Showing posts with label corporate governance. Show all posts
Showing posts with label corporate governance. Show all posts

Thursday, 2 April 2015

Board of Directors. Board, Board Members. Code of corporate governance of Spain. 2015

  1. Large part of the changes in the Good Corporate Governance Code relate to the board of directors and its specialised committees, to improve its efficient functioning and to favour the participation and dedication of its members:

I Meeting of the Board.-  It is recommended that the board meets at least eight times a year. 
II Board Members
  1. Non attendance.- If a director does not attend a meeting, it is recommended that he or she confers representation with precise voting instructions.                               
  2. Gender diversity is encouraged, promoting the objective that in 2020 the number of women directors represents at least 30% of the members of the board of directors.
  3. Independent directors are recommended to reach at least half of the total number of directors (or only a third in companies that do not have a high capitalisation or companies with one or various shareholders who jointly control more that 30% of the share capital).  
  4. Coordinating Director. The functions of the coordinating director ares extended with respect to those regulated by the Companies Act. He or she ought to be charged with keeping contact with investors and shareholders to learn about their opinions and concerns regarding the company's corporate governance.
  5. Conflicts of interests. It is recommended that companies publish on their websites any information on the remunerated activities performed by their directors, whatever their nature.
  6. Remunerations.

a.       Some recommendations are included towards there being a balance between the need to remunerate the directors' talent and dedication and promoting corporate sustainability and profitability at long term. It is recommended that the contract with the executive director includes the possibility that the company may claim reimbursement of the variable components of the remuneration when payment is not in line with performance conditions or when they have been paid in view of data that is later proved to be inaccurate.
b.      In relation to the termination compensation, it is recommended that a quantitative limit is established equal to the total annual remuneration for two years, and also that the compensation is not paid until the company has verified that the director has accomplished the established performance criteria.
III Board Structure. Commissions and Units
  1. Internal risk control and management unit. The Code recommends its creation under the supervision of the audit committee to the correct functioning of the company's risk control and management systems and monitor compliance of the policy defined by the Board.
  2. Nomination and remuneration committee, due to the importance given to the selection of directors and the plurality of technical considerations to be taken into account when establishing their remuneration systems, in high capitalization companies it is recommended that two separate committees be created, one for remunerations and the other for nominations,

CSR in the Corporate Governance Code of Spain. February 2015

Corporate Governance Code in Spain. New version, February 2015

  • On 24 February 2015 the regulatory body of the Spanish Stock Market (Comisión Nacional del Mercado de Valores, CNMV) published the new Unified Code on Good Corporate Governance for listed companies which substitutes the previous version from 2006, partly amended in 2013. 
  • The CNMV  had the support and assistance from the Committee of Experts on corporate governance created by agreement of the Council of Ministers on 10 May 2013 that also worked in drafting the Law 31/2014, published on 4 December 2014 and which amended the Companies Act in matters of corporate governance.
  • The new Good Corporate Governance Code excludes some recommendations of the previous Code as they have already been incorporated in a binding regulation. It  only includes matters subject to the principle of "comply or explain".
  • One of the fundamental changes in this Good Corporate Governance Code is the inclusion of recommendations related to the policy of corporate social responsibility, a matter that in recent years has aroused particular interest and awareness within and beyond our borders. This is why, for the first time, it is recommended that companies examine the impact their activity has on society and the minimum recommended content of the corporate social responsibility policy is established. Moreover, it is recommended that the company informs (whether in its management report or in a separate document) about matters related to corporate social responsibility.

Sunday, 1 March 2015



The amendments to the Revised Text of the Corporations Act (LSC), approved by Royal Legislative Decree 1/2010 of July 2, introduced by Law 31/2014 affect Directors’ duties, as it follows

1.- The reform provides important developments in the regulation of the legal status of the directors (functions, duties, liabilities and remuneration)
2.- Thus, in the case of the duty of care, the comprehensive reform of the general statement ("directors must perform and discharge  the duties imposed by the laws and statutes with the diligence of a prudent businessman, (...)"). Diligence in performing the duties should be assessed according to the functions assigned to each member of the board, thus taking into account the division of functions therein. (Article 225.1 LSC). The 2014 reform includes a duty to dedicate time in accordance with the position of each director (Article 225.2 LSC) as well as the duty to demand and the right to obtain from the company the information necessary (Article 225.3 LSC) 
3.- As for the duty of loyalty the Reform Act 31/2014 reinforces its regime expressly stating that it is mandatory: "The rules governing the duty of loyalty and liability for its violation are mandatory. Statutory provisions restricting this duty will be void (Article 230.1 LSC). It also
·         Reformulates the definition of generic duty: "Managers must hold their position with the loyalty of a faithful representative, acting in good faith and in the best interest of society" (Article 227.1 LSC).
·         Increases the detail in the definition of unfair behavior, completing the previous catalogue (especially on conflicts of interest), and dividing the content of the preceding Articles 227-230 and 232 LSC into two groups:
o    i) obligations derived from the basic duty of loyalty (new Article 228 LSC) and
o    ii) the duty to avoid conflicts of interest (new Article 229 LSC):
The former include the traditional duty of secrecy, abstaining from voting in cases of conflict of interest and acting independently without interference from third parties. The later refer to the duty not to take advantage of business opportunities of the Company and not to compete with the company.

