Corporate governance

The corporate governance of any company ensures that through established rules, clearly defined processes of adoption and verification of decisions, and specified ESG goals, the company develops a high-quality business system that is sustainable and successful in the long term, serving the interests of all shareholders, management, employees and the community in which it operates. Today, no large company can thrive without good corporate governance.

Corporate governance is particularly closely monitored. Today, in the time of transformation caused by climate change and the onset of measuring environmental, social and governance (ESG) factors, it is becoming crucial that almost every company, especially those whose shares are listed on the stock exchange, develops its corporate governance and raises the bar of its goals for control and supervision, as well as greater sustainability. 

With the aim of enhancing the corporate governance culture, Hanfa has:

* drawn up the Corporate Governance Code in cooperation with the Zagreb Stock Exchange

* independently initiated the preparation of the Annual Report on Corporate Governance of Issuers whose securities are listed on the regulated market of the Zagreb Stock Exchange.

Corporate Governance Code

In the European Union and other countries in the region and the world, corporate governance is directed at increasing the accountability of relevant persons within a company and strengthening the mechanism of internal and external control, as well as enhancing transparency requirements of business operations towards shareholders and investors.

Good corporate governance goes beyond compliance with laws and regulations and requires the commitment of all stakeholders (management board, supervisory board, executives, shareholders) in creating preconditions for issuers to act in line with the highest ethical standards, and standards of good corporate governance. In relation to the Capital Market Act, which stipulates a minimum level of transparent reporting to the investment public for issuers on the regulated market, the Corporate Governance Code establishes the foundations for the construction of sophisticated corporate relations within the organisation.

Hanfa and the Zagreb Stock Exchange produced the first Code as early as in 2007, and its revision followed in 2010. Significant progress in governance practices, which is reflected in changes in the Croatian and European Union law, has been made since then, along with a significant progress in understanding the factors and practices contributing to good governance.

Hanfa and the Zagreb Stock Exchange adopted a new Corporate Governance Code on 15 October 2019, superseding the previous Code published in 2010. Issuers began implementing it on 1 January 2020. The Code applies to all issuers whose shares are listed on the regulated market of the Zagreb Stock Exchange, except for shares of closed-ended investment funds.

The basic principles of the Corporate Governance Code imply:

-        ensuring transparent operation,

-        defining detailed procedures for the functioning of the issuer’s management and supervisory board,

-        avoiding conflicts of interest among relevant persons within the issuer (members of the management, supervisory board, senior management)

-        establishing an effective internal control system and an effective system of accountability.

Those principles of good corporate governance are achieved above all by responsible conduct of key persons within the issuer.

The realisation of the basic principles of the Corporate Governance Code is evaluated taking into account the achieved level of compliance with the standards of corporate conduct of an organisation in relation to the three most important interest groups within the issuer:

1. shareholders and the investing public

2. management board, supervisory board and employees, and

3. internal and external audit of the operation of the issuer.

The higher the level of compliance with the set standards of conduct within each interest group, the more compliant the issuer is with the established corporate governance standards. The Code recommends measures and procedures that reach the highest level of responsible corporate governance within each interest group. The Corporate Governance Code is available in Croatian here.

ESG factors

The Corporate Governance Code also stipulates the obligation to publicly disclose policies for the assessment of the effects of the company’s activities on the environment and community, the preservation of human rights and workers’ rights, and the prevention and sanctioning of bribery and corruption.

The Code requires the issuers to disclose information related to good corporate governance rules (“G“) in general, but also the information relating to the company’s strategy, taking into account the potential impact of its activities on the environment and community (“E“), the promotion of ethical behaviour, respect for human rights and positive and stimulating work environment (“S“).

In accordance with the introductory provisions of the Code, issuers must fill in two questionnaires on an annual basis: one stating whether the issuer has complied with each provision of the Code (compliance questionnaire) and the other providing more detailed information on their corporate governance practice (governance practice questionnaire). Issuers are obliged to submit both questionnaires to Hanfa, and the compliance questionnaire is also published. The questionnaires, together with the instructions for their completion, and information on when and how they should be submitted to Hanfa, as well as the publication of the compliance questionnaire, are available on the websites of Hanfa and the Zagreb Stock Exchange in the corporate governance section.

The Ordinance on data related to corporate governance which issuers are obliged to submit to the the Croatian Financial Services Supervisory Agency, as well as the format, deadlines and method of their submission (Official Gazette No 59/2020, 12/2023) prescribes the data concerning corporate governance that issuers with the registered office in the Republic of Croatia, whose securities are listed on the regulated market in the Republic of Croatia, are obliged to submit to Hanfa, along with the form, deadlines and methods of their submission.

Technical instruction for entities subject to the submission of regulated information to the official registry of regulated information and to the Croatian Financial Services Supervisory Agency contains a description of signing with advanced electronic signatures, registration, login and the manner of work for personnel authorised to access the computer system of Hanfa within the system for submitting regulated information to the Officially Appointed Mechanism for the Central Storage of Regulated Information, and to the reporting system of Hanfa in electronic form, as electronic documents signed by advanced electronic signature. The technical instruction is available in Croatian here.

Issuers are obliged to submit questionnaires to Hanfa as files in XML format, and instructions for the creation of an XML schema from an XLS file are available here.

Following the good corporate practice of European Union Member States, in 2011 Hanfa initiated the creation of the Annual Report on Corporate Governance as the next step aimed at improving the corporate governance culture in the Republic of Croatia. The basic idea is to include all corporate data on an annual basis for all the issuers whose securities are listed on the regulated Zagreb Stock Exchange in one place.

Data for the Annual Report on Corporate Governance are collected from issuers, the Zagreb Stock Exchange and the Central Depository and Clearing Company Inc., and data from the court registry of the commercial court is also used. Data from issuers is collected through the governance practice questionnaires.

The Annual Report on Corporate Governance presents a picture of the corporate governance culture of issuers in the Republic of Croatia, and shows the achieved level of corporate governance of domestic capital market issuers in relation to the regional environment and the European Union.


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