“We need better shareholder activism in Spanish companies”

Javier Cremades

Spain seems in urgent need to reform its Code of Good Corporate Governance.

It is an issue that will continue to evolve. We have already published several codes, supported by relevant people in the sector, and there possibly are some improved versions coming on in the pipeline. But this soft law will only be useful to the extent that some changes happen, as for example, that the behaviour and the working culture is based on honesty: no matter how detailed and profound codes are when rogue individuals feel safe enough to deceive.

We must also ensure that markets continue to have wide access to information, that there is transparency, that all these principles are actually implemented and not merely nominal. And then it is essential that this area remains protected from the ideological lobbies of our society. We are against the idea of quotas, for instance. Good governance is not feminist or non-feminist or egalitarian or anything. Good governance has to be as simple, or complicated, as the good management of a company seeking profits for its shareholders.

The International Organisation of Securities Commissions recently reported that Spain is one of the advanced countries where minority shareholders are worst treated.

Minority shareholders are always well placed when the company does well, when the company gives dividends and grows in a stable way. If not, whatever the legal framework for action, here and everywhere, shareholders suffer and see no return on their investment. What is true is that shareholder activism and cooperation registers lower levels in Spain because it is something very new, it has less than a decade. In Germany, Holland or England, shareholder activism has its origins in the nineteenth century, with the foundation of corporations. So in those countries, societies or groups of shareholders are numerous, are strong and influential.

And they make a difference.

They get involved and they do so with a very interesting philosophy that we should import and incorporate into our uses: that the shareholder is not an enemy of management but an investor who believes in the company and in its management team, and who can prove to be an advocacy voice of the company beyond its governing bodies. This, of course, with independence, self-monitoring and the appropriate controls.

In Spain, though, managers do dislike criticism or giving too many explanations.

Yes, in Spain it has occurred that many CEOs have seen shareholders as those who give them the power and provide a quorum at general meetings, but also who annoy them and make reproaches or insult them . But this is not representative: when shareholders invest in a company, they want that the management team succeeds and are willing to remunerate them accordingly.

What about the salaries of executive directors and advisers? There is a social outcry against a remuneration system most consider excessive. 

Oh well, shareholders want their companies to have a great performance and so they want to have the best people in the business and, if you want the best, you have to remunerate them well. People have to understand that we have to pay market prices to get the most prepared directors on board, or else. But I understand that today, amid this terrible crisis in which we live, there is a very strong hypersensitivity to these issues.

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