Published and draft legislation - Poland

Changes in the rules on corporate governance for listed companies

Best Practice for GPW Listed Companies 2016

From 1st January 2016, companies listed on the Warsaw Stock Exchange will have to apply the corporate governance regulations contained in the current Best practice code for listed companies, approved in October.

In line with the latest international codes published recently, such as Spain’s Code of good governance for publicly traded companies, Japan’s Corporate governance code, and Colombia’s New Country Code, the recommendations in this code follow the “comply or explain” principle. Thus, the annual corporate governance reports of listed companies must explain whether they fulfil the recommendations or not, and if not, give the reasons why they have not implemented them, so that the Stock Exchange can be aware of their compliance.

The document makes the following recommendations in its six chapters:

  • Policy of information disclosure and communication with investors. Companies must have a policy for disseminating information in an effective and transparent fashion. They must also ensure easy, non-discriminatory access to information. One of the changes from the previous regulation is that they can have their own website, not necessarily hosted in the Warsaw Stock Exchange’s domain, which will serve as the main means for publishing information and communicating with investors.
  • Management board and supervisory board. Companies will have to promote diversity of gender, education, age and professional experience among the members of the management board and supervisory board, which must spend sufficient time on performing their duties effectively. Specifically, the supervisory board should be made up of at least two independent members, and in order to fulfil their obligations properly, the board of directors must give the supervisor access to all the information considered necessary.
  •  Internal control systems. Companies must have effective internal control, risk management and compliance systems, as well as an effective internal audit function appropriate to their size and scale of activity. The units in charge of carrying out these functions must be separated, unless the company’s size or activity warrants their being combined. Those responsible for risk management, internal auditing and compliance should report directly to the Management board, the supervisory board or the audit committee.
  •  The General Meeting and shareholder relations. The Management and supervisory boards must ensure that shareholders are involved in the company’s affairs and that their rights and interests are respected.
  •  Conflicts of interest and related-party transactions. In their internal regulations, companies will have to specify how they prevent and identify potential conflicts of interest, as well as how to proceed in the event of these occurring. Members of the management and supervisory boards should avoid taking part in activities which could generate a conflict of interest for the institution or might affect their reputation. In any event, any conflict of interest generated should be reported at once.
  •  Remuneration policy. Companies must have a remuneration policy, at least for the members of the Management board and senior management, which must be publicly available and give an itemised break down of each individual’s compensation. The document recognises that remuneration should be sufficiently generous to retain and motivate staff responsible for managing and supervising the company, and should be decided with long term financial results in mind. Furthermore, remuneration of the supervisory board members may not have a variable component.

With these recommendations, the new code has adapted to several international corporate governance standards, although some of them are not very specific and leave room for interpretation. For this reason, the Warsaw Stock Exchange is preparing a manual to explain these recommendations and to provide companies with technical answers to help them comply with their information disclosure obligations.