The primary sources of corporate governance legislation in Türkiye are the Turkish Commercial Code (No. 6102) enacted on 13 January 2011 (“TCC”), the Capital Market Law (No. 6362) enacted on 6 December 2012 (“CML”), and the Banking Law (No. 5411) enacted on 19 October 2005, regulations issued by the Banking Regulation and Supervision Agency (“BRSA”) and various Communiques of the Capital Markets Board of Türkiye (CMB) which is the state regulator responsible for supervising the capital market and the activities of publicly traded joint stock companies. The CMB is the entity in charge of adopting and revising the Corporate Governance Principles and is actively promoting their application and monitoring the securities market.
The Corporate Governance Code in Türkiye is represented by the “Principles on Corporate Governance” (“CG Principles”), annexed to the CMB Communiqué II-17.1, first issued in 2003 and revised various times, most recently in 2020 (“CG Communique”). Some of the provisions of the Principles are mandatory (24), others (73) are to be implemented under the so-called “comply or explain” approach.
Most notable developments from the previous assessment include (i) the introduction of the CMB’s CG Reporting Framework in 2019 (developed with the EBRD assistance), and (ii) the Sustainability Principles in 2020, which were appended to the CG Communique. Key progress made is in the way the (listed) companies’ compliance with the CG Principles is monitored by the regulator (CMB), which we consider to be a step in the right direction. The introduction of the CG Reporting Framework by the CMB in 2019 as well as the Sustainability Principles in 2020 seems to have led to better quality disclosures in the Annual Reports by listed companies.
Companies are organised under a one-tier system. The board is in charge of appointing and removing executives. The CG Principles recommend the role of the CEO and chair of the board to be separate, and in the case of combined roles, grounds for such decision should be provided by companies. Two out of the ten largest listed companies disclose having their CEO as a chair of the board. The law and the CG Principles require companies to establish committees and that the majority of the board members be composed of non-executive directors and at least one third of independent directors (in any case, not less than two for companies and not less than three for banks). All ten largest listed companies comply with this requirement. The CG Principles include a fairly comprehensive definition of independence. Audit committees must be entirely composed of independent directors, while other committees have to comprise a majority of non-executive members of the board, but the rest of the members can be executives and non-board members.
Gender diversity at the board is limited, albeit it appears to have improved greatly from the previous report (from 7.89% in 2017, to 14.61% now). Despite the notable improvement, the gender diversity at the board remains below the 25% target recommended by the CG Principles.
The law and the CG Principles require disclosure of a fair amount of non-financial information and companies seem to comply with this requirement, disclosing through their website, the central securities depository’s Public Disclosure Platform or their annual reports information on their board (and committees) composition, directors’ qualifications and independence, board and committee activities, capital, number of shares, major shareholders, transactions by directors with company’s shares, general shareholders’ meeting’s minutes, articles of associations and material events. Companies’ websites are generally complete and updated.
While there is an improvement compared to our previous assessment, explanations remain rather weak and according to the 2019 CG Monitoring Report there seem to be many cases of miscodings, where a company reports ‘Partial’ compliance but the explanation indicates an instance of non-compliance. The 2019 CG Monitoring Report also found a disappointing level of explanations by the companies (in cases of non-compliance) vis-à-vis the standards for a sufficient explanation outlined in the Corporate Governance Reporting Manual, published by the CMB in 2019.
Banks are required to set up a compliance function and to establish a clear separation between the management and control functions. All the companies in our sample disclose their financial reports along with the auditor’s opinion and declare their external auditor to be independent. Related party transactions and conflicts of interest are regulated by law. There is no comprehensive whistle-blowing legislation in place. Yet, seven of the top-ten listed companies in our sample report having internal whistle-blowing protection mechanisms in place.
Basic shareholder rights seem to be adequately regulated by law. Shareholder agreements are common, but they lack specific regulation.
The institutional framework supporting good corporate governance in Türkiye is relatively advanced. Indicators provided by international organisations rank Türkiye moderately well with regard to corruption, competitiveness, and investor protection perceptions.
View report 2017
View report 2022