Corporate governance in Greece started to be explicitly codified with the original 1999 Principles which were released as a voluntary corporate governance code, and were closely modeled according to the Organization for Economic Co-operation and Development (OECD) Principles on Corporate Governance. These were supplemented by the 2000 Stock Exchange Code of Conduct and finally, in 2002, by the Law on Corporate Governance No. 3016 of 2002, which applies exclusively to listed companies. In addition, the regulatory authority for the capital markets in Greece--the Hellenic Capital Market Commission--together with the Athens Stock Exchange has taken steps to improve internal control mechanisms, and enhance the role of minority shareholders in corporate management, according to a 2005 study by the Lambadarios and Associates law firm. The OECD believes that the effectiveness of the corporate governance principles in the 2002 Law could be enhanced by adding them to the listing requirements, on a comply or explain basis. In the European context, the legislative framework of the Greek capital market is fully harmonized with European Union guidelines and directives, as reported in the 2005 study by Spanos. While Spanos' study acknowledges positive developments in the corporate governance framework in Greece, it finds that the majority of listed companies in Greece lack sufficient corporate governance mechanisms. Greece predominantly applies a one-tier board system, and is also characterized by a high degree of ownership concentration. Companies are often family-owned, and the state is a majority shareholder in a significant number of listed companies. In addition, there is a lack of disclosure regarding institutional investors' voting and investment policies.

General Overview

According to a 2002 study prepared by the international law firm Weil, Gotshal & Manges for the European Commission, the Hellenic Capital Market Commission (HCMC) set up the Committee on Corporate Governance in April 1999 to establish efficient corporate governance practices. In October 1999, the Committee introduced a White Paper, titled "Principles on Corporate Governance in Greece: Recommendations for its Competitive Transformation," better known as the Mertzanis Report, which functioned as a voluntary corporate governance code, and was closely modeled according to the Organization for Economic Co-operation and Development (OECD) Principles on Corporate Governance. In November 2000, the HCMC issued the Code of Conduct for Companies Listed on the Athens Stock Exchange (ASE). As opposed to the Mertzanis Report, the Code of Conduct is mandatory, and requires listed entities to establish an internal audit unit to monitor the company's auditing process and report to the board of directors. The Hellenic Federation of Enterprises (SEV) further developed a voluntary corporate governance code in 2001.

According to a 2005 study by the Lambadarios and Associates law firm, the HCMC and the ASE have been encouraging listed companies to improve their internal control mechanisms, and enhance the role of minority shareholders in corporate management. The Law on Corporate Governance No. 3016 was enacted in 2002, introducing new principles on the composition of listed companies' board of directors, as well as organization of internal controls. The main features of the Law, as noted in the OECD 2005 Economic Survey on Greece, include the definition of the board of directors' duties and the role of internal auditors, the safeguard of minority shareholders' rights, and the protection of shareholder rights. The OECD believes that the effectiveness of the corporate governance principles could be enhanced by adding them to the listing requirements on a "comply or explain" basis. The Lambadarios and Associates law firm states that the Law on Corporate Governance applies exclusively to listed companies in conjunction with the Law on Public Limited Liability Companies No. 2190 of 1920.

In the European context, Greece's legislative framework for the capital market is fully harmonized with European Union (EU) guidelines and directives, according to a 2005 study by Loukas J. Spanos. The Law on the Protection of the Capital Market from Abuse of Privileged Information and Market Manipulation No. 3340 of 2005 has implemented the EU Market Abuse Directive No. 2003/6/EC. The Law on Public Bids No. 3461 of 2006 transposed into Greek legislation the EU Takeover Directive No. 2004/25/EC. The EU Prospectus Directive No. 2003/71/EC was also incorporated into Greek law through the Law on Prospectus for the Public Offer of Securities and Admission to Trading No. 3401, which came into force in October 2005. Finally, Greek Law No. 3556 of 2007 aligned the transparency requirements to the provisions of EU Transparency Directive No. 2004/109/EC.