The reform regulates dispensation from the obligations associated with the duty of loyalty (Article 230.2 LSC)in relation with conflicts of interests the waiver may be granted by the board, provided that it is safe for the company's assets , it takes place at market conditions, and with transparency. However, in the most relevant cases listed in Article 230.2 LSC, this is authorizing Directors to perform competing activities (it can only be waived when it is not expected to harm the Company) or the expected damage would be compensated by providing benefits obtained (Article 230.3 LSC). This waiver is granted by express and separate agreement of the general meeting. The duty of loyalty extends to de facto directors managers (art. 236.3 LSC).
The scope of the penalty for breach of duty of loyalty is extended because not only will bring the obligation to compensate the damage to the Company but also there would be an obligation to give back to the Company any unjust enrichment obtained (Article 227.2 LSC).

Tuesday, 3 February 2015

CG, CSR and Multiple listings

Interesting paper by Nasr Taha Hassn "Corporate Governance, Degree of Multinationality, and Corporate Social Responsibility" 
The companies with multiple listing are more likely to have a greater number of shareholders  which increases monitoring costs. One method to reduce shareholders' monitoring costs and alleviate the moral hazard problem is through disclosure in corporate annual reports.
ISSN (2384-4787), J. Emp. Res. Acc. Aud. 1, No. 1 (Oct-2014)

Friday, 16 January 2015

The penalty for insider trading does not require having obtained a specific economic benefit

The penalty for insider trading does not require having obtained a specific economic benefit
The Division of Administrative Litigation of the Supreme Court of Spain delivered a ruling dated November 14, 2014 ( application number 5244/2011 and rapporteur Mr Bandrés Sánchez- Cruzat ) , whereby it confirmed the fine of 210,000 euros to the Ministry of Economy imposed in 2010 the president of a company insider trading in connection with the sale of shares of the same Company in 2005 .

The Court rejected the appeal against the judgment of the High Court in 2011 and confirmed the fine.

In its judgment , the Supreme Court of Spain considers that the purchase in December 2005 by an entity of 51,780 shares of real estate amounting to 54.26 euros per share was prompted by information that the then president of that entity forwarded to the assignee of the acquiring company , given the close ties of family and professional character existing between society and punished.

The Supreme Court underlines: "it is not required to show that with the misuse of information either of the persons involved obtained a specific economic benefit. " The intention of the legislature with the imposition of this legal duty to agents and individuals operating in the stock market is to preserve the integrity of the securities markets and ensure equal conditions of potential investors.

Non profit boards: Hardening duty of loyalty. Related parties. NY_USA 2014

New York Non-Profit Revitalization Act.-  The Act's goal is two-fold: to reduce outdated regulatory burdens on nonprofits, thereby encouraging greater efficiency, and to enhance corporate governance, accountability and oversight of those nonprofits. The Act mandates a number of internal procedures which previously were optional "best practices" and applies these governance rules to charitable trusts.(force 1st july 2014)

Tuesday, 13 January 2015

Dividends, liquidity and shareholder activism

Dividends, liquidity and shareholder activism
A recent study "Relationship between  Liquidity and Shareholder Activism  " ( ) shows that since Blockholders’ incentives to intervene in corporate governance are weakened by free-rider problems and high costs of activism; liquidity helps overcome the free-rider problem and induces activism via pre accumulation of target firms’ shares.  

Authors of the Study: * Oyvind Norli  BI Norwegian Business School - Department of Financial Economics; BI Norwegian Business School, BI Norwegian Business School; Central Bank of Hungary, ; Charlotte Ostergaard , BI Norwegian Business School Ibolya Schindele BI Norwegian Business School; Central Bank of Hungary

Wednesday, 7 January 2015

Corporate governance: what about Islamic banks?

Islamic Banking  and Governance.- Wacht out for this paper: 

Corporate governance: what about Islamic banks?

Corporate governance: what about Islamic banks?

JournalInternational Journal of Financial Services Management
PublisherInderscience Publishers
ISSN1460-6712 (Print)
1741-8062 (Online)
SubjectAccounting and Finance
IssueVolume 8, Number 1/2015
Subject GroupEconomics and Finance
Online DateMonday, December 29, 2014
Resumee: The purpose of this research is to analyse some key issues in corporate governance in Islamic banks. This governance has been analysed almost exclusively in the context of conventional banking markets. Islamic banking shows a fundamental departure from conventional banking. Our objective is also to compare corporate governance in Islamic banking firms in both the (GCC) countries and Southeast Asia countries (SAC). Moreover, this study investigates the effects of the relevant corporate governance variables of the financial performance of the Islamic banks. It focuses on a sample of 67 Islamic banks (42 Islamic banks in GCC countries and 25 Islamic banks in (SAC)) during the 2004–2012 period. Our investigation reveals that the board's fee, CEO duality and age positively and significantly affect the performance of Islamic banks. In contrast, the Shari'ah Supervisory Board characteristics do not have an impact on the financial performance of the Islamic banks.

Extrated from