The objective of corporate governance is to create a sound, transparent and accountable environment and to contribute to the long-term participation of shareholders, corporate financial stability and business integrity, thus contributing to faster economic growth and greater public involvement.
Proper communication to companies’ shareholders about their rights and effective implementation of property rights are essential aspects of corporate governance. To ensure this, all shareholders must have equal rights and access to all the information needed for making informed decisions. This is emphasised both by the Organisation for Economic Co-operation and Development (OECD) in its corporate governance principles, analyses and other documents, and by the European Union institutions when adopting legislation at various levels.
Effective corporate governance is one of the key factors determining the attraction of investments, their preservation and the improvement of corporate competitiveness. The quality of corporate governance is key in building trust among investors and shareholders in the company and in creating its value.
In this Overview, the Bank of Lithuania (LB) aims to assess the way companies disclose information on compliance with the recommendations set out in the principles of the Corporate Governance Code for the Companies Listed on Nasdaq Vilnius (hereinafter – the CGC). In 2017, when Lithuania was pursuing its accession to the OECD, major amendments were implemented in the Republic of Lithuania Law on Companies regarding ensuring the supervisory function of public limited liability companies whose shares are admitted to trading on a regulated market, ensuring the independence of collegial bodies formed by these companies, establishing requirements for transactions with a related party and their disclosure, establishing the shareholder’s right to submit questions to the company in advance, etc. This was also largely due to the recast of the CGC on 15 January 2019, as well as the new form of compliance.
This overview assesses the information disclosed by 26 companies whose shares are admitted to the main and secondary trading lists of Nasdaq Vilnius, AB. The type of activity and specificity of these companies often also determine the specific features of their corporate governance (the structure and composition of bodies, etc.). An assessment of the responses provided by the companies in the reporting form of the CGC with regard to their compliance with recommendations shows that they consider the recommendations to be followed very well (except for principles 5 and 7, where quantitative indicators are lower).