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Foreword – Ali Fuat Taşkesenoğlu
Chairman of Capital Markets Board of Turkey
Current economic conditions necessitate alternative means of financing to credit-based financing. To this end, financing through capital markets is highlighted as one of the means of reducing economic vulnerabilities and channelling savings more effectively to the economy. Good corporate governance practices play a key role in ensuring healthy development and efficient functioning of capital markets. Good governance must be understood as practices that protect the interests of stakeholders. Stakeholders include not only the main shareholders and small investors in a public company but also the other stakeholders, in a broader social sense. For good governance to prevail, the abilities and the skills of the board of directors, in assessing the opportunities and risks and in developing strategies and policies to achieve its objectives, are of great importance. Consequently, in constructing the board and selecting the candidates, due consideration must be given to the structure of the board with respect to the desired skill and demographic diversity. Effective working of the board committees, assessment of board performance, evaluation of top management performance and performance-based compensation are all instrumental in protecting the interests of stakeholders. The most crucial aspect of all these however, is that these practices and tools should be understood, accepted and implemented as a matter of necessity, rather than a matter of compliance.
Our corporate governance regulations are relatively heavier on the rules around the structure and processes of the Boards, in consideration of the fundamental theories, institutional realities in our country and the lessons learned from global practices. In order to construct boards that would protect the interests of all stakeholders, we have introduced regulations for the size of the board, the percentage of independent members, the existence of key committees and the percentage of female members. Accordingly, the guidance for Corporate Governance Ratings calculations sets more weight for compliance with the provisions related with the boards. A voluntary-based approach is adopted for the representation of women in the board of directors in order to promote diversity and enable women to participate more effectively in decision-making mechanisms.
The preliminary findings of our Corporate Governance Project conducted in collaboration with the European Bank for Reconstruction and Development (EBRD), revealed that the lowest level of compliance, amongst all the voluntary principles on the structure of the board of directors, is on the principle related with women’s representation on boards. With the introduction of our new reporting framework in 2019, we will be able to monitor compliance with corporate governance principles more effectively, assess the poor compliance areas more accurately and implement required policy changes much faster. In terms of demographic diversity, academic studies show that, higher representation of women in top management has positive effects on the profitability of companies and the efficiency of board meetings. Higher representation of women is also associated with less corruption and better risk management. The adoption of “more minds make less mistakes” perspective on board level, having members with different skills and perspectives, especially in terms of background and gender, and making good use of independent membership contribute positively to both operational and financial performance of companies. An important development followed by the CMB with respect of demographic diversity is the “2018-2023 Women’s Empowerment Strategy Paper and Action Plan” published by the Ministry of Family, Labour and Social Services which sets a target for including at least one female board member in publicly listed companies. The CMB will provide the necessary support for the realization of the target set by the Action Plan.

2018 6th Annual Report WOMEN ON BOARD Turkey