A legislative approach to corporate governance of listed companies: The example of the new Greek Corporate Governance Law

I. Historical background

In Greece, corporate governance rules have always been a mixture of soft and positive law rules, with the rules of positive law prevailing already from the initial stage of the establishment of corporate governance rules in the country. At the beginning, two corporate governance codes were adopted in line with the European trend: the first in 1999, entitled “Principles of corporate governance in Greece: Recommendations for the Enhancement of its Effectiveness and Competitive Transformation”^[1] and the second in 2001, entitled “Principles of Corporate Governance”.^[2] In 2002, shortly after the adoption of the latter, a law on corporate governance was introduced, namely Law 3016/2002 “On corporate governance, payroll issues and other provisions”.^[3]

The Greek corporate governance law applied to sociétés anonymes with shares or other securities listed in a regulated market and contained provisions (11 Articles) in relation, inter alia, to:

1. The distinction between executive, non-executive and independent directors, albeit with a rather confusing description of their duties and tasks: more specifically, according to Article 3 of Law 3016/2002, executive members of the Board of Directors (hereafter ‘BoD’) were considered those “dealing with daily administrative issues of the corporation”, whereas non-executive members were considered to be “the Board members mandated with the promotion of all corporate issues”. However, the promotion of corporate issues is a duty of all the members of the BoD collectively.^[4]

2. The analogy between non-executive and executive members of the BoD, stating that the number of non-executive Board members should not fall short of one third (1/3) of the total number of BoD members,^[5] whereas at least two thereof should be independent non-executive members, as defined in Article 4 of Law 3016/2002, which determined the criteria that should be fulfilled in order for a member to be considered independent.

3. The rules of procedure of the company, focusing on content prerequisites.^[6]

4. The obligation for listed companies to set up an internal audit department^[7] and lay out its responsibilities, such as monitoring implementation and ongoing compliance with the rules of procedure and the articles of association of the company and the reporting to the BoD of cases of conflicts of interest, which were defined in Article 8 of the above Law.

5. Reporting of the BoD to the general assembly of shareholders in case of share capital increase by means of cash injection, according to Article 9 of the above law. Furthermore, it was established that any important deviations in the use of capital raised as mentioned in the prospectus and the decisions of the general assembly or the BoD should be decided upon by the BoD by a majority of 3/4 of its members and approved by an extraordinary general assembly of shareholders, convened to this end.

6. The legal consequences of breaches of Law 3016/2002,^[8] as well as transitional provisions.^[9]

The tasks of monitoring and enforcement of compliance with the provisions of Law 3016/2002 were assigned to the supervisory authority for the Greek capital market, i. e. the Hellenic Capital Market Commission (hereafter ‘HCMC’). In case of violation of the relevant provisions the HCMC could, pursuant to Article 10(1) of Law 3016/2002, impose on BoD members or persons entrusted with relevant responsibilities a reprimand or a pecuniary fine ranging from three thousand (3,000) to one million (1,000,000) euro.^[10] The criteria for the measurement of the fine that should be taken into account, in accordance with Article 10(1) of the above law, included, by way of indication, the impact of the infringement on the smooth functioning of the market, the risk of damage to investors’ interests, the needs of specific and general prevention and any repeated infringements of Law 3016/2002. There was thus a direct link between these provisions and capital markets law and the impact of their violation on the market’s smooth functioning. Furthermore, Article 10(2) of Law 3016/2002 explicitly stated that if the composition of the company’s BoD was not compliant with the Law’s relevant provisions,^[11] the validity of BoD decisions would not be affected. Therefore, the possibility of invoking a deficiency in a BoD decision due to a violation of the specific legislative provisions was excluded.^[12]

