Tag Archives: board of directors

Oficina profesionales

Impact of reform of the Corporate Enterprises Act on the governing body

Last December 3rd, Law 31/2014 amending the Corporate Enterprises Act (hereinafter the “CEA”) to improve corporate governance was approved, subsequently entering into force on December 24. The main objective of the reform is to enhance transparency and good practices by the governing bodies of companies in order to achieve effective improvement of the corporate governance of companies, as well as greater efficiency in their management and administration.

In this information note we will focus on changes affecting the governing body of non-listed companies.

Remuneration of directors

  • The system of remuneration is now the same for both types of companies, joint stock companies (hereinafter, “JSC”) and limited liability companies (hereinafter, “LLC”).
  • The General Meeting will have to approve annually the maximum amount of remuneration received by all the directors of the company as a whole. Nevertheless, the directors themselves will decide how that amount is shared among them.
  • The remuneration of the directors must be linked to the sustainability and profitability of the company, which is a further reflection of the philosophy behind this reform aimed at achieving transparency and good governance.

Directors’ duties

  • Directors’ duties are delimited and defined with a view to achieving good corporate governance of companies. The changes include, among others, a more detailed description of the concept of due diligence, its mandatory nature and the extension of the liability regime applicable to it. The duty of loyalty and its liability regime are also dealt with in greater depth. The “business judgment rule” is introduced to protect strategic and business decision-making under certain circumstances.

Liability regime

  • Definition of “de facto director” as someone under whose instructions the directors of the company might be accustomed to acting.
  • Extension of the liability regime to the chief executive of the company in cases where there is no managing director and to the natural person who is the representative of a body corporate director.
  • Any action against directors for corporate and individual liability becomes time-barred 4 years from the date on which it could have been exercised.

Board of directors: organization and functioning

  • Regarding board members’ remuneration, the position will generally be unremunerated, unless the Company by-laws provide otherwise. Besides, the amount of remuneration must be reasonable relative to the functions and responsibilities inherent to the position, and proportionate to the importance and economic situation of the company. Henceforth, a contract detailing salary components has to be signed between the company and the managing director (s), or board members having executive functions which are different from those of the managing director (s).
  • The list of non-delegable powers of the Board has been expanded (preparation of annual accounts, appointment and removal of executives, decisions regarding the remuneration of board members, but most notably, non-derogable powers include the power to call meetings and to prepare the agenda. This goes against a line of case law that has been recognizing the competence of the managing director to call meetings).
  • The Board of Directors shall meet a minimum of once per quarter, that is, there must be at least four meetings per year.





Red Eléctrica Española, Acciona, FCC, CaixaBank, Inditex or Viscofan are the listed Spanish companies with the most gender-balanced boards of directors based on the gender profile of their members

Spain: new measures, but are these enough?

As we already mentioned in our previous post, the measures contained in the Draft Law relating to corporate governance of corporate enterprises refer exclusively to commercial undertakings listed on the Spanish secondary stock market and provides that a commission set the goal of representation for the underrepresented sex,  in addition to facilitating the appointment of women in the  selection processes for directors.

In 2013, 79.5% of women directors of IBEX-35 companies were independent directors, another 16.4% were consejeras dominicales (directors representing shareholders with substantial shareholdings) and only 4.1% were executive directors, in companies such as Banco Santander, Telefónica, Arcelor and Bankinter. There were also two Chairwomen of the Board: in Dia and FCC.

We cannot deny that in Spain gender quotas on corporate boards are an example of the catalyst effect that the adoption of legislative measures can have. We have to recall that  Organic Law 3/2007 of 22 March 2007 for Effective Equality of Women and Men included a recommendation  that companies (and not just listed ones)  include in  their  boards of directors a number of women that would  permit balanced representation of gender,  leading to a sharp increase  in the presence of female directors in Spanish listed companies (from 3.30%  in 2005  to 17.23% in 2013).

On the other hand, the Unified Good Governance Code, published in 2006 by the National Securities Market Commission (in Spanish “CNMV”) contains other recommendations: in the event that there are no directors or that a limited number are appointed, the Board shall state the reasons for, as well as the initiatives adopted to correct this situation. In addition, the appointments committee must ensure that when filling new vacancies, selection policies involving positive discrimination in favor of women are adhered to.

But what lies behind these equality policies? Do they only seek social justice between genders? Many studies conclude that greater gender parity undoubtedly leads to improved performance by businesses: not only because more women in the corporate governance of companies implies the proper management of diversity, but also because of better quality in decision making, the existence of more innovation, a better knowledge of the market or identification with customers, as well as greater use of European talent (let us not forget that 60% of European students are women).

We therefore welcome the fact that with  the Draft Law this matter will be  incorporated directly into the Spanish Corporate Enterprises Act, and subsequently integrated into the Commercial Code, although it is likely that it  may remain a mere statement of good political intentions. This will certainly help, but it will be insufficient   if the threshold of 40% female presence on boards of directors by 2020 – the target earmarked by proposed European legislation – is to be reached.  Clearer mandatory rules, including deadlines and administrative or financial penalties, would have been preferable.  As things are, the fate of female board directors is sealed… though perhaps it can still be modified in the parliamentary debate.



Only 17.23% of Spanish companies listed on the IBEX 35 have women on their boards of directors

We analyze the new legislative initiative in Spain,  as well as the European debate on gender parity on the board of directors of companies

On 27th May 2014, the Spanish Government approved the Draft Law on Corporate Governance of Corporate Enterprises, which includes provisions aimed at achieving greater gender equality within these corporate enterprises.

Panorama of European legislative gender parity

In the EU context, Justice Commissioner Viviane Reding made a proposal in 2012 for a European Directive on the obligation to establish quotas on boards of publicly traded companies, with the aim of achieving a female presence of 40% in these governing bodies by 2020.  However, two groups of countries with close to conflicting views on the best way to implement these positive discrimination policies have emerged, and this has hindered the adoption of the legislative proposal.

On the one hand, one group of countries led by the United Kingdom,  and including other countries such as Germany, Holland and the Czech Republic considers that the regulation of this matter by the EU authorities is a clear interference in national politics, and that, indeed, this matter should be left to self-regulation by companies.

On the other hand, some countries, like France, are in favor of regulation by public authorities. Thus, in 2011, the Gallic country passed the Equality Act, which requires that by 2017, the proportion of female directors in large companies – whether or not these are listed Company – be a minimum of 40%.

However, the paradigmatic case is that of Norway. Despite not being part of the European Union, it deserves special consideration. With the adoption in 2003 of the Law on Limited Liability Companies, companies are required to ensure a presence of women of at least 40% on boards of directors, with drastic measures like no possibility of registration for companies incorporated since 2006 that have not met this requirement, or the winding up of those in 2008 that have not reached it. The positive effects of the law are clear: in 2012, 44% of large companies in Norway had already met this 40% limit.

The recently approved Draft Law in Spain provides that a committee set the target representation for the underrepresented sex, and facilitate the appointment of women in the selection processes carried out by Directors. However, the draft legislation does not establish either time limits or penalties for non-compliance, reestablishing simple recommendations as did the previous legislation.