General Questions

(1) Should EU corporate governance measures take into account the size of listed companies? How? Should a differentiated and proportionate regime for small and medium-sized listed companies be established? If so, are there any appropriate definitions or thresholds? If so, please suggest ways of adapting them for SMEs where appropriate when answering the questions below.

We understand that if listed companies are subject to a national corporate governance code on a ‘comply or explain’ basis and not to a strict legislation, a differentiated and proportionate regime for small and medium-sized listed companies is not needed, because such companies can explain in their Corporate Governance Statements how they approach individual corporate governance principles, alternatively why they do not apply some of such principles. It is important to achieve, through regular monitoring, a higher quality of Corporate Governance Statements so that they have information value and provide sufficient information on the method of corporate governance. It is definitely insufficient for a company to state in its Corporate Governance Statement only the fact that it does not apply a certain principle, without giving any explanation.

(2) Should any corporate governance measures be taken at EU level for unlisted companies? Should the EU focus on promoting development and application of voluntary codes for non-listed companies?

Also non-listed companies should definitely comply with corporate governance principles, due to the fact that their shareholders and employees, as well as other stakeholders, business partners, lending institutions, etc., have the same right to information on the method of corporate governance as the stakeholders of listed companies, because they participate in forming the business environment. This would surely contribute to trust between partners and to overall market stability. Non-listed companies often include large companies and state enterprises having a great influence on national, regional, or European economy, and their shareholders are citizens who also have the right of access to information and of decision-making with respect to management of their assets. It would definitely be appropriate if the EU promoted development and application of codes for non-listed companies.

Boards of Directors

(3) Should the EU seek to ensure that the functions and duties of the chairperson of the board of directors and the chief executive officer are clearly divided?

To ensure efficient monitoring and control by shareholders it is desired that the functions of the chairperson of the board of directors and the executive officer be clearly divided

(4) Should recruitment policies be more specific about the profile of directors, including the chairman, to ensure that they have the right skills and that the board is suitably diverse? If so, how could that be best achieved and at what level of governance, i.e. at national, EU or international level?

It is definitely required to insist on suitable professional qualifications and sufficient experience of directors. The question whether diversity is needed can be left to company owners for consideration and decision-making, as they know best the needs of the company and requirements for directors.

(5) Should listed companies be required to disclose whether they have a diversity policy and, if so, describe its objectives and main content and regularly report on progress?

With reference to the previous question we understand that it is not required that companies disclose whether they have a diversity policy and report regularly.

(6) Should listed companies be required to ensure a better gender balance on boards? If so, how?

We understand that there is no need for regulation of the requirement ‘to ensure a better gender balance on boards’; board composition should be left at the discretion of experienced experts.

(7) Do you believe there should be a measure at EU level limiting the number of mandates a non-executive director may hold? If so, how should it be formulated?

In this respect it is required to ensure that there is no conflict of interest if a non-executive director holds a larger number of mandates; however, setting a maximum number of mandates need not solve this problem. Setting the limit could reduce the probability of conflict of interest and theoretically ensure a better concentration and preparation of directors for board meetings, but these are personal qualities that are very individual.

(8) Should listed companies be encouraged to conduct an external evaluation regularly (e.g. every three years) ? If so, how could this be done?

Definitely yes. Specifically, by embodying the obligation of a regular external control in national codes, or, if possible, in OECD principles that are the basis for most national corporate governance codes.

(9) Should disclosure of remuneration policy, the annual remuneration report (a report on how the remuneration policy was implemented in the past year) and individual remuneration of executive and non-executive directors be mandatory?

Definitely yes. Transparency would help break taboo on this area and often help avoid misapprehension of the remuneration policy and of an amount of individual remuneration. Individual remuneration would not have to be disclosed, but a total amount used for remuneration for the board of directors and separately for the top management should be disclosed and compared to the total amount of wages paid to employees

(10) Should it be mandatory to put the remuneration policy and the remuneration report to a vote by shareholders?

We understand that shareholders, i.e., company owners, have the right to make decisions on the remuneration policy and the content of remuneration reports. If a remuneration committee is set up, it should be responsible for assessment of correctness of the set rules and conditions, and shareholders should assess a selected approach to remunerating the board of directors and the top management.

(11) Do you agree that the board should approve and take responsibility for the company’s ‘risk appetite’ and report it meaningfully to shareholders? Should these disclosure arrangements also include relevant key societal risks?

The board cannot take responsibility for risk management. However, the general meeting and subsequently the board must clearly set and/or approve the risk management rules for the company’s executive management and monitor compliance thereof.

(12) Do you agree that the board should ensure that the company’s risk management arrangements are effective and commensurate with the company’s risk profile?

Definitely yes, pursuant to the answer to the preceding question.

Shareholders

(13) Please point to any existing EU legal rules which, in your view, may contribute to inappropriate short-termism among investors and suggest how these rules could be changed to prevent such behaviour.

In the current automated trading, which enables holding securities literally for a couple of minutes only, it is very difficult to require from investors to present a certain vision or strategy of their investment, as often their only motif is an immediate profit from purchase and sale of securities.

(14) Are there measures to be taken, and if so, which ones, as regards the incentive structures for and performance evaluation of asset managers managing long-term institutional investors’ portfolios?