The legislator’s decision to opt for legislative provisions at a time when the vast majority of corporate governance rules were soft law, sparked off an intense debate and was heavily criticised by legal doctrine.^[13] The main arguments raised were the vagueness of several of the above Law’s provisions, the inconvenient “one-size-fits-all” approach concerning the internal structure of the companies, and the fact that the qualitative elements related to the company management went “beyond the law”. With regard to the latter point, the rationale was that “the peculiarities of each company, the subjectivity in the assessment of what is qualitatively good and the many ways to achieve the latter should be taken into account”.^[14] Listed companies should be able to decide the rules that they would apply taking into account their specific needs, idiosyncratic characteristics and structure,^[15] and the specificities of the Greek capital market.^[16]

II. The reform of the corporate governance framework

Articles 1-24 of Law 4706/2020,^[17] which concern the corporate governance of sociétés anonymes with shares or other securities listed on a regulated market in Greece, entered into force on 17.7.2021. Although the above law was published one year earlier (on 17.7.2020), a 12-month transitional period was given to listed companies in order to ensure their smooth adaptation to the new requirements. According to the explanatory memorandum of the draft law, these provisions seek to reform and modernise the corporate governance framework in order to take into account any changes in the regulatory framework governing listed companies since the issuance of Law 3016/2002 and current trends in corporate governance.

Articles 1-24 are accompanied by several decisions, circulars and interpretative documents of the HCMC. Currently, Decision 1/891/30.9.2020 of the HCMC BoD “Specifications of Article 14(3) and (4), Evaluation of the Internal Audit System and the implementation of the provisions on corporate governance of Law 4706/2020”,^[18] Decision 2/905/3.3.2021 of the HCMC BoD “Implementation of Article 17 of Law 4706/2020,^[19] Decision 1A/890/18.9.2020 of the HCMC BoD “Specification of the system for determining, calculating and measuring the amount of penalties per infringement imposed under Article 24 of Law 4706/2020”,^[20] and Circular of the HCMC No 60 “Guidelines for the Suitability Policy of Article 3 of Law 4706/2020”,^[21] as in force, apply in parallel with Law 4706/2020.

Furthermore, corporate governance provisions are also allocated in other legal acts, concerning either listed companies in general or special categories of companies. In particular, corporate governance provisions for listed companies are found in Law 4548/2018 on sociétés anonymes (mainly, Articles 110–112 on the remuneration policy and the remuneration report, respectively, and Articles 152–153 on the corporate governance statement),^[22] in Law 4449/2017 (article 44 on the Audit Committee which applies to entities of public interest, i. e. listed companies, credit institutions and insurance companies),^[23] as well as in legislation concerning special categories of companies (by way of indication, credit institutions, investment firms or public enterprises).

Concurrently with the entry into force of Law 4706/2020, a revised Hellenic Corporate Governance Code (hereafter ‘the Code’) was adopted in June 2021. This Code replaced the “Hellenic Corporate Governance Code for Listed Companies” issued in 2013 by the Hellenic Corporate Governance Council.^[24] The Code is applied on the basis of the “comply-or-explain” principle and its main objective is to create an accessible and understandable reference guide, which sets in a codified way in a consolidated text, elevated (higher than mandatory) requirements and specifications for corporate governance.^[25] The Code lays down principles beyond the mandatory framework of corporate governance legislation and addresses those matters which are (a) not regulated by law, such as economic, social and governance (ESG) issues, (b) regulated, but the applicable framework allows for selection or derogation, or (c) regulated in terms of minimum content.^[26]

I. Composition and duties

Pursuant to Article 5(1) of Law 4706/2020, the BoD consists of executive, non-executive and independent non-executive members. The BoD determines which members are executive or non-executive, while the independent non-executive members are elected as such by the general assembly of shareholders or are appointed by the BoD according to Article 9(4).^[36] The independent non-executive members shall comprise at least one third (1/3) of the total number of BoD members and, in any case, no less than two.^[37] The chair of the BoD shall be a non-executive member; however, if the chair is an executive member of the BoD, it is mandatory to appoint one of the non-executive members as vice-chair.^[38]

The BoD, as a whole, is responsible to set and supervise the implementation of the company’s corporate governance system and to monitor and periodically evaluate, at least every three fiscal years, the efficient implementation thereof by performing the necessary actions for dealing with any deficiencies.^[39] Furthermore, it shall ensure the adequate and efficient operation of the company’s internal control system, that the internal control functions operate independently from any business lines that they control and that they have appropriate financial and human resources as well as powers to operate effectively in line with their role requirements.^[40] Their reporting lines and allocation of duties should be clear, enforceable and properly documented. These responsibilities of the BoD mainly concern corporate governance issues and apply in parallel with those established in the corporate law on sociétés anonymes, i. e. Law 4548/2018.

