Corporate Governance

Corporate governance defines the system by which companies are governed and held accountable to stakeholders. It ensures that enterprises operate transparently, responsibly, and sustainably, particularly in highly regulated sectors like banking, insurance, and capital markets.

The fundamental principles include accountability, fairness, transparency, and responsibility. These are reflected in board practices, executive conduct, disclosure policies, and stakeholder engagement.

Boards of directors are responsible for setting strategic direction, overseeing management, and ensuring regulatory compliance. Effective boards exhibit independence, diversity, and competence. Dual-board systems (e.g., supervisory and management boards) are common in civil law jurisdictions such as Slovenia.

Corporate governance frameworks require that executive compensation aligns with the long-term interests of the company and its stakeholders. Remuneration policies must be disclosed and subject to shareholder approval under the EU Shareholder Rights Directive II.

Independent audit committees play a key role in financial oversight, ensuring robust internal controls, audit integrity, and risk management. Listed companies in the EU are required to have audit committees under the Statutory Audit Directive.

Corporate governance safeguards shareholder rights, including voting, dividend entitlement, and participation in general meetings. Companies must facilitate shareholder communication and disclose relevant governance matters.

Beyond shareholders, modern governance frameworks recognize the role of employees, customers, creditors, regulators, and the broader public. Stakeholder engagement is essential for ESG compliance and social license to operate.

Environmental, Social, and Governance (ESG) considerations are increasingly integrated into board oversight. EU legislation such as the Corporate Sustainability Reporting Directive (CSRD) mandates sustainability-related disclosures and due diligence across the value chain.

Corporate governance in Slovenia is regulated by the Companies Act (ZGD-1), sector-specific laws (e.g., ZBan-3, ZTFI-1), and soft law instruments such as the Slovenian Corporate Governance Code. These instruments are aligned with EU directives and OECD guidelines.

The EU promotes governance convergence through directives such as the Shareholder Rights Directive II, Non-Financial Reporting Directive (NFRD), CSRD, and Capital Requirements Directive (CRD). These laws impact board structures, disclosure, and stakeholder responsibilities.

The OECD Principles provide internationally accepted standards for governance, covering board responsibilities, shareholder rights, disclosure, and equitable treatment. They serve as a benchmark for EU and Slovenian regulatory frameworks.

Boards must ensure the implementation of effective risk management and compliance systems. Governance failures often originate from inadequate risk oversight or conflicts of interest at the board or executive level.

Banks and insurers are subject to stricter governance requirements under EU prudential frameworks (CRD, Solvency II). These include fit and proper requirements for management, robust internal governance, and remuneration controls.

Historical governance failures (e.g., Wirecard, Enron) highlight the importance of transparency, independent audit, board oversight, and whistleblower protection. Such cases have driven significant regulatory reforms.

Supervisory bodies such as the Bank of Slovenia, ATVP, and EBA oversee corporate governance compliance in financial entities. They can issue fines, restrict licenses, or require structural changes.

Smaller firms are encouraged to adopt proportional governance frameworks that balance agility with accountability. Investor expectations often drive improved governance in venture-backed or IPO-ready companies.

As digital transformation accelerates, boards must address IT governance, cybersecurity, data privacy, and technology-related risks. This includes overseeing AI deployment, cloud reliance, and digital ethics policies.