As evidenced in the past, the incentive structures lead to accounting frauds and have also probably contributed to the recent economic and financial crisis; however, they are still the most effective incentive for asset managers. Therefore, we understand that the incentive structures will continue to be used, but it is indispensable to ensure that bonuses payment be spread over time, at least from 2 up to 3 years, so that asset managers are not motivated by short-term effects where not appropriate.

(15) Should EU law promote more effective monitoring of asset managers by institutional investors with regard to strategies, costs, trading and the extent to which asset managers engage with the investee companies? If so, how?

In this area it is necessary to focus on raising awareness, on education of investors/shareholders so that they know and exercise their rights, ask for information and for control of how their investments are managed. A natural source of information for the investors/shareholders of listed companies is a stock exchange; therefore, it would be appropriate if websites of stock exchanges provide manuals for shareholders from which they would learn to what information they have right; how they should ask for such information; how they should exercise their rights to participate in governance of investee companies.

(16) Should EU rules require a certain independence of the asset managers’ governing body, for example from its parent company, or are other (legislative) measures needed to enhance disclosure and management of conflicts of interest?

In this respect it is desired to define the term “independence” and “conflicts of interests”. To be able to require independence and prevent conflicts of interests, it is necessary to prove them.

(17) What would be the best way for the EU to facilitate shareholder cooperation?

To (i) disclose to shareholders a list of shareholders so that they can know each other and, if interested, communicate their intentions, and (ii) ensure that information be easily available to shareholders not only before the session of a general meeting, but also ensure for them, throughout the year, access to minutes of sessions of the board of directors and of the supervisory board.

(18) Should EU law require proxy advisors to be more transparent, e.g. about their analytical methods, conflicts of interest and their policy for managing them and/or whether they apply a code of conduct? If so, how can this best be achieved?

Transparency of proxy advisors should be enforced by investors/shareholders that use services of such advisors. If there are more entities offering services of proxy advisors on a market, it is up to investors/shareholders to check what analytical methods they use, what their policy of solving a conflict of interest is, and whether they comply with ethical codes, and based on this information to decide whom they will address. Implementation of EU conduct rules and/or standards could help investors/shareholders decide what they should require from proxy advisors. On the other hand, regardless of compliance with such rules, their implementation may give rise to formalism.

(19) Do you believe that other (legislative) measures are necessary, e.g. restrictions on the ability of proxy advisors to provide consulting services to investee companies?

It is again the question of conflict of interest that has to be also defined in this respect. To prevent such a conflict of interest, it must be proved.

(20) Do you see a need for a technical and/or legal European mechanism to help issuers identify their shareholders in order to facilitate dialogue on corporate governance issues? If so, do you believe this would also benefit cooperation between investors? Please provide details [e.g. objective(s) pursued, preferred instrument, frequency, level of detail and cost allocation].

In Slovakia, shares of all listed companies are registered in the Central Securities Depository of the Slovak Republic, and issuers have the opportunity to request lists of shareholders. As a rule, they do so prior to the session of a general meeting. It is up to issuers whether they provide such lists to their shareholders and enable them to communicate their intentions in the area of corporate governance.

(21) (Do you think that minority shareholders need additional rights to represent their interests effectively in companies with controlling or dominant shareholders?

We understand that there should be set an obligatory structure of information that must be available to shareholders throughout the year as well as prior to the session of a general meeting so that they could defend their interests.

(22) Do you think that minority shareholders need more protection against related party transactions? If so, what measures could be taken?

Minority shareholders need protection against any transactions that are unfavorable to them. The board of directors should set a limit for the executive management in excess of which the management must prove that a transaction is efficient for all shareholders.

(23) Are there measures to be taken, and if so, which ones, to promote at EU level employee share ownership?

It is necessary to remove a legislative ban for listed companies on employee shares so that company owners, who perceive employee shares as an efficient incentive for employees, have the opportunity to use such a tool.

Monitoring and Implementing Corporate Governance Codes

(24) Do you agree that companies departing from the recommendations of corporate governance codes should be required to provide detailed explanations for such departures and describe the alternative solutions adopted?

Definitely yes. Such obligation should be embodied in a company’s Articles of Association so that shareholders have the possibility to require detailed explanations in partial or full non-compliance with certain principles of corporate governance codes.

(25) Do you agree that monitoring bodies should be authorised to check the informative quality of the explanations in the corporate governance statements and require companies to complete the explanations where necessary? If yes, what exactly should be their role?

If the codes and publishing of corporate governance statements are to fulfill a task of increasing the openness, fairness and responsibility of the executive management towards shareholders and other stakeholders, there is a necessity of the existence of national monitoring bodies that oversee compliance with the principles and subsequently with the quality of the explanations provided in the corporate governance statements. If a monitoring body is not authorized to check the informative quality of the statements, the information obligation of issuers may only be formal and thereby also misleading.
It is desired that a monitoring body have the possibility to verify an explanation provided directly with a company’s representative, or a company’s auditor. To increase the motivation for publishing quality statements, a monitoring body should publish, and possibly appreciate, those companies that provide quality statements. A good motivation would be if companies that provide quality corporate governance statements enjoyed certain privileges, such as considering this fact when assessing loan terms and conditions or access to public contracts, etc..