January 17, 2021

The Good Governance Code affects corporate communication and telematic voting

The new wording of the Code of Good Governance of listed companies, approved by the National Securities Market Commission (CNMV), urges companies to have a general policy of communication of financial and corporate information, and to have systems that allow shareholders to exercise their right to vote electronically.

Regarding the presence of women on the boards of directors, the Code gives until the end of 2022 for companies to reach a percentage of 40%, as the president of the CNMV, Sebastián Albella, had advanced.

The stock exchange supervisor has approved the planned partial revision of the Code of Good Governance of listed companies, which is articulated around four axes: promoting the presence of women on the boards, greater relevance of non-financial information, greater attention to reputational risks and clarification of aspects related to the remuneration of directors.

Five years after its elaboration, the reform updates and adapts various recommendations of the Code to the legal modifications approved since its publication and clarifies the scope of others that had raised doubts.

In the final text, the wording of twenty recommendations of the 64 that make up the Code has been revised.

As a novelty, the new wording establishes that companies must have a general policy for communication of economic, financial and corporate information through the channels deemed appropriate (media, social networks and other channels). The objective, according to the CNMV, is “to maximize the dissemination and quality of information” available to the market, investors and other stakeholders.

The stock exchange supervisor emphasizes that, by including this recommendation (number 4), the Code “becomes the first text of this type that includes this aspect”.

The situation created by the expansion of the coronavirus has led the CNMV to modify Recommendation 7, which now asks companies to provide systems so that shareholders can exercise their right to vote electronically, either directly or by proxy.

In addition, it is recommended, at least to the most capitalized companies, that they have mechanisms for telematic attendance at meetings.

Recommendation 15 establishes that, before the end of 2022, the boards of directors must have at least 40% female directors. Until that date, the percentage must not be less than 30%.

In Recommendation 14, the Code urges companies to expand the number of senior managers.

The new wording modifies the recommendations regarding the cases in which the behavior of a director may damage the reputation of the company. From now on, the council will have to analyze the situation and take action without waiting for the courts to act, that is, before there is an indictment or an oral trial is opened.

The amended code recommends that the executive committee have at least two non-executive directors, one of them independent.

Regarding the remuneration of the directors, it is clarified that the variable remuneration should only be paid when it has been verified “sufficiently” that the required conditions have been met.

Recommendation 64 specifies that, among the payments for termination of the contract -which should not exceed the two-year remuneration as a whole- include, among others, the amounts derived from the long-term savings systems and covenants of no competition.


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