SAHA’s methodology for rating the degree of compliance with the Principles of Corporate Governance is based upon the CMB’s “Corporate Governance Principles” released on January 2014.
The CMB based these principles on the leading work of The World Bank, The Organization of Economic Cooperation and Development (OECD), and the Global Corporate Governance Forum (GCGF) which has been established in cooperation with the representatives of the preceding two organizations and private sector. Experts and representatives from the CMB, Borsa Istanbul and the Turkish Corporate Governance Forum have participated in the committee that was established by the CMB for this purpose. Additionally; many qualified academicians, private sector representatives as well as various professional organizations and NGOs have stated their views and opinions, which were added to the Principles after taking into account country specific issues. Accordingly, these Principles have been established as a product of contributions from all high-level bodies.
Certain applications of the Principles are based on “comply or explain” approach and others are mandatory. However, the explanation concerning the implementation status of the Principles, if not detailed reasoning thereof, conflicts arising from inadequate implementation of these Principles, and explanation on whether there is a plan for change in the Holding’s governance practices in future should be mentioned in the annual report and disclosed to public.
The Principles consist of four main sections: shareholders, public disclosure and transparency, stakeholders, and the board of directors.
Based on these Principles, the SAHA Corporate Governance Rating methodology features around 330 sub-criteria. During the rating process, each criterion is evaluated on the basis of information provided by the company officials and disclosed publicly. Some of these criteria can be evaluated by a simple YES/NO answer; others require more detailed analysis and examination.
SAHA assigns ratings between 1 (weakest) and 10 (strongest). In order to obtain a rating of 10, a company should be in full and perfect compliance with the Principles (see Rating Definitions).
To determine the total rating score for each main section parallel to the CMB’s Corporate Governance Principles, SAHA allocates the following weights:
- Shareholders: 25%
- Public Disclosure and Transparency: 25%
- Stakeholders: 15%
- Board of Directors: 35%
To determine the final overall rating, SAHA utilizes its proprietary methodology which consists of sub-section weights and weightings for the criteria thereunder, with allowance to optional criteria.