EBRD brings best European corporate governance to Croatia

Croatia introduces new code of corporate governance for listed companies

  • More responsibility, transparency and equality in representation
  • EBRD supported project and welcomes agreement

Croatian companies listed on the Zagreb Stock Exchange will further improve their corporate governance to meet the best European standards thanks to the introduction of a new code of corporate governance developed with support of the EBRD, led by the Bank’s Legal Transition Team.

The new regulatory framework was signed by Ante Žigman, President of the Board of the Croatian Financial Services Supervisory Agency (Hanfa) and Ivana Gažić, President of the Board of the Zagreb Stock Exchange (ZSE), in Zagreb today.

The new code requires increased responsibility and independence on the part of the governing bodies of Croatian companies. It also requires the adoption and publication of rules and regulations for all employees and management bodies. In addition, the code obliges issuers to increase in the long term the number of women in management positions and on supervisory boards, and to provide for communication with minority shareholders. Moreover, it obliges issuers to disclose in their business reports their socially responsible activities – not only those related to environmental issues, but also those regarding human rights protection, the prevention of corruption and others.

The project was implemented with support from the EBRD. The Bank’s Director for Croatia, Victoria Zinchuk, said: “We are delighted to support Hanfa and ZSE in the development of the new code of corporate governance. We are very pleased that the code sets a robust and modern foundation for the dialogue between issuers and the market. The EBRD will continue to support the Croatian authorities in establishing a monitoring framework and motivating firms to adopt the principles of the new code and put them into practice.”

Mr Žigman commented: “The new principles introduce the best European corporate governance practices into the Croatian capital market and place emphasis on the responsibility of companies’ governance structures as regards expertise, independence, remuneration, relationship to shareholders and all key stakeholders.”

He continued: “In order to revive the trading volume and stimulate the capital market, one of the key factors is to secure and increase investor confidence in the financial instruments they buy, and the high level of corporate governance of companies that issue these instruments directly affects this.”

“Corporate governance has been our focus for many years and, together with the regulator, issuers and other stakeholders, we are working to create an environment that fosters excellence and the highest business standards. According to research, reputation can account for 75 per cent of a company’s value. The capital market rests on trust, and once trust disappears it is very difficult to regain it. With this code we are opening a new chapter of corporate governance in Croatia and we look forward to continuing our joint efforts to raise the transparency and standards of corporate governance,” added Ms Gažić.

Corporate governance in listed companies has a major impact on the trading of companies’ financial instruments. Only 40 per cent of Croatian issuers’ independent supervisory boards are female, while women make up only 20 per cent of supervisory boards and 15 per cent of management boards. The average percentage of shareholders attending general meetings dropped from 38 per cent in 2014 to 22 per cent in 2018. Only 30 per cent of issuers have a separate department or employees in charge of investor relations.

The assets of entities supervised by Hanfa – that is, assets under its management – amount to more than HRK 206 billion (€2.76 billion), while the market capitalisation of companies that have listed their financial instruments for trading on the regulated market amounts to HRK 145.5 billion. The trading volume in the first nine months of 2019 amounted to HRK 2 billion.

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