Apart from the duties and competences of the BoD as a whole, the corporate governance law seeks to define the role and mission of both executive and non-executive members, in order to clarify the distinction between the two and the areas on which they should place emphasis in the performance of their duties. As explicitly stated in the explanatory memorandum of the draft law, the relevant provisions of Articles 6 and 7 of Law 4706/2020, introduce minimum powers for executive and non-executive members of the BoD in order to clarify to the extent possible their respective tasks, which had largely remained unclear. It is self-evident that these competences are established in addition to the duties of the BoD members under the abovementioned corporate law as members of the BoD.

For the purposes of Law 4706/2020, executive members are defined as the members of the BoD that have implementing powers in respect of company management in the context of the duties assigned to them.^[41] Those members of the BoD are mainly responsible^[42] for the application of the strategy set by the BoD and to consult with the non-executive members on a regular basis on the appropriateness of the applied strategy. Furthermore, amidst a crisis/risk situation or when circumstances call for measures to be implemented that are reasonably expected to significantly affect decisions on the progress of business activity and undertaken risks that are expected to affect the company’s financial situation, the executive members either jointly or individually, are required to immediately notify in writing the BoD by submitting a relevant report on their assessments and recommendations.

Non-executive members are defined as the members of the company’s BoD that do not have implementing powers regarding company management in the course of the duties assigned to them beyond the general duties resulting from their capacity as members of the BoD but have been entrusted with the role of the systematic supervision and monitoring of the decision making of the management.^[43] The non-executive members of the BoD including the independent non-executive members mainly have the following obligations:^[44] a) to monitor and review the company’s strategy and its implementation as well as the achievement of its goals; b) to ensure effective supervision of executive BoD members, including monitoring and assessing their performance; and c) to examine and express their opinion on the recommendations submitted by BoD executive members based on the existing information.

II. Independent non-executive members

Independent non-executive members are the non-executive members of the company’s BoD that upon their appointment or election and during their term satisfy the independence criteria provided for in Article 9 of Law 4706/2020.^[45] The establishment of the requirement of participation in the BoD of listed companies of independent non-executive members, whose main responsibility is control of the management, is quite simple and reasonable in its conception: Persons who have a link with the company (by way of indication, creditors, suppliers, consultants, employees), are presumed as potentially having a conflict of interest and unable, or lacking the necessary independence, to exercise effective control or challenge the decisions of executive BoD members.^[46] On the contrary, persons who have no links with the company are presumed to be independent of its management and, therefore, they may be in a better position, as members of the BoD, to exercise control and challenge choices and decisions, when and to the extent they deem necessary.^[47]

Competent and truly independent corporate directors, provided that they have sound and adequate information, are reasonably expected to be able to engage in constructive criticism of the executive members and management of the company in general, with reference to the impact of BoD decisions on company interests. At the same time, the participation of independent corporate directors in the BoD, operates or it is expected to operate, due to their independence and the ability thereof to exercise effective supervision of the management, for the benefit not only of shareholders, but also of third parties, such as, for example, of the company’s creditors.^[48]

With regard to the concept of “independence”, the standard approach is to establish both a general rule and specific criteria, which provide guidance in order to consider a person independent.^[49] According to Recommendation 2005/162/EC, a director should be considered to be independent only if he is free of any business, family or other relationship, with the company, its controlling shareholder or the management of either, that creates a conflict of interest such as to impair his judgement.^[50] The Recommendation also sets out a number of criteria for assessing the independence of corporate directors, which provide guidance to Member States for the adoption of their respective national criteria.^[51]

