Following major problems observed in the management of several listed companies over the last few years, investors have become more vigilant regarding the principles of corporate governance applied by the companies in which they invest. With a view to protecting the investors’ interests and regaining their confidence, the Swiss stock exchange issued the “SWX-Directive on Information Relating to Corporate Governance” in 2002. This Directive specifies the information that companies must henceforth disclose in their annual reports regarding corporate governance.
As an institutional investor, the ethos Investment Foundation pays particular attention to the level of compliance with the new SWX-Directive, as well as the general application of principles of best practice in corporate governance. In pursuance of this objective, ethos has carried out a study on the standards of corporate governance achieved by the 100 major companies listed on the Swiss stock exchange which held their annual general meetings before 30 September 2003.
The study analysed and rated the 100 companies according to their levels of compliance with:
-The SWX-Directive transparency requirements.
-Principles of best practice in corporate governance.
The results revealed that 38 companies (6 of which are listed on the SMI index) lack transparency in matters relating to corporate governance. The ethos Foundation is therefore unable to classify them as being in compliance with the requirements of the SWX-Directive.
With regard to the principles of best practice in corporate governance, the ethos “Corporate Governance” rating was used to classify companies according to their levels of transparency in disclosing information concerning capital structure, the composition and organisation of the board of directors, the independence of the auditors, and shareholders’ participation rights.
The leaders in corporate governance are the companies that comply equally with the SWX-Directive requirements concerning transparency, and with principles of best practice in corporate governance. In this respect, UBS, Swiss Re, CS Group, Unaxis and Zurich Financial Services lead the way. At the other end of the scale, Zehnder, Conzetta, Belimo, Ems Chemie and Edipresse lag far behind.
Since the study aims to contribute to an improvement in corporate governance in Switzerland, it also includes a list of proposals for the refinement of the “SWX-Directive on Information Relating to Corporate Governance” and The “Code of best practice for Corporate Governance” issued by economiesuisse.