcement and compliance: VI.D.2.4 In practice, do boards take responsibility for the corporate governance practices in the company? VI.D.2.5 In practice, do boards have a professional and qualified company secretary to help monitor the effectiveness of the company's governance practices? -77- The board should fulfill certain key functions, including 3) Selecting, compensating, monitoring and, when necessary, replacing VI.D.3. keyexecutives and overseeing succession planning. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. The board made responsible for selecting, compensating, monitoring and, replacing key executives, and succession planning. VI.D.3.1 Are boards required or encouraged to take responsibility for selecting or dismissing the CEO? VI.D.3.2 Are boards required or encouraged to take responsibility for setting the CEO’s remuneration? VI.D.3.3 Are boards required or encouraged to take responsibility for monitoring the CEO’s performance? VI.D.3.4 Are boards required or encouraged to develop a succession policy? ii. Enforcement and compliance: VI.D.3.5 In practice, do boards select or appoint the CEO? VI.D.3.6 In practice, do boards set the CEO’s remuneration? VI.D.3.7 In practice, do boards dismiss the CEO (when warranted)? VI.D.3.8 Do companies have a formal succession plan in place? -78- The board should fulfill certain key functions, including 4) Aligning key executive and board remuneration with the longer term VI.D.4. interests of the company and its shareholders. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. The board's non-executive directors are to develop and publicly disclose a remuneration policy linked to long term performance. VI.D.4.1 Are boards required or encouraged to develop a policy on executive remuneration? VI.D.4.2 Can remuneration policies include so-called “claw back” provisions to recover previously paid remuneration? VI.D.4.3 Are boards required or encouraged to develop a policy on non-executive remuneration? VI.D.4.4 Are boards required or encouraged to publicly disclose said remuneration policies? VI.D.4.5 Are boards required or encouraged to ensure that executive remuneration is aligned to both the company's short and long-term performance? VI.D.4.6 Does the corporate governance framework require or encourage the development of executive remuneration to be overseen by non-executive directors capable of exercising independent judgment or have remuneration committees of the board with independent directors? ii. Enforcement and compliance: VI.D.4.7 In practice, do companies have a policy on executive remuneration developed by the board? VI.D.4.8 In practice, do companies have a policy on non-executive remuneration developed by the board? VI.D.4.9 In practice, do companies disclose their executive and non-executive remuneration policies and/or the relationship between performance and remuneration? VI.D.4.10 In practice, is executive remuneration tied to both short and long-term performance indicators? VI.D.4.11 Do boards have remuneration committees with a majority of non-executive directors -79- capable of exercising independent judgment? -80- The board should fulfill certain key functions, including 5) Ensuring a formal and transparent board nomination and election VI.D.5. process.* № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Boards are to develop transparent board nomination and elected processes and disclose these to shareholders. VI.D.5.1 Does the corporate governance framework call for boards to develop transparent board nomination and election processes? VI.D.5.2 Does the corporate governance framework require or encourage shareholders to be provided with detailed information on board candidates’ experience and expertise, before electing candidates to the board of directors? VI.D.5.3 Does the corporate governance framework require or encourage non-executive directors capable of exercising independent judgment to play a leading role in the nomination process, for example through a nomination committee of the board? ii. Enforcement and compliance: VI.D.5.4 In practice, do companies publicly disclose their nomination and election processes for the board of directors? VI.D.5.5 In practice, are shareholders provided with detailed information on the board candidates’ experience and expertise, before electing such candidates to the board of directors? VI.D.5.6 Do boards have a dedicated nominations function or nomination committee led by non-executive directors capable of exercising independent judgment? -81- The board should fulfill certain key functions, including 6) Monitoring and managing potential conflicts of interest of VI.D.6. management, board members and shareholders, including misuse of corporate assets and abuse in related party transactions. № Question Answer Source Legal text and data i. The legal and regulatory framework: EC 1. The board is to oversee a system of internal controls. VI.D.6.1 Are boards required or encouraged to oversee the establishment of a robust system of internal controls designed to monitor and manage conflicts of interests, use of corporate assets, and related party transactions? VI.D.6.2 Does the corporate governance framework specify that the internal auditor review the adequacy of the company’s internal controls? ii. Enforcement and compliance: VI.D.6.3 In practice, do boards oversee the establishment of a robust system of internal controls designed to monitor and manage conflicts of interests, use of corporate assets, and related party transactions? VI.D.6.4 In practice, does the internal auditor review the adequacy of the company’s internal controls? VI.D.6.5 In practice, do board provide for appropriate disclosure of internal controls procedures to shareholders? -82- The board should fulfill certain key functions, including 7) Ensuring the integrity of the corporation’s accounting and finan cial VI.D.7. reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. The board is to develop and disclose policies on risk management and internal controls for financial reporting and operations. VI.D.7.1 Is the board required or encouraged to oversee the establishment of a risk management framework and an internal control system designed to ensure for the integrity of the financial reporting system? VI.D.7.2 Is the board required or encouraged to ensure for the integrity of the financial reporting process (e.g., by signing the financial statements)? VI.D.7.3 Does the corporate governance framework require or encourage companies to establish an independent internal audit department/function? 