Greece predominantly applies a one-tier board system, as reported in the 2005 study by Spanos. Pursuant to the law, the board combines supervisory and management functions, but delegates daily management to executive managers. The board must be made up of at least three members, and is required to meet at least once a month. In the case of listed companies, the composition of the board of directors entails that at least one third of the board members must be non-executive, of which at least two must be independent, as stated in Spanos' 2005 study. Shares in Greek companies are issued either in bearer or registered form. As of July 2004, out of the seven Greek companies listed on the FTSE Eurofirst 300, six applied the "one share-one vote" principle, according to a 2005 report by the Association of British Insurers (ABI). The single company deviating from the one share-one vote principle used a voting right ceiling of 10 percent.

Despite positive developments in the corporate governance framework in Greece, according to the 2005 study by Spanos, "the majority of the listed companies in Greece lack sufficient corporate governance mechanisms" (p. 20). Greece also has a high degree of ownership concentration. The study further highlights that companies are often family-owned, and the state is a majority shareholder in a significant number of listed companies. In addition, there is a lack of institutional investors' disclosure in their voting and investment policies.

The HCMC is the main independent regulatory authority for the capital markets in Greece. The HCMC further supervises entities such as the ASE, and the Hellenic Exchanges (HELEX). In turn, the Ministry of Economy and Finance (MEF) supervises the HCMC, and is responsible for "the harmonization of legislation with European Law and supervision of observance of the law by all agencies of the capital market and the Stock Exchange" (p. 9), as indicated by the Spanos' 2005 report. The ASE was founded in 1876 as an independent regulatory government agency, operating 5 different equity markets: the main market; parallel market; new market; market of emerging capital markets; fixed income instruments market; and derivative instruments market. The HELEX completed its merger with its 100% subsidiaries--the Central Securities Depository and Athens Derivatives Exchange Clearing House--in November 2006.

As noted in the International Bank for Reconstruction and Development and World Bank's (IDRB&WB) 2009 Doing Business report, published in 2008, investor protection in Greece was significantly below the average achieved by member states of the OECD. The Investor Protection Index is a subcomponent of the IDRB&WB's 2009 Doing Business Indicators, and consists of three dimensions of investor protection: transparency of transactions (Extent of Disclosure Index), liability for self-dealing (Extent of Director Liability Index) and shareholders' ability to sue officers and directors for misconduct (Ease of Shareholder Suits Index). The indexes range from 0 to 10, with higher values indicating greater disclosure, greater liability of directors, greater powers of shareholders to challenge the transaction, and better investor protection. Greece scores 1 in the disclosure index against an OECD average of 5.9. It scores 4 in the Director Liability Index against an OECD average of 5.0 and 5 in the Shareholder Suits Index against an OECD average of 6.6.

The Principles

Principle I: Ensuring the Basis for an Effective Corporate Governance Framework

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The HCMC set up the Committee on Corporate Governance in April 1999 to establish efficient corporate governance practices, as stated in the 2002 study by Weil, Gotshal & Manges. In October 1999, the Committee introduced the Mertzanis Report, which functioned as a voluntary corporate governance code and was closely modeled according to the OECD Principles on Corporate Governance. In November 2000, the HCMC issued the Code of Conduct for Companies Listed on the ASE. As opposed to the Mertzanis Report, the Code of Conduct is mandatory, and requires listed entities to establish an internal audit unit, which is obligated to monitor the company's auditing process and report to the board of directors. The SEV further developed a voluntary corporate governance code in 2001.

According to the 2005 study by Lambadarios and Associates, the Law on Corporate Governance No. 3016 was enacted in 2002, introducing new principles on the composition of listed companies' board of directors, as well as organization of internal controls. The main features of the Law, as noted in the OECD 2005 Economic Survey on Greece, include the definition of the board of directors' duties and the role of internal auditors, the safeguard of minority shareholders' rights, and the protection of shareholder rights. The OECD believes that the effectiveness of the corporate governance principles could be enhanced by adding them to the listing requirements, on a "comply or explain" basis. The Lambadarios and Associates law firm states that the Law on Corporate Governance applies exclusively to listed companies in conjunction with the Law on Public Limited Liability Companies No. 2190 of 1920.

