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The emergence of it governance in greece

The latest comprehensive reforms of the corporate governance rules and the extensive changes to the practices of corporations in this field clearly follow international trends and EU measures.

  • In a case of indirect damage suffered by a shareholder loss of share value , the general meeting may decide the filing of an action;
  • Auditors are liable to the company and may be held liable by shareholders or third parties in cases of intentional cause of damage;
  • Representation of the company The board represents the company and acts on its behalf.

Amendments to company law mainly touched upon disclosure obligations and protection of minority shareholders, while specific corporate governance rules imposed control committees and notification obligations.

In 2010, as a result of the transposition of the emergence of it governance in greece directive 5 into the Greek legal framework, a new mandatory requirement was introduced for listed companies to disclose a statement of corporate governance as a specific section in the annual management report. This statement is made by the board and contains, as a minimum, the information required in the law.

A key element of the corporate governance statement is the reference to the code to which the company is subject or chooses to apply, and to the corporate governance practices implemented that are beyond the requirements of the law.

The company is also required to indicate the internet site where this information is available. Following this lead, the newly established Hellenic Corporate Governance Council has established a new, soft-law code, which was introduced as the new Greek Corporate Governance Code the Code or Greek Code.

The Code is mostly relevant to companies whose shares are admitted to trading on a regulated market, but, as explicitly stipulated, it is designed to prove useful to all Greek companies limited by shares. Its goal is to provide the Greek corporate sector as a whole with a useful tool for the standardisation of corporate governance practices. Hence, the code consists of two types of provisions: In view of the financial crisis and the particularities of the banking sector associated with governmental involvement in terms of guarantees, high-stake systemic consequences in the event of bank failure and the important role of stakeholders depositorsthere has been strong appetite for specific corporate governance rules.

The board of directors is in charge of the general management and leadership of the company.

Composition of the board The boards of all Greek companies limited by shares must comprise at least three members. The Greek Code recommends as best practice a minimum of seven and a maximum of 15 members. There is a compulsory distinction between executive, non-executive and independent non-executive members. The number of non-executive board members should not be lower than one-third of the total number of board members, and there should be at least two independent non-executive directors on the board.

The Code recommends that the majority of the members of the board should be non-executive, the independent members should comprise at least one-third of the board and the executive members should number at least two. Pursuant to the law, in cases where there are representatives of the minority shareholders on the board, there is no obligation for the appointment of independent members.

Corporate governance in Greece: developments and policy implications

However, the draft of the new corporate governance law the emergence of it governance in greece to abandon this flexible approach to the members of the board, and provides that half of the non-executive members should be independent and, in any case, no fewer than two should be independent. Independent board members are appointed by the general meeting of shareholders and the executive and non-executive directors are nominated by the board.

It is prohibited for independent, non-executive members to possess more than 0. Circumstances that suggest dependency pursuant to the law include a business, professional or employment relationship with the company or its subsidiaries, the position of president or manager in the company or its subsidiaries and the status of being married to or being a relative, up to the second degree, of an executive member or a manager or a majority shareholder of the company.

Such a clause will be put to good use, especially if there is an amendment to the law to include, as proposed, a general provision obliging the board to examine on a yearly basis the independence of its members, in principle and in substance. The law has been severely criticised for not providing professional quality selection criteria for board members, such as experience, skills or other similar considerations. The board should opine on the independence and the adequacy of each candidate.

The Code encourages companies to pursue diversity, mainly by ensuring gender balance on their boards as well as in managerial positions. Although the board should act collectively, in practice, most of its duties are carried out by its executive members, who are engaged in the day-to-day management of the company.

Until the issuance of the Code, there was no requirement for a minimum number of executive members and in some cases the only executive member of the board was the chief executive officer CEO.

Legal responsibilities of the board All the activities of the company that facilitate its objectives directly or indirectly fall under the competence of the board, except for issues that by law fall within the scope of the general meeting. Representation of the company The board represents the company and acts on its behalf. The board is free to decide on the allocation of powers among its members and must record the powers of the executive and non-executive members in the internal regulations of the company.

Delegation of board responsibilities It is a general principle that the board should act collectively. However, pursuant to a newly enacted prohibition, boards in listed companies cannot delegate further decisions regarding their transactions with parties related to company parties as defined by International Accounting Standard 24. The assignee may further delegate the relevant responsibilities provided that this is allowed by the statutes and by the decisions of the board.

Certain independence requirements and notification obligations for third parties are set out in the law to avoid conflicts.

Even after delegation, the board may still exercise its powers and remains fully responsible for decisions within the scope of its responsibilities. Third parties are similarly held responsible to board members. Separation of the roles of CEO and chair The the emergence of it governance in greece of the roles of CEO and chair is not explicitly provided by law, but it is a growing trend in Greek companies. Remuneration of directors The law holds the board of directors responsible for setting up the remuneration policy of each company, including the fees for managers and auditors.

