As defined by James Wolfensohn, ex-president of the World Bank, corporate governance is about “promoting corporate fairness, transparency and accountability.” Good corporate governance is normally recognized as a major contributor to corporate performance, but it can also boost the performance of a national economy.
Turkey has the dubious distinction of capturing remarkably low shares of global foreign direct investment (FDI) flows. FDI is a significant indicator and this suggests that Turkey is facing a serious investor confidence problem. From the outside, Turkey is often perceived as an “opaque” country. The capital market is characterized by low liquidity, high volatility, and the high cost of capital, while controlling shareholders maintain large stakes.
A report by PricewaterhouseCoopers (2001) ranked Turkey as the fourth least transparent country in the world. The estimated impact of opacity in terms of lost FDI is US$ 1.8 billion per year. Confirming this impression, research by McKinsey (2002) on 188 companies from Turkey, South Korea, Malaysia, Taiwan, India, and Mexico puts Turkey at the bottom of the ranking with respect to board oversight and transparency, and second from bottom ahead of only Mexico in respect of shareholder rights.
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