Corporate Governance in Turkey: Lessons From The American Experience
Why does Corporate Governance Matters?
Corporate governance serves as a tool in order to ensure accountability, transparency and responsible management on the part of the enterprises which have increasingly been finding themselves in a more competitive world. Such practice is not only necessary because it results with efficiency in a world where the sine qua non of market survival heavily depends on better and more effective management but also because it mitigates the ill effects of corrupt practices that might develop within the firms. Such practices might even develop in the countries like the United States which already have a strong culture of corporate governance. The Enron case, which had resulted with the demise of the firm alongside with Arthur Andersen and the morally very dubious practices of some of the banks such as Goldman Sachs which had resulted with a disaster for the customers but with a lucrative business cycle for the banks themselves clearly illustrate that corporate governance is a dire need not only for the mid or small size companies but also for the well-established giants of their respective industries.
Emerging markets like Turkey needs foreign capital to cover their current account deficits which poses a serious problem for their economies. One of the most important safeguards that the foreign investors seek is the corporate governance practices that foster accountability and transparency. Especially important to mention here is the changing attitude of the family owned firms in Turkey. The former generation of owners was much more prone to conduct their businesses as they wish without paying any heed to the principles envisaged for better corporate governance. However, the younger generation of owners had found themselves to be confronted with a market based on stiff competition. Hence their focuses are much more geared towards M&A activities which inevitably requires better corporate governance to make sure their companies survive in such a competitive market. Accountability, transparency, responsive and responsible administration inevitably gained a new importance for such companies.
Regulatory framework in recent years has evolved to reflect the changes of mentality of the new business elite in Turkey who is much more conducive to corporate governance compared to its predecessor. Capital Markets Board issues the necessary directives to ensure better corporate governance for the Turkish companies. Especially important in this regard is the transformation of the nature of the Capital Markets Board’s directives from being only advisory legislations to being binding legislations. When the binding nature of the directives combined with strict auditing and accounting standards that Capital Markets Board imposes on the Turkish companies, better corporate governance has gradually become a more attainable goal for the Turkish business. Other measures taken by the Capital Markets Board includes transparency in the sense of establishment of a separate department to better inform the stakeholders, the public and disclose information regarding the salaries of the CEO’s and the fiscal status of the respective companies.
The American experience of corporate corruption and decay should serve as a signal for all companies and investors which are looking to operate in a better regulated and more transparent market. The existence of corporate corruption and decay even in such a country like the United States which already has a business culture of transparency and responsible corporate governance illustrates how urgent is the need for regulations for better corporate governance practices. Turkey as an emerging economy which seeks to establish investor confidence has already initiated the process of issuing regulations through Capital Markets Board.