Challenges facing listed companies in 2025 proxy season

Georgeson and Cuatrecasas have published the 14th edition of “Corporate Governance and Institutional Investors,” a guide aimed at helping Spanish listed companies to prepare for their next general meeting of shareholders and to anticipate the demands of investors and proxy advisors. With this in mind, the guide analyzes the last proxy season results of the IBEX 35 companies and the “Top 40” companies on the Spanish continuous market (“Top 40 companies”), as well as the expectations and challenges of the 2025 proxy season.

 Change of course by proxy advisors

Traditionally, there has been a certain degree of homogeneity between the recommendations issued by proxy advisory firms Institutional Shareholder Services (“ISS”) and Glass Lewis and the proposals for inclusion in the agenda of the IBEX 35 companies. This year, however, Glass Lewis issued 28 negative voting recommendations, while ISS issued 18. This difference has been particularly notable in the directors’ remuneration proposals.

 Level of participation

The average quorum in the IBEX 35 companies slightly decreased by -0.38% compared to 2023, standing at 73.08%. In contrast, participation in the Top 40 companies increased by 2%, reaching 73.94%, the highest in the last five years.

 In this respect, Carlos Sáez Gallego, Country Head Spain at Georgeson, says: “From a corporate governance point of view, it is important to understand how the company has mobilized its floating capital to participate in the board. Factors that can galvanize the mobilization of floating capital include the communication initiatives that companies develop to proactively contact their shareholders—such as engagements and roadshows—after having identified who has voting authority. The investors’ qualification will also influence the level of board participation.”

 Moreover, the involvement of Spanish institutional investors in corporate governance has increased during the 2024 proxy season. This has been reflected in the development of their own voting policies, greater use of recommendations by proxy advisors and higher participation in the roadshows. The recent launch of the first stewardship code for the Spanish market by the Spanish Securities and Exchange Commission has been one of the main catalysts of this movement.

 Most conflictive issues

The number of unapproved proposals at the general meeting was less than that of 2023: only one proposal—which referred to reducing the period of notice for extraordinary general meetings—, compared to the three of the previous year. The trend continues: once again the most controversial issues are directors’ remuneration; reelection, appointment and ratification of board members; the alteration of share capital, although less than in previous years; and the scrutiny of ESG matters continues to rise, showing the need for good sustainability governance.

 José Luis Rodríguez, Corporate partner at Cuatrecasas, confirms: “The new regulation that will affect the corporate sustainability information on listed companies in 2024 highlights the need to assess their governance systems regarding this matter. The regulation does not oblige companies to conduct a due diligence process, but it does require them to specify in their management reports all the governance processes, controls and procedures established to assess, manage and supervise their sustainability-related incidents, risks and opportunities. This exercise in transparency converts the management report into a tool that obliges companies to assess and, where appropriate, rethink their corporate governance and compliance policies and procedures on sustainability. That is why many argue that the Corporate Sustainability Report Directive (“CSRD”) is a “management standard disguised as reporting,” which will have a major impact on the governance framework of listed companies.”

 Directors’ remuneration

Once again, this has been the most controversial issue. IBEX 35 received over 10% “no” votes to 36% of its proposals, as did the Top 40 companies for 26% of their proposals. Most of these proposals referred to approving the annual directors’ remuneration report. This is an improvement compared to 2023 (particularly for IBEX 35) when the percentages were 46% and 27%, respectively.

 Claudia Morante Belgrano, Head of Corporate Governance at Georgeson, notes: "The results for remuneration matters, although continuing to receive the most scrutiny, show that Spanish listed companies are on the right track. This is particularly the case for the largest cap companies, where it can be seen that efforts have been made in recent years to implement remuneration schemes that are increasingly aligned with market expectations. Shareholder engagement activities are also helping these companies to understand their shareholders’ individual circumstances. However, this path forward requires constant effort and adjustment to the emerging challenges.”

 In Spain, the most belligerent institutional investors in remuneration matters have been Amundi, Legal & General and AVIVA. The most scrutinized topics include CEO pay raises, below average payments, remuneration mixes that do not focus on the long term, and a lack of transparency in the individualized compliance of the metrics and targets of variable remuneration. Companies must adjust their remuneration model to market expectations and step up their efforts in communicating information.

 Appointment, reelection and ratification of directors

This year there has been a marked difference between the voting results of IBEX 35 and the Top 40 companies. In IBEX 35, proposals with over 10% “no” votes dropped significantly. In contrast, opposition in the Top 40 companies has been the highest for the last three years. ISS has penalized this type of proposals more than Glass Lewis, both for IBEX 35 and the Top 40 companies.

 The independent directors continue to obtain greater support from proxy advisors and shareholders in IBEX 35 and the Top 40 companies. By comparison, support for the executive directors has slightly decreased in both.

 Continuing the trend from previous years, the presence of women has increased on the boards of directors of Spanish listed companies, reaching almost 42% in IBEX 35 companies and 36% in the Top 40 companies. Companies must work to comply with the requirements of the new Spanish Gender Equality Act within the stipulated periods.

 Challenges facing 2025 proxy season

In the 2024 management report—which listed companies will submit to their boards of directors for approval in 2025—it will be mandatory to include sustainability information in line with the CSRD. This will be one of the main challenges in the next proxy season, which will not only have a significant effect on the reporting process, but also sustainability management and governance.

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