News 6. 12. 2019

Slovenian Sovereign Holding revises Corporate Governance Code for SOEs and introduces several new cases of good practice

Ljubljana, 6 December 2019 On 27 November 2019, the Supervisory Board of Slovenian Sovereign Holding (SSH) granted its consent to amendments and supplements to the Corporate Governance Code for SOEs (the "Code") which will come into effect on 1 January 2020.  The amendments and supplements represent further improvement of recommendations regarding cases of good practice for corporate governance addressed to the state-owned enterprises (SOEs). New recommendations refer to the following: diversity policy and succession policy, the adoption of the annual plan of work, the quality of external reporting, corporate integrity and the handling of some relations between shareholders and stakeholders.

The purpose of the Code is to set the standards of governance and supervision in SOEs and to develop a transparent and understandable system of corporate governance in the above-mentioned companies. The aim of the Code is to improve the long-term operations of SOEs by improving the quality of corporate governance in SOEs, for the benefit of all stakeholders.

The most important and substantive amendments and supplements to the Code are presented below.

Amendments to diversity policy

The diversity policy shall be formulated and adopted by the Supervisory Board of SOE (previously the Management Board together with the Supervisory Board) in which case the gender diversity must always be included and it should be then followed by other criteria determined by SOEs themselves. The Corporate Governance Statement shall include the report on the implementation of diversity policy and on the results of its implementation, defining the aspects of diversity, goals and the method for its implementation.

Relationship between stakeholders, SSH, the state and SOE

The amendments of some of guidance are mainly of editorial nature. This chapter aims to assist SOEs in finding the right balance between the principle of equal treatment of shareholders and stakeholders and the principle of protecting the interest of a company, when necessary. Public limited companies are advised to adopt a special legal document by way of which the method of shareholder communication should be regulated in a transparent and comprehensive manner. The President of the Supervisory Board has been given a greater role in providing answers to shareholders’ questions raised at the General Meeting of companies. 

Introduction of the internal succession planning

The Code regulates anew the internal succession planning policy; this is a methodical process for identification, training and selection of the most appropriate internal candidates of a company for the senior management positions. The first phase, identification of potential internal candidates, relates to the needs of a company resulting from the planning of succession for senior management positions in cases when a term of office of senior managers is terminated or in case of an early termination. The suitable profile of a candidate must be made regarding the company's development strategy and in regard to its needs, taking into consideration the compatibility and diversity of board members. It is the responsibility of the Supervisory board, the HR and the relevant commission to follow the progress of the identified internal candidates during their training phase and to direct them towards the expected target profile. There are two key reason for introducing the succession planning policy in a certain company: firstly, the suitable internal succession planning enables the company to train and grow its internal staff so that they are best suited for the company's needs, and secondly, in cases of unforeseen events, the company is better prepared for a transition at the senior management positions. The internal succession planning policy ensures long-term staffing planning and identification of prospective staff for other positions which are not necessarily senior management positions. 

Adoption of the annual plan of work for Supervisory Board and Audit Committee

The revised Code includes a new recommendation for Supervisory Boards and Audit Committees as regards the adoption of their annual plan of work for a financial year. Such plan should include the schedule of sessions and their agenda as anticipated. Such plan should be adopted at the beginning of the financial year. The annual plan of work for Supervisory Boards and for Audit Committees must be aligned with key dates in the financial calendar.

Supplemented recommendations on the transparency of operations and on reporting

The Code has been supplemented with the recommendation on responsible reporting and on gradual raising of the quality of external reporting. The principles of good quality reporting have been defined in a more detailed manner. Among other matters, this recommendation facilitates transparency and responsibility, it contributes to a comprehensive review of the company's position and its performance and to other factors.

Amendments to chapters on Code of Ethics and Corporate Integrity

SSH expects all SOEs to adopt their Code of Ethics. As regards corporate integrity, the following guidelines and recommendations have been added, significantly raising the standards of corporate integrity in companies. These are: appointing the Compliance Officer by defining his/her duties; identifying risks in regard to corruption, illegal conduct or unethical action; drawing up the integrity plan or anti-corruption programme; defining areas of work to which the integrity plan should refer to and adopting measures for managing risks; establishing the system for detecting and dealing with irregularities and for protecting whistle blowers; organising training sessions in regard to compliance and corporate integrity.

SSH expects SOEs to apply the Code as the reference code, to observe its recommendations and explain any deviations in their Annual Reports. SOEs should take into consideration the amendments to the Code when reporting for the financial year of 2020. The Code will be improved and supplemented in the future according to the development of best practice followed by SSH.

Appendix: the amended Corporate Governance Code for SOEs

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