Law 4706/2020 follows the same approach as Recommendation 2005/162/EC. In Article 9(1) a general definition of “independence” is established, while in Article 9(2) specific criteria for the existence of a “relationship of dependence” are determined, in a rather detailed way.^[52] Thus, independence is defined negatively: if there are no specific dependency relationships, the member shall be considered independent.^[53]

In particular, by virtue of Article 9(1) of Law 4706/2020: “A non-executive member of the Board of Directors is considered independent provided that during the appointment and during his term of office he does not directly or indirectly hold a percentage of voting rights greater than zero point five percent (0.5%) of the company’s share capital and is free from financial, business, family or other types of dependency relationships, which may influence his decisions and his independent and objective judgment”. Therefore, in order for a member of the BoD to be considered independent non-executive, on the one hand, the quantitative criterion, i. e. the limit on the holding by the non-executive member directly or indirectly of a percentage of voting rights up to 0.5% of the company’s share capital, must be met at the time of the appointment and during his term of office, and, on the other hand, a qualitative criterion applies, which consists in assessing the absence of a member’s financial, business, family or other kind of dependent relationships, which may influence his decisions and his independent and objective judgment in the performance of his duties and the performance of his or her mission as an independent non-executive member in accordance with the above.^[54]

In Article 9(2) of Law 4706/2020, the legislator divides cases of dependence relationships into three main categories, which are further analysed and defined.^[55] Although the enumeration of the relationships of dependence is indicative (“in particular”), paragraph 2 provides comprehensive guidance for the identification of the most important sources of such kind of relationships in order to facilitate the implementation of the relevant provisions, to ensure as much as possible legal certainty and, ultimately, effective and efficient application of the general rule.^[56]

Pursuant to Article 5(3) of Law 4706/2020, at the meetings of the BoD on the preparation of the company’s financial statements or on the agenda of which an item thereof refers to the adoption of a decision by the general assembly by increased quorum and majority, according to the corporate Law 4548/2018, the BoD has the required quorum when at least two (2) independent non-executive members are present. In case of unjustified absence of an independent member in at least two (2) consecutive sessions of the BoD, it is considered that this member has resigned.^[57] Thus, a specific quorum of the BoD is established, by derogation of the corporate Law 4548/2018 for resolutions of major importance for the company.

I. Purpose and minimum content

Pursuant to Article 3 of Law 4706/2020, listed companies shall establish a suitability policy for the members of the BoD.^[58] This policy is approved by the BoD and then it is submitted for approval to the general assembly of shareholders. Article 3(1) thereof specifies the minimum content of the suitability policy. Namely, it is stipulated that it must contain:

1. the principles relating to the selection or replacement of BoD members, as well as the renewal of the term of office of existing members,

2. the criteria for assessing the suitability of the members of the BoD, in particular as to their integrity and good reputation,^[59] the adequacy of knowledge and skills,^[60] their independence of judgement^[61] and the experience required to carry out the tasks assigned to them; and

3. the determination of diversity criteria for the selection of the members of the BoD.

By means of the principles laid down in this policy in respect of the selection or replacement of BoD members, the diversity criteria for the selection of BoD members and the criteria for the evaluation of their suitability, the company itself should establish a framework on the basis of which its BoD will be staffed according to the specific characteristics and needs of the company concerned. The HCMC was assigned to issue guidelines concerning the implementation of the abovementioned provisions. These guidelines, are included in Circular N0. 60 of the HCMC, entitled “Guidelines for the Suitability Policy of Article 3 of Law 4706/2020”, which was published on 18 September 2020.^[62]

According to the Circular No 60, a “suitability policy is defined as all the principles and criteria that are applied at least when selecting, replacing and renewing the term of office of the members of the Board, in the context of the evaluation of individual and collective suitability”.^[63]

