Fortunately, we have corrected this acute problem with the intervention of deputy prime minister Ali Babacan.

Let me stress one point as Xi Jinping, leader-to-be of the Communist Party of China (CPC), is in Turkey: Turkey is not becoming like China.  Turkey is not approaching the statism of the 1930s as systematically as China. In my commentary titled “Turkey is Becoming Just like China,” published on February 3, I drew your attention to the drafted amendment to the Law of Capital Markets Board (CMB) and argued that the arrangement about independent board members of the Board under the title of principles for corporate management eventually would put corporations under the tutelage of the central government. But fortunately, we have corrected this acute problem with the intervention of deputy prime minister Ali Babacan. Let me tell you how.

The “Communiqué amending the Communiqué on Principles Regarding the Determination and Application of Corporate Governance Principles” was issued in the Official Gazette  on February 11, 2012. This way, Turkey retreated from becoming like China, at least in one aspect.

This is what I see: First, with this communiqué, it was clarified that the investigation and approval of the CMB of independent board members shall be applicable solely for the “criteria for independence.” The purpose for assigning independent board members to publicly traded companies is to ensure with an independent assessment that corporate estates are well-managed, particularly for small partners. Here, independence is of significance in terms of preventing large partners from “making small partners dispossessed.” The duty of the independent board members is to block any attempt of dispossession, and not to obstruct or preclude the decision-making process of the company. This is why the independent members have to be independent from large partners per se. Independent members are obliged to defend the interest of the company, not to act in accordance with the demands of the management. The elements that raised doubts about such independence seem to have been eliminated with the latest communiqué. Now, it is clear that the CMB investigation will focus solely on identifying whether the criteria for independence is met. This is good. The next thing to do is to keep an eye on the implementation process. We had better be on the ball.

For those who ask about the link between China and the tradition of assigning political party members to the boards of private companies, I would like to recall the practices in the country during the 1990s. China’s transformation process can be divided into two periods. The first period was the Deng Xiaoping era of trying to make it to the shore and becoming prosperous. During this period, the collective enterprises of the Mao era rapidly became capitalist enterprises. The 1980s marked reforms both in China and in Turkey. In the 1990s, however, China continued on to the next phase while we wasted time. During the 1990s, the large public enterprises of China were restructured. In some cases, more than 100,000 people were laid off. In those times, they said, “it does not matter whether a cat is white or black, as long as it catches mice.” Public enterprises were therefore modified into private sector establishments which could catch mice. These were represented by individuals who traveled all around the world with cash in their pockets. And the board members of these companies were assigned by the CPC, via a new organization initiated to this end within the body of the party. It became a common practice to assign people who were competent, but also members of the CPC.

You might ask if the executives of the state-owned economic enterprises (SEEs) in Turkey were not assigned in the same manner after the Justice and Development Party came to power in 2002. Yes, they were. The interesting part is that the share of the public sector in the total value added of ISO 500 companies decreased from 40 percent in 2001 to 12 percent in 2010. After the Justice and Development Party came to power in 2002, the privatization process gained pace. Why would a political movement that previously had lowered the share of SEEs in the economy and changed the characteristics of board membership for SEEs want to intervene in the assignment of board members at private companies? There is no point in such an attempt, if we are talking about the same political party in power.

Either what we have been witnessing is a series of coordinated accidents, or the rule stressed by a resourceful politician who once said: “You cannot change the outcome of the ballot box, but you can change the winner.” Who knows? Maybe that is what it is. Fortunately, the mistake about the CMB has been corrected.

This commentary was published in Radikal daily on 24.02.2012