**4. Conclusions**

Good corporate governance is primarily the responsibility of every company and regulations at the national level taking into consideration specifics of the national economy, and the latest developments of governance practices and regulations at the European or even global level should ensure that certain governance standards are respected. Therefore, it is important that both hard law and soft law (i.e. especially corporate governance codes) provide comprehensive corporate governance framework, thereby encouraging the introduction of high governance standards and best practices in the companies' corporate governance system. This is of key importance for performance, growth and long-term sustainability of companies.

The findings of research studies and analyses discussed in this contribution show that the Slovenian CG Code has been playing an important role in developing corporate governance practice in Slovenia. Especially this is true for Slovenian-listed companies supporting cognitions by Aguilera and Cuervo-Cazurra [31] about the issuer's ability to enforce changes in the companies' governance system. Codes that are developed by the stock markets have strongest enforceability, since they are designed as the norm of operation, and thus having a greater impact on the promotion of good governance. The CG Code itself as well as mandatory disclosure of compliance with the code's recommendations serves as a guideline to different groups of stakeholders by clearly describing the particularities of the Slovene business world. Disclosures in the CG Statement based on 'comply or explain' approach should be specific and of high quality so that shareholders, investors and other stakeholders get a transparent and a reliable picture of the company's governance system.

The LJSE analyses from 2012 and 2015 of disclosures of compliances with the Slovenian CG Code [40, 50] show that the number of specific, high-quality explanations of deviations describing besides deviations also alternative solutions has increased. Even though these results indicate that companies have become aware of the importance of good disclosure practices, their share is still relatively low and therefore improvements are needed in this respect. Such situation is not specific for Slovenia, but has been noticed in other European countries where companies often use standard explanations of deviations, see [10]. The 'comply or explain' approach is effective only when high-quality explanations of deviations are disclosed. That is a way we find of crucial importance to raise awareness of the companies' key stakeholders on the main features of the high-quality explanations. According to the EC Recommendations, the high-quality explanations of deviations mean [32, Article 18]

• avoiding the use of the standardized language,

A closer look at the results shows that the share of companies disclosing deviations from particular recommendations has increased in the observed period. Half of the statistically most

Another research on corporate governance codes in Slovenia was conducted as a part of research on measuring the corporate governance quality by applying *the SEECGAN Index of Corporate Governance* [38, 39]. The main goal of the SEECGAN Index of Corporate Governance (the SEECGAN Index) is to enable assessment of the quality of governance practice in individual companies as well as the situation regarding overall corporate governance practice in a national economy. Additionally, it makes possible to compare corporate governance practices in South Eastern European countries since the SEECGAN Index methodology pays attention to the particularities of these economies. Seven governance categories are assessed [51, 52]:

All companies of the prime and standard market, in total 22 companies, that were listed on the Ljubljana Stock Exchange in June 2014 were explored. The main source of data was annual reports for the year 2013. Additionally, reports and documents published on the companies' websites were analysed. Research results revealed that more than three-quarter of the prime and the standard market companies disclosed a code. The majority of companies referred to one of the official codes. All standard market companies and 88.9% of the prime market companies disclosed the compliance with the corporate governance code and explained the deviations from it. Even though the disclosure of compliance with the chosen code is obligatory for the prime and the standard market companies in Slovenia [45, 46], one of the prime

Good corporate governance is primarily the responsibility of every company and regulations at the national level taking into consideration specifics of the national economy, and the latest developments of governance practices and regulations at the European or even global level should ensure that certain governance standards are respected. Therefore, it is important that both hard law and soft law (i.e. especially corporate governance codes) provide comprehensive corporate governance framework, thereby encouraging the introduction of high governance standards and best practices in the companies' corporate governance system. This is of

key importance for performance, growth and long-term sustainability of companies.

market companies did not disclose compliance with the code [39].

frequent deviations were those from the recommendations on the transparency.