The suitability policy concerns both individual and collective suitability, i. e. the criteria that the company’s BoD member must meet individually and the criteria that the BoD should collectively have in order to be suitable for the company.^[64] According to Article 3(2) of Law 4706/2020, the composition of the BoD shall reflect the knowledge, skills and experience required for the exercise of its functions, in accordance with the business model and the strategy of the company. Although in paragraph 2 there is no explicit reference to the suitability policy, the inclusion of this provision systematically in Article 3 in conjunction with the rationale of the suitability policy as mentioned above leads to the conclusion that the policy serves the purpose of paragraph 2 and must contribute to its fulfillment.

Although the influence of banking legislation on Article 3 of Law 4706/2020 is clear, the differences between these two categories of provisions are significant. On the one hand, the provisions of banking legislation are much more detailed and rigorous. Credit institutions are subject to specific arrangements for the qualifications and skills to be fulfilled by their BoD members, as well as for the time they must devote in order to discharge their duties efficiently. These arrangements are set out in Directive 2013/36/EU^[65] and further specified in the joint EBA/ESMA guidelines on the assessment of the suitability of members of the management body.^[66] On the other hand the involvement and role of the competent supervisory authorities is quite different.^[67]

Furthermore, in addition to the general eligibility requirements of the Greek company law 4548/2018 concerning the members of the BoD of a société anonyme, by means of Article 3(4–5) of Law 4706/2020 specific prerequisites were introduced both for BoD members and for third persons entrusted with the powers of company management and representation. More specifically, pursuant to these provisions, a prerequisite for the election or continuation of BoD membership or for the delegation of powers on company management and representation to third parties or continuation of the relevant delegation in force, is the absence of any final court decision issued one (1) year prior to or since the election respectively on the liability of the member for related party transactions of the company or a non-listed company of Law 4548/2018 that caused injury.^[68] Each candidate must submit to the company a solemn declaration to the effect that there is no impediment and each member of the BoD shall promptly notify the company on the issuance of a relevant final court decision. Obviously, these provisions do not concern suitability criteria, but incompatibilities for the members of the BoD. However, they are systematically included in Article 3 of Law 4706/2020 on suitability.

II. Timing of suitability assessment

The assessment of suitability is carried out at individual level, upon selection, term renewal and replacement of a BoD member in order to determine whether the candidate to be elected or re-elected as a member meets the conditions set out in the company’s suitability policy. Taking into account that several of the criteria of individual suitability are dynamic, such as good reputation or the availability of time, individual suitability should also be assessed on a regular basis, as well as if exceptional events arise which (may) affect it.

Collective suitability should be reassessed accordingly, either because of the fact that an attack on the individual suitability of a member of the BoD may affect collective suitability, or because new needs arise that should be met in order for the BoD to be collectively suitable for the fulfillment of its duties. By way of indication, this may occur as a result of a legislative or regulatory development or due to a change or expansion of the company’s activity, which results in the need to strengthen the profile of one or more members of the BoD.^[69]

In order for the company to comply with its obligation regarding the individual suitability of the members of the BoD and the collective suitability of the BoD on an ongoing basis, the frequency of this assessment, the way it may take place (e. g. self-assessment of the members of the BoD and /or assessment by an external consultant), and possibly the procedure to be followed in this regard shall be specified by the company.^[70]

The suitability assessment should not be confused with the evaluation of the BoD, which refers to the performance of its members, the effectiveness of their participation in the BoD, the proper fulfillment of their duties, their availability and participation in the work of the body and, issues related to the evaluation of their presence as members of the BoD. BoD evaluation is a best practice of corporate governance,^[71] presupposes that its members are suitable both individually and collectively, and concerns their performance and effectiveness as members of the BoD. The BoD’s evaluation follows the assessment of their suitability.