In the European context, Greece's legislative framework for the capital market is fully harmonized with EU guidelines and directives, according to the 2005 study by Spanos. The Law on the Protection of the Capital Market from Abuse of Privileged Information and Market Manipulation No. 3340 of 2005 has implemented the EU Market Abuse Directive No. 2003/6/EC. The Law on Public Bids No. 3461 of 2006 transposed into Greek legislation the EU Takeover Directive No. 2004/25/EC. The EU Prospectus Directive No. 2003/71/EC was also incorporated into Greek law through the Law on Prospectus for the Public Offer of Securities and Admission to Trading No. 3401, which came into force in October 2005. Finally, Greek Law No. 3556 of 2007 aligned the transparency requirements to the provisions of EU Transparency Directive No. 2004/109/EC. However, the available sources do not directly address Greece's compliance with this principle.

Principle II: The Rights of Shareholders and Key Ownership Function

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According to the 2005 study by Spanos, shareholders' rights are exercised through the shareholder meeting, which takes place at least once a year. Shares in Greek companies are issued either in bearer or registered form. With the exception of preference shares, all shares are equal. As of July 2004, out of the seven Greek companies listed on the FTSE Eurofirst 300, six applied the "one share-one vote" principle, according to the 2005 report by the ABI. The single company deviating from the one share-one vote principle used a voting right ceiling of 10 percent.

The Law on Corporate Governance No. 3016 of 2002 addresses the safeguard of minority shareholders' rights, and the protection of shareholder rights, as noted in the OECD's 2005 Economic Survey. However, the available sources do not directly address Greece's compliance with this principle.

Principle III: The Equitable Treatment of Shareholders

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According to the 2005 study by Lambadarios and Associates, the HCMC and the ASE have been encouraging listed companies to enhance the role of minority shareholders in corporate management. In addition, the Law on Corporate Governance No. 3016 of 2002 addresses the safeguard of minority shareholders' rights, and the protection of shareholder rights, as noted in the OECD's 2005 Economic Survey. However, the available sources do not directly address Greece's compliance with this principle.

Principle IV: The Role of Stakeholders in Corporate Governance

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The 2005 study by Spanos indicates that there is a lack of disclosure with regards to institutional investors' voting and investment policies. However, the available sources do not directly address Greece's compliance with this principle.

Principle V: Disclosure and Transparency

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The 2005 study by Spanos states that "the disclosure framework in Greece is quite strong and in line with the EU trends" (p. 12). Listed companies are required to publish an annual report and a cash flow statement. The latter, according to Spanos, "constitutes the first step of implementing International Accounting Standards in Greece" (p. 12). Audits are also performed to verify the disclosure of additional information in the financial statements published by listed companies. In addition, the Law on Corporate Governance No. 3016 of 2002 introduces new principles on the organization of internal controls, and includes the definition of the role of internal auditors. The EU Prospectus Directive No. 2003/71/EC was incorporated into Greek legislation through the Law on Prospectus for the Public Offer of Securities and Admission to Trading No. 3401 of 2005, which came into force in October 2005. Finally, Greek Law No. 3556 of 2007 aligned the transparency requirements to the provisions of EU Transparency Directive No. 2004/109/EC.

As a result of the European Commission (EC) Regulation No 1606 of 2002, starting January 1, 2005, all EU listed companies are required to prepare consolidated accounts following the International Financial Reporting Standards (IFRSs) endorsed by the EC. Member States may decide as well to extend this permission or this requirement to other companies as regards the preparation of their consolidated accounts and/or their annual accounts. In addition to EU requirements, Greece requires IFRSs for annual accounts for listed companies and permits the use of IFRSs in the consolidated and annual accounts for other companies which are audited by certified auditors. However, the available sources do not directly address Greece's compliance with this principle.

Principle VI: The Responsibilities of the Board

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Greece predominantly applies a one-tier board system, as reported in Spanos' 2005 study. Pursuant to the law, the board combines supervisory and management functions, but delegates daily management to executive managers. The board must be made up of at least three members, and is required to meet at least once a month. In the case of listed companies, the composition of the board of directors entails that at least one third of the board members must be non-executive, of which at least two must be independent, as stated in the 2005 study by Spanos.

The 2005 study by Lambadarios and Associates reports that the Law on Corporate Governance No. 3016 of 2002 introduces new principles on the composition of listed companies' board of directors. In addition, according to the OECD's 2005 Economic Survey, the Law defines the duties of the board of directors. However, the available sources do not directly address Greece's compliance with this principle.