In this v- NET case it will be examined the corporate governance implementations at a

Turkish family owned conglomerate which is Vakur Holding Vakur Holding is one of the
successful family owned enterprises in Turkey However it has an introverted structure since
the !oard of "irectors of the Holding constitutes of mostly family members The constitution
of the Vakur Holding#s !oard of "irectors can be described as six insider and three outsider
members Those three outsiders are also family friends or loyal people who have worked for
$% years for Vakur &roup 'ompanies (rom this point of view of this structure of the !oard
of "irectors it can be said that the 'ompany which is v-NET was very dependent on the
family members of the Vakur (amily )oreover the main problem occurred when a foreign
partner *oined the !oard of directors of the v-NET
v-NET was a intra-group company of the Vakur Holding and was supplying IT and software
services for Vakur Holding companies !ulent +aya who was the 'E, of the 'ompany co-
founded the 'ompany with the Vakur (amily Then he thought that offering software
products to third parties would help the 'ompany to gain market share in IT sector and also
he thought that this would strengthen v-NET#s negotiation power with Vakur Holding
Eventually he accomplished to convince family members and also he convinced the !o" to
go public Then the I-, was made with $./ of the shares of the v-NET 0t the first stage the
'ompany was doing well and attracted interest of an 0merican 1ava-based mobile systems
developer corporation which is 2orytel Inc 0fter the negotiations 2orytel and v-NET decided
the ac3uisition of a certain percentage of v-NET would be sold to the 2orytel in return for a
royalty amount of 2orytel know-how and technology In order to accomplish the ac3uisition
45/ of v-NET shares were sold to 2orytel and 2orytel was entitled to nominate one member
to the 'ompany#s board of directors
0t the beginning everything was going right in terms of support of 2orytel and royalty fees
for 2orytel products were paid in time The key person of this ac3uisition was of course
!ulent +aya and Ian 2ory who is the founder and the 'E, of 2orytel was trusting him !oard
meetings were held without any problem as long as !ulent and 0hmet Vakur- who had
second big percentage of shares held- reached an agreement
0fter a while the company started receiving new orders and it began growing fast 0s a result
of this situation new employees were hired in order to meet needs of customers This growth
process also attracted Vakur Holding#s attention and (amily members began interfering to v-
NET in hiring new personnel with 6suggestions7 Vakur Holding assigned one of the family
$
members as sales and marketing manager However the person assigned for the *ob had no
experience about the sales and marketing and his English also was not very good
(urthermore another family member who is 0li ,sman Vakur 8had *ust completed his )!0
in !ilgi 9niversity offered an idea of forming a new IT company 0fterward the idea was
accepted by Vakur (amily with !ulent#s support to 0li ,sman v-TE+ was established in
1une :;;< and nine members of the core team of v-NET was transferred to v-TE+ )oreover
the largest contracted pro*ects of v-NET were subcontracted to v-TE+ and also 2orytel#s
know-how was deployed to v-TE+ This situation caused reduction in the revenues of v-NET
and after a while 2orytel started to 3uestion relationships of the v-NET#s operations with
Vakur Holding#s other companies Then 2orytel at the ordinary shareholders meeting
re3uested detailed information about the relationship of v-NET= v-TE+ and other Vakur
Holding companies However this re3uest was ignored by other members and other intentions
of 2orytel were avoided by the Vakur (amily and 2orytel decided carry the case into the
court
0s it is summari>ed above this is a classical case in corporate governance of family owned
enterprises The board of directors of the company mostly composed of family members
Thus effectiveness of the board depends on the decisions of family members although !ulent
+aya was the 'E, of the company Interventions of the Vakur Holding in hiring process and
other factors bounding !ulent#s intentions about carrying the company to the future
cannibali>ed the company 0lso ignoring the foreign partner#s chair in the board who is Ian
2ory and keeping him out of the operations and undervaluing his existence in the board made
the board ineffective in terms of principles of corporate governance described by the ,E'"
Those principles are rights and e3uitable treatment of shareholders= interests of other
stakeholders= role and responsibilities of the board= integrity and ethical behavior= disclosure
and transparency and the board of the directors of v-NET fails to fulfill many of those items
especially e3uitable treatment of shareholders and disclosure and transparency
(rom the point of view of stakeholders= corporate governance should improve confidence of
external and internal stakeholders towards the corporation In this case it can be observed that
stakeholders are the main aggrieve part !ulent +aya who is the founder and 'E, of the
company was hurt by Vakur (amily#s decisions about neutrali>ing v-NET and also minor
shareholder 2orytel was also in*ured from the activities of Vakur Holding
:
In terms of independent board members and internal auditing and governance= it can be said
that the company#s independent members were ineffective and internal auditing was serving
in favor of other members in the board such as Vakur family members Independent members
were loyal people to Vakur family and had close relationship with the family Thus any
conflict with the family would cause significant problems 0lso the government
representative was ignoring 2orytel#s rights by contradicting with the laws (urthermore
internal auditing was refusing to provide enough information to 2orytel although 2orytel had
right to reach data which was regulated under Turkish ?aw
The other point that can be discussed about the case is the relation between strategy-economic
performance-corporate governance 0s it can be deducted from the case at the beginning the
company was doing well= however afterward with the interventions of the Vakur &roup
economic performance of the company started going down both internal and international
markets This situation was not caused by ineffectiveness of the managers@ it was because of
the implementations of the Vakur Holding 0lso !ulent#s intention was making the company
more independent from the Vakur (amily however the more he strived the more he had been
dependent on the family#s decisions
0dditionally disrespecting the Turkish ?aw can be observed in the case Vakur Holding
disobeyed some issues such as )inority 2hareholding Aights under the Turkish ?aw= $%
th
article of the 'apital )arket ?aw about intra-group transactions and <<4
th
and <<%
th
articles of
Turkish 'ommercial ?aw about non-competition rules )oreover some intra-group
transactions were obvious= ignorance of this actions and disrespecting the minority
shareholder drove the company into the way of collapsing
Conclusion
0ccording to the case mentioned above it is clear that many companies are having trouble
with implementing corporate governance criteria in their organi>ations 0lthough many
company have strong organi>ational cultures and success both at internal and external
markets= many of them lack of professional viewpoint This deficiency of implementing
corporate governance criteria causes deprives Turkish corporations being respected in
international areas ,therwise it would be easier to attract foreign investors# attention toward
profitable Turkish companies
<

4