Corporate Governance Evaluation: Garanti Bankasi in Turkey as a Case Study

Abstract

This report has been prepared based upon information available by Garanti Bankasi web site and according to the Corporate Governance Principles by the Turkish Capital Markets Board as amended on 2005. Evaluation includes the following main elements: (1) Shareholders rights: Under this heading the following sub-elements can be scored positively: facilitating the exercise of shareholders’ statutory rights, shareholders right to obtain and evaluate information, the right to participate in the general shareholders’ meeting, voting rights, dividend rights and transfer of shares. While there is lack of minority rights and lack equal treatment of shareholders can be scored negatively. (2) Disclosure and Transparency: Public announcements are made via all communications channels and are in accordance with the CMB and ISE’s rules and regulations. Under this heading the following sub-elements can be scored positively: principles and means for public disclosure, periodical financial statement and reports in public disclosure, functions of external audit, significant events and developments that must be disclosed to the public, and the concept of trade secret and insider trading. But the bank does not make any public disclosures about individuals who are ultimate controlling shares after eliminating the indirect-shareholding and cross-shareholding relations is not included in the footnotes of the financial statements and in the annual report. And lastly, public disclosure of relations between the bank and its shareholders, the board of directors and bank executives can be scored negatively. (3) Stakeholders: On the topic of Stakeholders heading the following sub-elements can be scored positively: protection of bank assets, bank policy on human resources, relations with customers, ethical rules and social responsibility. Unfortunately, Garanti bank hasn't declared a policy document regarding stakeholders. The Bank, taking into consideration all stakeholders, aims to improve product and service quality and to achieve internal and external customer satisfaction. Stakeholders are all the parts which have a positive or negative effect on the bank, and limited to the customers. The participation in management is limited through Customer Care Line. (4) Board of directors: From the perspective of the Principles regarding the Board of Directors heading the following e sub-elements can be scored positively: Vision, mission and strategic goals of the company are clearly defined. The Garanti board is effective and highly qualified members; Remuneration of the board of directors is just attendance fees. Audit Committee, The Credit Committee, Assets and Liabilities Committee, Liquidity Risk Management Committee (LRMC), and Sub-committees for market risk, credit risk and operational risk are established. Chief Executives Officer and board chairman positions are separately chaired. The Bank Directors & key management officers are fit to their positions. But board majority are executive and the board doesn't have any independent members at all. Garanti Board responsibilities and duties are just a part of what is mentioned in CMB principles. The board meetings and achievement are not evaluated. The Executive Management Committee and The Corporate Governance and Social Responsibility Committee are two basic committees which are not established yet.