What is Corporate governance framework?

A corporate governance framework refers to the system of rules, practices, and processes by which a company is directed and controlled. It involves the relationships between the company’s management, board of directors, shareholders, and other stakeholders, ensuring that the company operates in a transparent, ethical, and accountable manner. In Switzerland, corporate governance is governed by legal requirements, best practices, and voluntary codes to ensure that companies are managed effectively, with the interests of shareholders and other stakeholders at the forefront.

Key Features of a Corporate Governance Framework

  • Board of Directors: The board is responsible for overseeing the company’s management and ensuring that the company adheres to its strategic goals, ethical standards, and legal obligations. The board typically includes both executive directors (who are involved in day-to-day operations) and non-executive directors (who provide independent oversight).
  • Shareholder Rights and Engagement: Shareholders are central to corporate governance, as they provide capital and expect returns on their investments. A robust governance framework ensures that shareholders have the right to vote on significant decisions, such as mergers, dividends, and the appointment of board members.
  • Transparency and Accountability: Corporate governance emphasizes transparency in financial reporting, decision-making processes, and disclosure of material information. This builds trust with investors, regulators, and other stakeholders, while ensuring that the company is accountable for its actions.
  • Risk Management and Internal Controls: A strong corporate governance framework includes mechanisms for identifying and managing risks, as well as internal controls to prevent fraud, misconduct, and inefficiencies. These measures help ensure the long-term success and sustainability of the company.

Corporate Governance Framework in Switzerland

In Switzerland, corporate governance is influenced by both legal requirements and voluntary best practices. Swiss companies, especially those listed on the SIX Swiss Exchange, are subject to specific corporate governance rules that ensure accountability and alignment with international standards.

  • Swiss Code of Obligations: The Swiss Code of Obligations (CO) provides the legal framework for corporate governance in Switzerland. It outlines the duties and responsibilities of the board of directors, including fiduciary duties, reporting obligations, and requirements for shareholder meetings. The CO also regulates the formation and operation of various types of companies, such as limited liability companies (GmbH) and public limited companies (AG).
  • Swiss Corporate Governance Code: The Swiss Corporate Governance Code (SCGC) is a set of voluntary guidelines that provides best practices for corporate governance, specifically aimed at listed companies. The code addresses issues such as board composition, executive compensation, shareholder rights, and disclosure practices. Companies are encouraged to adopt the SCGC, although compliance is not mandatory. However, companies must explain any deviations from the guidelines in their annual reports.
  • Regulatory Oversight: Swiss companies are regulated by the Swiss Financial Market Supervisory Authority (FINMA) and other regulatory bodies, which oversee financial markets, corporate behavior, and legal compliance. Listed companies are required to meet specific corporate governance standards to protect investors and ensure fair and transparent operations.

A well-structured corporate governance framework in Switzerland promotes effective management, shareholder value, and corporate social responsibility. By adhering to legal standards and best practices, Swiss companies can strengthen their credibility, foster investor trust, and navigate the complexities of modern business operations.