Anna Grygo

Best practice just gets better and better

Under amendments to the WSE Code of Best Practice, companies will have to publish their sponsorship policies and comment on false reports about the company.

The Code of Best Practice for WSE Listed Companies is a set of rules and recommendations for companies listed on the Warsaw Stock Exchange and their management boards, supervisory boards and shareholders. The first edition of the code was adopted in 2002, and the code has been revised every few years since then. The goal of the code is to assure transparency in public companies, good communication with investors, and protection of the rights of shareholders.

Under the principle of “comply or explain,” listed companies should comply with sections II (Best Practice for Management Boards), III (Best Practice for Supervisory Boards) and IV (Best Practice for Shareholders) of the code, but if they elect not to apply certain rules, or violate the rules, they must disclose this and explain why. Information about compliance with best practice or departures from the rules is published on the company’s website in the form of current reports.

Recent amendments to the code which go into effect on 1 January 2012 mainly concern corporate governance issues.

One of them is a recommendation that listed companies publish a position on their website addressing untrue or outdated information or opinions about the copy expressed by company officials or other influential persons, or take other measures to insure that investors receive accurate information. For example, if the media publish reports forecasting the company’s earnings which are not the company’s official projections, the company should publish a correction on its website. Otherwise, investors may be left with a false impression of the company’s financial condition.

Companies are more and more active in supporting cultural, athletic, scientific or educational endeavours. The revised Code of Best Practice introduces a new recommendation to disclose the policies which the company follows when it conducts non-business initiatives. The recommendation is intended to insure that shareholders are informed of how the company spends money for non-business purposes, so that they can make their own assessment of whether such expenditures are justified.

The amended code also extends the deadline by which companies will be required to conduct shareholder meetings electronically, from 1 January 2012 to 1 January 2013. Until then, it is recommended but not mandatory for companies to enable shareholders to participate in shareholder meetings via electronic communications.

In another change, the supervisory board of a listed company will be relieved of the obligation to prepare an annual assessment of its own work for submission to the general meeting and publication on the company website. The other reporting requirements of the supervisory board will remain unchanged.

Anna Grygo, Capital Markets and Financial Institutions practice, Wardyński & Partners