Corporate Governance Initiative

Minutes of the METU-ERC Workshop

Izak Atiyas, SabanciUniversity

As part of the TUSIAD-SabanciUniversity initiative on corporate governance (CG) a workshop was organized in the Middle EastTechnicalUniversity, Ankara, on Thursday, September 12, 2002. The purpose of the workshop was to inform participants about the nature of the TUSIAD-SU initiative, to jump start a research network, brainstorm on how joint research efforts can be organized in the future and discuss possible priority research topics. There were 10 participants.

The participants were informed about the TUSIAD-SU initiative: It comprises training, research and policy advocacy. It also entails cooperation with various international research networks, including the Global Corporate Governance Forum (GCGF), sponsored by the World Bank and the OECD, and the EuropeanAcademy of Business in Society (EABIS).

Discussion

The following points were highlighted during the meeting.

  • Research efforts would target both CG issues in Turkey and general themes (such as family ownership), which would be relevant for many emerging and developed market economies.
  • Research is likely to address three general areas: Bringing out empirical regularities, theoretical/analytical research to explain these empirical regularities, and policy oriented work to come up with suggestions and recommendations on how CG practices can be improved.
  • It was emphasized that in countries such as Turkey, CG practices and institutions in the private sector are likely to be closely influenced by overall governance institutions in the country. (e.g. transition from a clientelistic to a more competitive mode of development is affecting CG practices in the private sector).
  • While there was an overall acknowledgement of a possible international convergence of CG laws, codes and practices, there also was a general caution towards uncritical promotion of international “best practices”. Bringing out best practices withinTurkey may help with policy design. The concern was expressed that international best practice codes may fail to address the critical barriers to improved CG practices prevalent in countries such as Turkey.
  • Regarding appropriate legal frameworks for CG, it was emphasized that enforcement is as important as design (design should take into consideration enforcement capacity)
  • One of the purposes of the research effort is to bring out/identify possible conflicts of interest and agency problems not emphasized in the literature.

Research topics

Topics listed in the “synthesis note” (prepared by Stijn Claessens) following the Research Network Meeting of the GCGF were seen as highly relevant. The following were also highlighted.

  • Are there types of conflicts of interest or tensions or agency problems endemic in countries such as Turkey not emphasized or identified in the literature; hierarchy of conflicts of interest
  • Why is family ownership widespread; what are its shortcomings?
  • Interviews with members of family and professional managers
  • The relation between CG patterns and corporate performance
  • The role of labor in CG; protection of labor
  • The nature and role of insolvency laws in shaping CG practices
  • More generally, the nature of the conflicts of interest between shareholders and creditors and their role in shaping CG
  • What role does culture play in shaping CG practices and behavior of owners and managers
  • Joint ventures (e.g. do foreign companies deviate from their CG norms in joint ventures in Turkey, or are the JVs conduit to different CG practices that deviate from local norms ?)
  • Adjustment costs that are likely to arise in adaptation to CG reform
  • To what extent, if any, do individual CG practices of companies compensate for the deficiencies in the legal framework and its enforcement
  • Composition of boards of directors

Data

It was decided that the research initiative would include a data collection effort. Specifically, data on companies listed in the Istanbul stock exchange will be augmented with CG variables, organized into a user-friendly format and will be made available to researchers online.

Future steps

There was a general agreement that it would be possible to organize a conference in 12-18 months. The structure and content of the conference would be decided after talks with the research network of the GCGF.

Participants will review the research topics and suggest others by September 27

Izak will incorporate the suggestions and will come up with a new list of topics by October 10

Participants will prepare research abstracts by December 15