The remuneration of the non-executive members should relate to the time dedicated to attending board meetings and performing their duties. In general, company law does not distinguish between remuneration in listed companies and non-listed companies. For listed companies, the total of the remuneration and any other compensation of non-executive board members should be reported in the annex of the annual financial statements.

The Greek Code explicitly provides that the remuneration of the executive members should comprise a fixed and a variable part, or other benefits, calculated on the basis of an appropriate balance.

In contrast, the remuneration of the non-executive members should not, according to the Code, include bonuses or stock options or other benefits that relate to the results achieved. Where such an agreement is considered to be of an everyday business nature, however, it may be exempted from this requirement.

  1. Finally, at the first general meeting following a successful takeover bid, and if the offeror holds at least 75 per cent of the voting rights, restrictions on transfers of securities or voting rights or special rights for appointment of board members do not apply and facilitate the offeror to easily remove the board and modify the articles of association. Auditors are liable to the company and may be held liable by shareholders or third parties in cases of intentional cause of damage.
  2. Similarly, restrictions on voting rights do not apply in the general meeting of the shareholders that authorises the adoption of post-bid defences.
  3. The law has been severely criticised for not providing professional quality selection criteria for board members, such as experience, skills or other similar considerations. The general meeting of the shareholders is declared in law as the highest in the corporate hierarchy and, in this context, shareholders acting as a company body may impose certain courses of action on the board of directors; nonetheless, it is generally accepted in case law and by scholars that the foregoing principle does not alter the fact that the board of directors is solely responsible for standard management decision-making.

Any other amounts paid to a board member are legally binding only upon approval by the general meeting. Stock option schemes addressed, inter alia, to the members of the board provided under company law are also subject to the approval of the general meeting or the board itself upon the authorisation of the general meeting.

In several cases involving listed companies, abuses of stock option schemes have been detected by the competent authorities, especially in recent years. The Code suggests that stock options should not vest within three years of the grant date and their exercise price should be no lower than the average closing share price of the past 30 trading days prior to the grant date.

Loans or credits granted by the company or by its subsidiaries to the members of the board, founders, managers or their relatives, as well as to legal entities controlled by the above persons, are null and void.

Generally, the Greek Code and a draft proposal for a new law that has been publicised in the past, in an attempt to address existing remuneration provisions considered fragmentary and inadequate, dedicate a special part to the reform and unification of the remuneration systems of corporations.

In particular, to ensure transparency the Code recommends the inclusion the emergence of it governance in greece an annual report on the remuneration of the board members in the corporate governance statement, where the whole compensation package for each member shall be described, as well as details of the proportion of variable and fixed payments, and of the criteria on the basis of which the variable payments for the executive board members will be determined.

Moreover, the Code has clearly defined the role of the remuneration committee and its competencies. The Code also recommends the establishment of a right for the board to demand full or partial recovery by its executive members of any bonuses granted on a misleading basis. Within the same context of ensuring transparency, a proposed draft of a new law stipulates that the remuneration policy of each company, as currently in force, should be posted on the internet. The same draft expands the obligation for listed companies to publish in their annual financial reports the remuneration of non-executive members, so that the companies will also be obliged to publish the total remuneration of each board member executive and non-executiveas well as the amounts received by the five most highly paid people in the company.

For state-owned companies, a restriction has been put forward by recent legislation on the amounts paid to their managers and CEOs, as well as to the members of their boards. In 2008 7 the audit committee was introduced as being compulsory for listed companies. The audit committee assists the board in monitoring the financial information process, the effectiveness of the internal controls system and the risk management unit, as well as the progress of the financial reports; it further monitors the independence and impartiality of the financial auditors.

The committee consists of at least two non-executive members and one independent non-executive member from the board. These members must all be appointed by the general meeting. The financial auditor has to cooperate with the audit committee and report all the deficiencies regarding the financial reports and the internal audit unit.

The emergence of it governance in greece, in 2017, the legislative framework on audit committees was amended. Currently, the audit committee, which is constituted as either an independent committee or a committee of the board of directors, consists of at least three members.

The members can be non-executive members of the administrative body of the audited entity or members appointed by the general meeting of shareholders of the audited entity, or both.

The majority of the committee members are independent from the audited entity and at least one member of the committee is a suspended or retired certified public accountant or a person with accounting and auditing competence. Furthermore, the creation of two additional committees, a remuneration and a nomination committee, which would assist the board, are recommended by the Code. During takeover periods, the board is required to decide only on regular business matters and refrain from acting in a way that could lead to the cancellation of the bid.

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The board must publish a document stating its reasoned opinion regarding the bid, specifically regarding its consequences for the company, its shareholders and employees.