The succession planning of the members of the BoD is also a different issue, however, closely linked with the suitability assessment, since it aims at ensuring the smooth continuity of the management of the affairs of the BoD and the decision-making following the departures of members of the Board. Succession planning aims to ensure or, at least, contributes to the maintenance of the smooth continuity of the company both in case of scheduled or unforeseen departure for any reason of one or more members of the BoD and is linked to the suitability of its members to the extent that suitability must be taken into account for the replacement of the member or members of the BoD to be replaced.^[72]

III. Gender Diversity criteria

According to Article 3(1) of Law 4706/2020, the criteria for the selection of the members of the BoD shall include at least adequate representation by gender at a rate that does not fall short of 25% of the total number of members of the BoD, while in the case of a fraction, this percentage shall be rounded to the previous integer.^[73] Therefore, an obligation to comply with the specific percentage regarding the underrepresented gender is established by law.

The establishment of a specific percentage in accordance with Article 3(1), arises from the under-representation of women in the BoDs of Greek listed companies. Relevant legislative requirements may also be found, among others, in Norway, Italy, Spain and France.^[74] According to the European Commission, citing relevant studies, there is evidence that women have different leadership styles, attend more board meetings and have a positive impact on the collective intelligence of a group.^[75] The European Commission itself acknowledges, however, that studies suggest there is a positive correlation between the percentage of women in boards and corporate performance, though for certain the overall impact of women on company performance is more nuanced.^[76] It is also argued that stronger female presence on BoDs will ensure that fewer risks are taken, insofar as women tend to avoid risk, unlike men, who are more prone to it.^[77] However, literature also states that companies that must meet quotas may have to appoint less capable directors which may lead to value destruction.^[78] In any case, it has been correctly pointed out that: “While some data shows some minor market shifts or potential governance benefits, firms across Europe now operate at least as well as they did prior to the quotas, but now with women holding nearly equal sway over firm governance. ... It may be safe to argue that the inclusion and its equality benefits prove cost-free”.^[79]

A balanced representation of genders in the BoD is part of the widely established tendency to enhance and encourage diversity in the BoD, which is recommended to be reflected in a policy of diversity of the company in order to promote an appropriate level of differentiation in the BoD and a diverse group of members.^[80] Beyond gender, the diversity criteria include, inter alia, age, geographical origin, colour, and disability.

IV. Interim Assessment

In the author’s view, laying down an obligation to adopt a suitability policy is per se welcomed to the extent that emphasis is placed not only on the status (executive, non-executive, independent non-executive member) of the BoD member, but also on the need to have BoD members with the necessary knowledge and experience on a case-by-case basis to be able to effectively fulfil their duties, whether they are executive or non-executive members. In this way, the importance of the presence of suitable members in the BoD is highlighted in order to ensure that they will be able to discharge their duties efficiently, in particular, but not only, in relation to non-executive directors, provided that they have the information they need.

Until very recently, the presence of non-executive and independent non-executive members in the BoD was considered sufficient to ensure the necessary checks and balances concerning management control. However, an independent non-executive member not having at the same time the personality, skills, knowledge, and/or experience required to be able to exercise this control may result in inability to exercise such a control in substance. In some cases, the obligation to include independent corporate directors in the governing bodies may have led to excesses in the sense that in order to find persons who met the individual independence criteria of the applicable legislative acts or corporate governance codes, skills and knowledge were put on the back burner.^[81] However, as it is rightly pointed out, it is not only the independence and objectivity that is at stake, but also the skills of a member of the BoD.^[82]

Furthermore, the obligation of the company with regard to the suitability policy is an obligation of means (obligation de moyens) and not an obligation of result (obligation de résultat).^[83] The legislator rightly follows in this case a principles-based approach rather than a rules-based approach. In other words, Article 3 of Law 4706/2020 lays down principles, the specific content of which is ultimately left to the company to be determined with reference to the general guidelines set out in Article 3. This approach is appropriate in terms of the suitability policy, as it provides, firstly, sufficient flexibility to companies to adapt the policy to their needs and characteristics, but also to the way in which they operate internally, and secondly, simplicity of the relevant regulation.^[84]

