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The Corporate Governance Recommendation for listed companies was included in the Helsinki Stock Exchange’s regulations concerning listed companies as of July 1, 2004.
The goal of the Recommendation is to harmonize the operating practices of listed companies and information given to investors and shareholders as well as promote trust in the securities markets. The Recommendation has been prepared in accordance with the "Comply or Explain" principle, i.e. the company should comply with the entire Recommendation. If a listed company has a justified reason to deviate from the Recommendation, it should account for such deviation and provide explanation for doing so.
A review made by Helsinki Stock Exchange examined whether the companies provided the minimum amount of information required in the Recommendation requirements. Companies that are to be de-listed and foreign companies were not included in the study. It was concluded that at the beginning of January 2006 out of the examined listed companies 84 complied with the Recommendation without deviations and 34 companies had deviations that were explained in accordance with the "Comply or Explain" principle. A total of 11 companies had deviations in complying with the Recommendation. These companies did not explain the deviations or the minimum amount of information required in the Recommendation was not available on the companies’ websites or annual reports. In addition one company did not have a website on the Internet.
Most of the deviations from the Recommendation concerned the founding of the board of directors. Eleven companies deviated from the recommended minimum of five board members and 19 companies deviated from the recommended independence of directors, which states that the majority of the board shall be independent members. Seven companies declared that their board members were elected for a longer term than the recommended period of one year.
Deviations from the Recommendation were generally explained by the requirements of the business. The dependency of the board members was usually explained by the intended presence of major owners and family-owners in the board. Deviating from the recommended amount of at least five board members was explained by the scale of the business and the size of the company. Deviations from the recommended one-year board term were explained by continuity and a need for thorough familiarization of the industry. A total of nine companies had a Supervisory board.
Board committees in the listed companies were mostly established in accordance with the Recommendation. A total of 46 companies had founded an Audit committee for financial reporting and surveillance. A Compensation committee was established in 43 companies and 33 had established a Nomination committee. In addition to the recommended committees the listed companies’ boards had established 19 other committees.
The most common insufficiencies in reported information were the absence of the number of board meetings and average attendance, the absence of board committee members and the number of meetings as well as insufficient information given on the directors.
Surveillance of Helsinki Stock Exchange has been in contact with the companies, which have had deviations from the Recommendation. Surveillance has advised companies to take actions, in order to present on the Internet website and in the annual report the minimum amount of information required in the Recommendation.
In the future Helsinki Stock Exchange will regularly review that companies will comply with the Recommendation. Moreover, Helsinki Stock Exchange requires that companies which declares to comply with the Recommendation, also presents minimum amount of information required in the Recommendation.