**1.** Structure and Governance of Boards,

76 Corporate Governance and Strategic Decision Making

**4.** Corporate Social Responsibility,

**6.** Corporate Risk Management and

**7.** Compensation/Remuneration.

**5.** Audit and Internal Control,

**3.** Shareholders' Rights,

**4. Conclusions**

**2.** Transparency and Disclosure of Information,


EC recommends companies [32; Section III, paragraph 8, 33; Section III, paragraph 8] to clearly state which specific recommendations they do not comply with and for each deviation, they should


The research findings show that the level of compliance with the codes' recommendations has been increasing in Slovenia. However, as stated in both reports [40, 50], we cannot make a firm conclusion on the actual level of compliance with the CG Code's recommendations. Companies may not disclose all deviations or may find them as unimportant in their attempt to disclose compliance with as many recommendations as possible. That is a way companies should be made aware of the main purpose of the corporate governance code and accompanying 'comply or explain' approach since 'departing from a provision in the code could in some cases allow a company to govern itself more effectively' [32, p. 44]. A non-compliance with the 'best practice' which is accompanying with an explanation of how the alternative approach achieves the goal of the non-adopted recommendation can present significant benefit when creating the governance system that best suits the company's specific circumstances, see [36]. Companies should be aware of the flexibility enabled by the 'comply or explain' approach, and develop a governance system that in the best possible way addresses the company's specifics. The practice of not disclosing all deviations could be a very dangerous one since it can raise doubt about the implementations of the rest recommendations for which a company disclose compliance, see [40].

Both analyses on disclosures of compliances with the CG Code [40, 50] provide important cognitions on the adoption of the CG Code in Slovenian companies. Findings of such analyses reveal improvements in the governance practice and indicate those areas where changes are required. That is a way such monitoring and analysis should be done on the regular basis. Since we can observe high concentrated ownership in Slovenia [50] and companies with controlling shareholders are found to be less prone to disclose information [26], a regular monitoring of disclosures is of great importance. The EC recommends that public or specialized bodies should regularly monitor corporate governance statements published by companies in order to make 'comply or explain' approach effective [32, Article 19]. Shareholders should also perform effective monitoring in order to encourage good-quality explanations [32, Article 20]. Shareholders should play an active role in improving the quality of explanations in Slovenia as well. A dialogue between shareholders, a management board and a supervisory board is of great importance in the process of creating a suitable governance system. External institutions as professionals in monitoring the quality of disclosures [40] cannot do this. However, such professionals can play an important role in the process of monitoring due to knowledge and expertise they possess.

Reporting on the monitoring results can considerably contribute to better understanding of the code's recommendations among companies, promote debate and thus foster awareness of the underlying issues, see [26]. Regular monitoring of the codes adoption can provide legislators, policy makers and stock exchanges with an important insight into the effectiveness and efficiency of the codes, thus providing basis for developing and updating the recommendations 'in order to address the potential failures of corporate governance mechanisms' [10, p. 222]. Such monitoring can be the opportunity for regulators to 'make the rules less ambiguous' [26, p. 196] as it is the case with the last revision of the Slovenian CG Code that considered the findings of analysis of disclosures of compliances with the Slovenian CG Code from 2009 for the 2011–2014 periods.

The research studies and analysis not only in Slovenia but also in other surroundings deal mainly with the disclosures of compliance with the codes' recommendation. However, we believe that future research should address not only the statements on (non)-compliances but also how companies implement and practice the code's recommendations. Effective governance is demonstrated by the implementation of the regulations and recommendation in the practice and 'whether a code really contributes to improving practices depends on the extent to which companies actually comply with the recommendations in the code and to what extent compliances leads to changes in corporate behaviour' [12, p. 63]. We believe that a more in-depth analysis of the declared and implemented governance arrangements and their consequences is needed. An important contribution in this direction can be the SEECGAN Index that enables to measure how the codes' recommendations and national regulations contribute to the quality of corporate governance practice. The SEECGAN Index enables the comparisons of governance practices among South Eastern European countries, thereby creating a platform for debate about the best governance practices considering the specifics on national economies in that part of Europe.

Future research should also address the relationship among the code's compliance and the company's performance in general as well as in Slovenia. None of the researches and analyses conducted in Slovenia have addressed this question yet. We find this issue to be of great importance especially since mixed results about the impact of the level of compliance with the code's recommendations on companies' performance can be found in the literature, see [10]. Some research studies even showed that financial performance could justify non-compliance [7]. Diverse and mixed results can be explained by cognitions of several authors that corporate governance is a complex construct influenced by many factors, see [37]. Both the research and the practice regulated by different forms of hard and soft laws should adequately address the complexity of corporate governance construct. We hope that findings presented in this paper contribute to better understanding on how the codes of good governance as a form of soft law address this complexity and where improvements are required.