I. The obligation to set up BoD committees

Pursuant to Article 10 of Law 4706/2020, the obligation of listed companies to create two new committees of the BoD was established, namely, the nomination and the remuneration committee the responsibilities of which are defined in articles 11 and 12 of Law 4706/2020, respectively. The obligation to create an audit committee at BoD level was already established by means of Article 44 of Law 4449/2017, through which Article 39 of Directive 2006/43/EC was transposed into Greek law.^[85] Those committees must consist of non-executive and in their majority independent non-executive members of the BoD. For practical reasons and depending on the size and structure of the BoD of the listed companies, it is provided that the responsibilities of both committees may be assigned to one single committee. The reference to Article 10 in the audit committee is without prejudice to the application of Article 44 of Law 4449/2017 to this committee in the sense that Article 44 shall apply autonomously.

Although it is not explicitly provided for, it follows that the possibility for companies to “merge” the two committees into one is based on the principle of proportionality^[86]. However, there is no obligation for the company to state the reasons for any such choice or to take prior approval or ex post clearance from the HCMC. Until the adoption of Law 4706/2020, the establishment of the above two committees was foreseen regarding Greek listed companies – except for credit institutions – as a recommendation in the HCGC’s Hellenic Corporate Governance Code.^[87]

According to OECD, although 90% of jurisdictions have laid down an obligation to set up an audit committee, as far as remuneration and nomination committees are concerned, the percentages of mandatory establishment are clearly lower.^[88] In particular, the obligation to set up a nomination committee is found in 24% of jurisdictions and a remuneration committee in 32% of jurisdictions,^[89] respectively, while around 60% contain a relevant recommendation in corporate governance codes combined with the application of the “comply-or-explain” principle, according to which a company that does not adopt this recommendation is required to notify its deviation from the rule and explain the reasons behind such deviation.^[90]

The rationale for the establishment of special committees at the level of the BoD, which are composed of non-executive and independent non-executive members,^[91] is that these committees, which examine specific issues based on their responsibilities and submit the relevant recommendations to the BoD, facilitate the BoD’s work and make it more effective, since it is called upon to resolve on already elaborated issues. Furthermore, the aim is to ensure that the decisions of the BoD on these issues are free from material conflicts of interest, as is generally accepted to be the case in the field of remuneration, financial audit, and the nomination of candidate members of the BoD.^[92]

The BoD committees also seek to strengthen the role that non-executive members are called upon to perform in terms of their active participation in the BoD and in relation to the exercise of their supervisory role.^[93] It should be noted that, precisely in order to avoid conflicts of interest, it may be more appropriate for decisions on certain issues to be taken at the level of those committees. Such decisions are not excluded, provided, however, that the law allows it^[94] and that the BoD assigns to the committees the exercise of specific powers, which may be subject to delegation.^[95]

Also, in some national corporate governance codes, such as the UK Corporate Governance Code, the remuneration committee should have delegated responsibility for determining the policy for executive director remuneration and setting remuneration for the chair, executive directors and senior management.^[96] Furthermore, especially with regard to credit institutions, which are subject to the EBA Guidelines on sound remuneration,^[97] it is stipulated that the management body in its supervisory function should be responsible for adopting and maintaining the remuneration policy of the institution, and overseeing its implementation to ensure it is fully operating as intended. The supervisory function should also determine and oversee the remuneration of the members of the management function and, if the remuneration committee has not been established, directly oversee the remuneration of the senior officers in the independent control functions, including the risk management and compliance functions.

In any case, the function of the BoD as a collective body, which remains responsible for the decisions it takes within the framework of its powers, should under no circumstances be overlooked.^[98] Indeed, the general rule is that committees assist and support the work of the BoD. Some of its members, who have the appropriate knowledge and experience and, where appropriate, the necessary independence, process in depth the matters assigned to them and make recommendations to the BoD, for the relevant BoD decision to be taken.^[99]

II. Operation and responsibilities