Powers and Responsibilities of Independent Board Members in Public Companies

Corporate governance is a common fundamental approach developed to meet the need for transparency and accountability within a company. This approach is codified under the Capital Markets Law No. 6362 and the Corporate Governance Principles annexed to the Communiqué on Corporate Governance No. II-17.1. The Turkish Commercial Code No. 6102 also provides for the application of provisions related to independent board members outlined in the Capital Markets Law. In this context, corporate governance principles are regulated in Turkish law on the basis of the Capital Markets Law and the Turkish Commercial Code, establishing open and fair management as a legal obligation for public companies.
In companies where controlling shareholders hold management control, the board of directors may be influenced by the dominant group that holds the majority of the capital. In such cases, there is a risk of the rights of minority shareholders being compromised due to the prioritization of controlling shareholders’ interests. For this reason, within the framework of corporate governance principles, independent board membership is structured as a neutral role that does not actively participate in the company’s day-to-day commercial operations but rather protects shareholders’ interests and opposes situations incompatible with the company’s objectives. The primary purpose of independent board members is to create a mechanism that prevents the company from being managed in a closed-loop system.
According to the Capital Markets Board’s Corporate Governance Principles, the majority of board members must consist of non-executive members, and among them, there must be independent members who are capable of performing their duties without being influenced by external factors. Non-executive and independent members are individuals who do not hold any shares in the company and serve solely as board members. In line with Article 1529 of the Turkish Commercial Code and Article 17 of the Capital Markets Law, the procedures and principles regarding corporate governance principles, the rules for their implementation, and the responsibilities and qualifications of independent board members in public companies are determined by the Capital Markets Board. In this regard, the Board published the Communiqué on Corporate Governance (II-17.1) in the Official Gazette dated January 3, 2014, and numbered 28871.
Article 1, paragraph 2 of the Communiqué specifies the scope of compliance with corporate governance principles, making the Communiqué applicable to public companies whose shares are traded on the stock exchange. Consequently, in public companies, the board of directors must consist of at least five members, and among the non-executive members, there must be independent members capable of performing their duties without external influence. The number of independent members on the board must not be less than one-third of the total number of members. Fractions are rounded up to the nearest whole number, ensuring that the number of independent members is never fewer than two. Furthermore, according to the Communiqué, the term of office for independent board members is up to three years, with the possibility of being re-nominated and re-elected.
The powers of independent board members can be categorized under three main headings: prevention, disclosure, and participation in committees. The first of these powers is to prevent the execution of board decisions in transactions with related parties and significant transactions affecting the company’s financial position. Related party transactions are defined as transactions of a certain magnitude between the parent company and group companies. Although each board member has one vote, independent board members possess the authority to veto certain decisions, as detailed in Article 9 of the Communiqué. If the majority of independent board members oppose significant transactions specified by law, the board cannot adopt such decisions, even if a quorum is achieved. If the majority of independent members do not approve the transaction, the reasons for opposition must be disclosed to the Public Disclosure Platform. Furthermore, for such transactions to be valid, approval by the majority of independent board members or the general assembly is required. Decisions that fail to meet these conditions are deemed null and void under Article 17, paragraph 3 of the Capital Markets Law. The disclosure function of independent board members arises in continuous transactions with related parties and transactions requiring guarantees. According to Article 10, paragraph 2(b) of the Communiqué and the relevant provisions of the Capital Markets Law, in cases where independent board members do not approve a transaction despite a quorum being achieved, the reasons for their dissent must be publicly disclosed.
Article 5, paragraph 1 of the Communiqué requires the establishment of committees within the board of directors as outlined in Article 4.5 of the Corporate Governance Principles. These committees must consist of at least two members, and if they consist of only two members, both must be independent. The CEO/general manager cannot serve on these committees. Additionally, the chairs of all committees must be selected from independent members, and all members of the audit committee must be independent.
In terms of financial rights, public companies are required to establish a remuneration plan for board members, document the principles of remuneration in writing, and include them as a separate agenda item in the general assembly. Article 4.6.2 of the Corporate Governance Principles states that the remuneration of independent board members cannot be tied to the company’s performance, profit-sharing, or share options. Article 4.6.3 requires that the remuneration be set at a level that preserves the independence of independent board members. The remuneration and all benefits provided to board members must be disclosed to the public on an individual basis in the annual activity report.
Ultimately, the purpose of appointing independent members to the board of directors within the Corporate Governance System is to enhance the board’s supervisory function, ensure the accuracy of its decisions, and provide objective contributions to the company’s strategy. In terms of responsibilities, independent members are not authorized to execute decisions or directly manage the company. Thus, their liabilities arise not from operational losses of the company but from failures to fulfill their oversight, supervision, and disclosure duties.