In the general government sector, officers are required to perform their duties with integrity, objectivity, impartiality, transparency and social accountability, act exclusively in the public interest, and respect and abide by the rules of discretion and confidentiality regarding matters that come to their knowledge in the performance of their duties. The members are requested to demonstrate the qualities of prudent and diligent businessmen or businesswomen, and the care required must be judged on the basis of the duties and capacity of each member.

This provision aims to avoid conflicts of interest, given that in Greece most listed companies are controlled by majority shareholders. Since 2010, there has been a collective duty and liability of the board to ensure that the annual financial statements, the annual report and the corporate governance statement are drawn up and published according to the emergence of it governance in greece law and pursuant to international accounting standards.

Shareholders may claim damages for direct losses suffered if the members of the board acted intentionally. In a case of indirect damage suffered by a shareholder loss of share valuethe general meeting may decide the filing of an action. The same right is attributed to shareholders having one-tenth of the share capital, who may request that the board file an action and, if a period of six months has lapsed, they may request that the court appoint special representatives to that effect.

Furthermore, the success of the claim presupposes that the loss suffered and the link between the conduct and the loss can be proven by the applicant. Gathering evidence for both of these elements may prove a very costly and time-consuming process and very often hinders the enforceability of claims against the board.

Criminal liability could also be founded on several provisions. In the latter, the board should outline the performance of the company, significant events and risks, and transactions with related parties; these reports should also include the statement of corporate governance and refer to the corporate governance practices and systems of internal control and risk management. Corporate governance rules provide for the establishment of a corporate announcements department. Furthermore, public consultation has been initiated on a draft provision for the transposition of the European law rule referring to the corporate governance report.

Auditors are liable to the company and may be held liable by shareholders or third parties in cases of intentional cause of damage. Statutory auditors are subject to a set of professional ethics principles, including confidentiality, objectivity and professional secrecy.

To that effect, the audit committee should periodically review these systems to properly identify, manage and disclose relevant risks. With respect to the banking sector, in particular, institutions shall ensure that: Where own-funds requirements are based on a rating by an external credit assessment institution or based on the fact that exposure is unrated, this shall not exempt institutions from additionally considering other relevant information for assessing their allocation of internal capital; 3 the ongoing administration and monitoring of the various credit risk-bearing portfolios and exposure of institutions is operated through effective systems; and 4 diversification of credit portfolios is adequate.

Although there is no general requirement in law for a company procedure dealing with whistle-blowing, the Code provides for the establishment of proper internal communication channels intended to support the role of the system of internal controls and the role of the employees.

It is specifically suggested that a whistle-blowing policy should be in place for the reporting of illegal acts of company employees.

Customers, statutory auditors and external counsels may the emergence of it governance in greece as important sources of information and should thus be given means of communicating with the company.

Hence, as a best practice model, the board should take into consideration the interests of stakeholders such as employees, creditors, customers and social groups that are influenced by the way the company operates, provided the emergence of it governance in greece these interests are not in conflict with the interests of the company. Corporate governance, social responsibility and sustainable growth are said to constitute the three main pillars of a business, which needs to develop on a solid social grounding.

The main tool available to shareholders for controlling corporate governance arrangements and influencing the objectives of a corporation is their participation in general meetings.

  • To that effect, the audit committee should periodically review these systems to properly identify, manage and disclose relevant risks;
  • Legal responsibilities of the board All the activities of the company that facilitate its objectives directly or indirectly fall under the competence of the board, except for issues that by law fall within the scope of the general meeting;
  • The board should opine on the independence and the adequacy of each candidate;
  • Although the board should act collectively, in practice, most of its duties are carried out by its executive members, who are engaged in the day-to-day management of the company;
  • In a case of indirect damage suffered by a shareholder loss of share value , the general meeting may decide the filing of an action.

The law lays down the matters that fall within the exclusive competence of the general meeting and refer the emergence of it governance in greece to major corporate decisions, including approval of financial statements, distribution of profits, changes in the share capital, election of the board, and merger, transformation, dissolution or revival of the company.

Exceptionally, under certain conditions, the board may decide upon the aforementioned matters; for example, members of the board may be elected by the board itself when members have resigned, or in certain cases of share capital increases or distribution of profits within the relevant financial year and based on a prior general meeting authorisation. Corporate governance concerns with regard to shareholder engagement brought about the EU intervention and the adoption of the directive on the exercise of certain rights of shareholders in listed companies, 8 which introduced minimum standards to remove obstacles that deter shareholders from voting.

This directive has been transposed into law in Greece via recent legislation focusing on procedural issues and certain — rather limited — material aspects of shareholder participation. In companies limited by shares, minority shareholders owning one-twentieth of the paid-up share capital have the right to put forward a request for the convocation of a general meeting, specifying the agenda to be discussed.

They may also request that specific matters be added to the agenda of an already convoked meeting, in which case they are subject to observing minimum time frames for prior notification of such requests to the board.