2. The board is to manage the relationship with the external auditors to ensure for the auditor's independence and competency. VI.D.7.4 Does the corporate governance framework require or encourage the board to manage the overall relationship with and ensure the independence of the external auditors? VI.D.7.5 Does the legal and regulatory framework require and/or the corporate governance code recommend for the external auditor to report to the board or its audit committee? 3. Boards are to establish a policy on compliance with laws, regulations, and standards, including the company’s ethical code . ii. Enforcement and compliance: VI.D.7.7 In practice, have companies established a risk management framework and an internal control system designed to ensure for the integrity of the financial reporting system under the board's leadership? VI.D.7.8 In practice, do boards have a sufficient number of financially literate directors to ensure for the integrity of the financial reporting process? VI.D.7.9 Have companies established an independent internal audit department/function in practice? -83- VI.D.7.10 In practice, does the board manage the overall relationship with and ensure the independence of the external auditor? -84- VI.D.8. The board should fulfill certain key functions, including 8) Overseeing tbhe process of disclosure and communications. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. The board is to oversee company disclosure and take responsibility for the company’s communications strategy. VI.D.8.1 Does the corporate governance framework require or encourage boards to oversee the process of disclosure and communications? VI.D.8.2 Are companies required or encouraged to establish an investor relations function? ii. Enforcement and compliance: VI.D.8.3 In practice, do boards oversee company disclosure and communications? VI.D.8.4 Do companies have an investor relations function? -85- Chapter VI: The Responsibilities of the Board Boards should consider assigning a sufficient number of non-executive board members capable of exercising independent judgement to tasks where there is a potential for conflict of interest. Examples of such key responsibilities are ensuring the VI.E.1. integrity of financial and non-financial reporting, the review of related party transactions, nomination of board members and key executives, and board remuneration. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. A proportion of the board is to be independent in-line with a clear definition; companies publicly declare who is independent. VI.E.1.1 Does the corporate governance framework require or encourage boards to be composed of a sufficient number or an appropriate percentage of non-executive, independent board members? VI.E.1.2 Do the legal and regulatory framework and/or the country’s corporate governance code provide a definition of independence, in-line with good practice? VI.E.1.3 Does the corporate governance framework require or encourage the position of the CEO to be separated from that of the chairman of the board of directors? VI.E.1.4 Are companies required or encouraged to designate and publicly disclose which board members are deemed to be independent? 2. A sufficient number of non-executive directors can exercise independent judgment where there is a potential conflict. VI.E.1.5 Does the corporate governance framework require or encourage the independent board members to play a particular role in evaluating executive performance? VI.E.1.6 Are independent board members required or encouraged to play the lead role in reviewing the company’s accounting policies, internal controls and financial statements, e.g. through the board's audit committee? VI.E.1.7 Are independent board members required or encouraged to play a lead role in reviewing related party transactions? VI.E.1.8 Does the corporate governance framework require or encourage the audit committees to be chaired by or composed of a majority of independent board members? VI.E.1.9 Are independent board members required or encouraged to play a lead role in -86- nominating, hiring, and dismissing key executives? VI.E.1.10 Are independent board members required or encouraged to play a lead role in establishing executive remuneration policies and plans? ii. Enforcement and compliance: VI.E.1.11 In practice, are boards composed of a sufficient number of non-executive, independent board members? VI.E.1.12 In practice, do boards separate the position of the CEO from that of the chairman of the board of directors? VI.E.1.13 In practice, do companies designate and publicly disclose which board members are deemed to be independent? VI.E.1.14 In practice, do independent board members play a particular role in reviewing the company’s accounting policies, internal controls and financial statements, e.g. through the board's audit committee? VI.E.1.15 In practice, do independent board members play a lead role in reviewing related party transactions? VI.E.1.16 In practice, do independent board members play a lead role in nominating, hiring, and dismissing key executives? VI.E.1.17 In practice, do independent board members play a lead role in establishing executive remuneration policies and plans? VI.E.1.18 Are audit committees chaired by or composed of a majority of independent board members in practice? -87- Boards should consider setting up specialised committees to support the full board in performing its functions, particularly in respect to audit, and, depending upon the company’s size and risk profile, also in respect to risk management and remuneratio n. VI.E.2. When committees of the board are established, their mandate, composition and working procedures should be well defined and disclosed by the board. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Companies are to fully disclosure the mandate, composition, and working procedures of its board committees. VI.E.2.1 Does the corporate governance framework (i) allow and encourage boards to establish committees composed of board members, for example, committees on audit, remuneration, and/or nomination? VI.E.2.2 Are boards required or encouraged to publicly disclose the mandate, composition and working procedures of its board committees? ii. Enforcement and compliance: VI.E.2.3 In practice, do boards establish board-level committees composed exclusively of board members, for example on audit, remuneration, and/or nomination? VI.E.2.4 Do companies publicly disclose the mandate, composition and working procedures of its board committees? -88- VI.E.3. Board members should be able to commit themselves effectively to their responsibilities. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Companies are to disclose each director’s tenure; employment and work income; other board positions; and attendance record. VI.E.3.1 Are companies required or encouraged to publicly disclose a director's length of service as a board member and tenure on various board committees? VI.E.3.2 Are companies required or encouraged to disclose each board member’s primary employment? CA Are companies required or encouraged to publicly disclose other board seats held by its board members? VI.E.3.4 Are companies required or encouraged to publicly disclose the attendance records of board members in board and committee meetings? ii. Enforcement and compliance: VI.E.3.5 Do companies in practice publicly disclose a director's length of service as a board member and tenure on various board committees? VI.E.3.6 Are companies required or encouraged to disclose each board member’s primary employment? VI.E.3.7 Do companies in practice publicly disclose other board seats held by its board members? VI.E.3.8 Do companies in practice publicly disclose the attendance records of board members in board and committee meetings? -89- Boards should regularly carry out evaluations to appraise their performance and assess whether they possess the right mix of VI.E.4. background and competences № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Regular Board Evaluations VI.E.4.1 Are boards and their committees encouraged to evaluate their own performance on a regular, at least annual, basis (so-called board evaluations)? VI.E.4.2 Does the corporate governance framework recommend that the results of such an assessment be linked to the remuneration of non-executive board members? 2. Encourage gender diversity VI.E.4.3 Does the corporate governance framework No require or encourage measures to encourage gender diversity, such as voluntary targets, disclosure requirements, boardroom quotas, and private initiatives? 3. Initial and On-Going Training for Board Members VI.E.4.4 Does the corporate governance framework require or encourage companies to offer induction training to their newly appointed board members? VI.E.4.5 Does the corporate governance framework require or encourage companies to offer ongoing or continuous professional education to board members? ii. Enforcement and compliance: VI.E.4.6 In practice, do boards and their committees evaluate their own performance on a regular, at least annual, basis (so-called board evaluations)? VI.E.4.7 In practice, are boards diverse in terms of gender? VI.E.4.8 Do companies in practice offer an induction training to their newly appointed board members? VI.E.4.9 Do companies in practice offer ongoing or continuous professional education to board members? -90- VI.F. In order to fulfil their responsibilities, board members should have access to accurate, relevant and timely information. № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Board members are to be provided with access to material information to fulfil their responsibilities. VI.F.1 Does the legal and regulatory framework provide non-executive and independent board members with the right (or obligation) to obtain relevant information on the corporation from management? VI.F.2 Does such information need to be provided to the board sufficiently (for example five business days) in advance of the board meeting? VI.F.3 Are boards required or encouraged to establish the position of company secretary to facilitate the flow of information between management and the board? VI.F.4 Does the legal and regulatory framework require or encourage boards to have access to professional advice at the expense of the corporation in regard to company matters? VI.F.5 Does the legal and regulatory framework require companies to disclose the use of paid advisors by the board, for example in the context of advising on extraordinary transactions? ii. Enforcement and compliance: VI.F.6 In practice, do non-executive and independent board members obtain relevant information on the corporation from the executive officers? -91- VI.F.7 Are board member provided with adequate information sufficiently (for example at least five business days) in advance of a board meeting in practice? -92- When employee representation on the board is mandated, mechanisms should be developed to facilitate access to information and VI.G. training for employee representatives, so that this representation is exercised effectively and best contributes to the enhancement of board skills, information and independence № Question Answer Source Legal text and data i. The legal and regulatory framework: 1. Employee board members should have access to information and training. VI.G.1 If employee board membership is mandated, does the corporate governance framework require or encourage the establishment of procedures to facilitate their access to information, training and expertise of employee board representatives? II.G.2 If employee board membership is mandated, do the employee board members have rights to report to employees on a regular basis, provided that board confidentiality requirements are duly respected? VI.G.3 If employee board membership is mandated, does the corporate governance framework requires or encourages the establishment of procedures to facilitate the independence of employee board members from the CEO and management, including adequate, transparent appointment procedures, and clear procedures for managing conflicts of interest? ii. Enforcement and compliance: VI.G.4 In practice, if employee board membership is mandated, do companies provide employee directors with access to information? VI.G.5 In practice, if employee board membership is mandated, are employee board members independent from the CEO and management? -93-