2020-02-10T08:13:00
The changes are limited in scope and are intended to bring the Code in line with legislative changes introduced since 2015 and strengthen, among others, recommendations on diversity and sustainability, supervision of non-financial information, and monitoring and management of non-financial risks.
The changes are limited in scope and are intended to bring the Code
in line with legislative changes introduced since 2015 and strengthen, among
others, recommendations on diversity and sustainability, supervision of
non-financial information, and monitoring and management of non-financial
risks.
On January 15, the Spanish National Securities Market Commission [Comisión
Nacional del Mercado de Valores] (“CNMV”) announced that it was
holding a public consultation until February 14 on changes
to certain recommendations in the code of good governance for publicly traded
companies (the “Code“).
The proposed changes are limited in scope, and we highlight two of
the main objectives: to bring the Code into conformity with the current legal
framework, given that since it took effect in 2015, the statute on publicly
traded companies has made certain recommendations compulsory; and to strengthen and promote the role of certain
issues in corporate governance related to socially responsible investment, such
as gender diversity, anti-corruption measures, sustainability, and social and
environmental issues. It is, then, a compilation of changes introduced by
Spanish Law
11/2018 of December 28, 2018 and the proposed changes being introduced by
the draft
bill on fostering long-term stockholder engagement, and it goes further
into the considerations made in the CNMV’s
announcement of November 2019 on cases of alleged illegal practices at some
publicly traded companies.
Chief among the proposed changes are that:
- Publicly
traded companies have a general policy concerning reporting corporate economic
and financial information through the channels they consider appropriate.
- The board
of directors set up a policy aimed at fostering a suitable composition of the
management body and, among other measures, favor diversity in several areas
(know-how, experience and gender), with a presumption that diversity is
fostered if measures are in place that help lead the Company have a significant
number of top female executives. Likewise, it is advisable that the gender with
lower representation make up at least 40% of the total number of members of the
management body.
- Rules
should be implemented requiring directors to report and, if necessary, resign
in any situations that may affect them, including cases of corruption,
regardless of whether their conduct in the company is called into question. The
board should review the case without delay (without waiting for the director to
be charged or arraigned) and decide whether any measures should be taken in
that regard (e.g., asking the director to resign, recommending dismissal, or
starting an internal investigation).
- As
indicated in the Technical
Guidelines 3/2017 on Audit Committees of Public-Interest Entities [Guía
Técnica 3/2017 sobre Comisiones de Auditoría de Entidades de Interés Público],
this committee’s mission should be expanded to include oversight of
non-financial information and systems for monitoring financial and
non-financial risks, and its members (especially the chairperson) should be
knowledgeable and experienced in these matters.
- It is
envisaged that publicly traded companies will set up a specialized committee on
environmental and social affairs and corporate governance to be composed
entirely of external directors, at least two of whom will be independent
directors.
- In connection
with the Code’s recommendation that directors’ severance payments on
termination of their contracts, should not exceed two years’ total annual
remuneration, the proposed changes specify that calculation of such amounts
should include any payment obligations or payments accruing as a consequence of
termination of the contractual relationship (including indemnity, previously
unconsolidated amounts from long-term savings schemes, or indemnity for
post-contractual non-compete covenants).