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While Estonia has made significant progress in its implementation of the Principles and the Guidelines the Committee identified a number of areas where further improvements are recommended:

Enhancing Estonia’s “comply or explain” Corporate Governance code. The planned review of the Corporate Governance code should be used to address gaps in Estonia’s listed company disclosure requirements, for example in relation to company objectives, board members, relations with stakeholders and other subjects set out in Principle V.A. The review should also clarify which recommendations are purely voluntary and which need to

involve stricter disclosure requirements.

  • • Strengthening enforcement. Further steps should be taken to increase the sanctioning capacity of Estonia’s Financial Services Authority (FSA), particularly in relation to cases involving market abuse. Recent increased priority given to prosecution of such cases should continue. FSA’s role should also be strengthened to provide companies with clearer guidance backed by FSA enforcement as necessary to ensure that companies provide sufficient explanations to the market in relation to Estonia’s “comply or explain” reporting and other disclosure requirements, and to assess the effectiveness of the “comply or explain” approach in the Estonian context.
  • • Reinstating requirements related to board independence. Estonia should consider reinstating requirements for listed companies to have supervisory board members with independence from controlling shareholders to, inter alia, oversee related party transactions. Disclosure requirements related to board member qualifications and board composition should be clarified. Strengthening the role of independent board members should be considered both in relation to the above-mentioned review of Estonia’s Corporate Governance code and in relation to Estonia’s recently established Audit Committees.
  • • Improving mechanisms for nominations to boards of state-owned enterprises. To reduce the risk of political intervention in the day-to-day business of SOEs, Estonia should consider adopting a more formal and transparent nomination process that increases the emphasis on professional skills and qualifications.
  • • Recognising stakeholder rights. Specific provisions covering employee rights with respect to, inter alia, whistle blower protection, need to be put in place.

Corporate Governance in Estonia 2011 © OECD 2011

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