The Code of Corporate Governance for Finnish listed companies was reviewed and reorganised in October 2015 as a result of the legislation passed in April 2014 by the European Commission in the area of corporate governance, which strengthened both the comply or explain principle and the quality of the explanations that companies must report to the market.

The reform aims to retain and further promote the application of high standards of corporate governance by companies listed on the Helsinki Stock Exchange, making their practices and procedures comparable to those of other companies internationally.

The number of recommendations has been reduced from those in the earlier version of the Code (2010). This has largely been effected by bringing together all the information reporting requirements in a single chapter, promoting better content of the information that companies report, thus encouraging greater market transparency.

The new code is divided into six chapters: Annual General Meeting; Board of Directors; Board Committees; Remuneration; other corporate governance issues; and Information & Reporting. It also includes an introductory chapter with general information about the corporate governance framework in Finland, in response to the information needs of companies, investors and other stakeholders.

The key modifications to the Code include the following:

• Composition of the Board of Directors: companies must publish the procedure followed when deciding the make-up of the Board of Directors.
• Diversity policy: companies must define the diversity policy they apply to members of the board and, specifically, report on their gender diversity policy and measures they are taking to ensure equal representation.
• Independence: the time after which a member can be considered independent has been cut from 12 to 10 years and a provision included pursuant to which firms must assess their board members’ independence at least once a year.
• Related-party transactions: entities will have to report on the procedures put in place to approve transactions with related parties in order to ensure appropriate decision making and to avoid potential conflicts of interest.
• Audit Committee: the levels of knowledge and expertise in the subject required of the committee members has been raised, and the obligation that they all be independent has been reinforced.

This Code of Corporate Governance became law on 1st January 2016. Since then, companies have been required to report on their compliance with the Code’s guidelines on their websites and in their annual corporate governance report.

Other countries around the world, such as Spain and Poland in Europe, and Colombia, Ethiopia, Japan and Peru elsewhere, have also recently published their corporate governance codes, all with the aim of encouraging listed companies to follow clearcut principles of market transparency and ensuring proper dissemination and circulation of information.  

Similarly, last September, the Organization for Economic Cooperation and Development (OECD) published an updated version of its Corporate Governance Principles (last revised in 2004), defending good governance as an acknowledged driver of growth and inclusive development.