Corporate governance practices of non-listed companies in Turkey

Corporate governance is also on the agenda of the companies that are not listed on the stock exchange (non-listed companies). Corporate Governance, which is based on principles of "equity", "transparency", "accountability" and "responsibility", supports successful decision making and competitiveness in not only public companies but also in non-listed companies.

The study  provides information with regards to the level of importance given to the corporate governance guidelines and the extent to which its principles are implemented in the non-listed Turkish companies. The study is based on a data collected from the non-listed Turkish companies; it has been performed between August - November 2014 with the participation of 62 non-listed companies with 50 or more employees or 10 millions of TRY in annual revenue.

Key points of the research:

     Corporate Governance:

·    Although, there are no spesific legal requirements, corporate governance is considered as a priority for 90% of the non-listed companies..

·    Half of these companies have non-executive members on their board of directors.

·    50% of the companies have female members on their boards.

·    In 21% of these companies, board of directors meet as necessary rather than regularly.

Strategy:

·    Only 36% of the companies have a permanent committee for their strategic management and monitoring activities.

·    58% of the companies develop their strategies based on a documented strategic plan.

Risk Management:

·    53% of the companies have a risk inventory or a risk map which includes their identified business risks.

·    47% of the companies participated in the survey have a risk manager or a risk department; in 14% of the companies this responsibility is assigned to an internal auditor or internal audit department and in 6% of the companies a risk committee is responsible of this function.

Internal Control:

·    77% of the companies consider internal control as a priority for their companies.

·    However, these companies accept the need for improvement with regards to the documentation and formulation of the current systems/mechanisms in use.

Internal Audit:

·    57% of the companies have an internal audit function and this function is mostly executed by the permanent in-house staff.

·    29% of the companies execute their internal audit function by the permanent in-house staff supported by outsourced resources. Outsourcing of internal audit has gradually been preferred by more and more companies around the world.

Corporate Social Responsibility and Sustainability:

·    The corporate social responsibility activities which are increasingly gaining significance are performed by 66% of the companies.

·    Only 41% of the companies with a social responsibility policy issue an official report.

Appointment and Compensation:

·    3 out of 10 members of the board of directors do not get paid.

·    Almost 57% of the companies do not conduct official performance evaluation for their members of the board of directors while this figure is 39% for the senior management performance evaluation.

·    Only 58% of the companies have a succession plan for the key members of their executive team.

Prevention of Misconduct:

·    Although companies consider the misconduct risk as an important issue, only 47% of the companies have an action plan for preventing misconduct.

·    The fields which are exploited the most by far are indicated as purchasing (44%), sales (23%) and production/inventory processes (23%).