Partial review of the Listed Companies Good Governance Code

The CNMV approves a partial review of the Listed Companies Good Governance Code to update it and keep it aligned with international good governance standards.

On June 26, the Spanish Securities Exchange Commission (”CNMV”) published a partial review of the Listed Companies Good Governance Code of February 2015 (the “GGC”) to keep it aligned with international good governance standards.

The main purpose of the review, which involves 20 of the 64 recommendations comprising the GGC, is to adapt it to the legislative amendments approved since February 2015, clarify the scope of some Recommendations that had generated doubts and align it with international good governance standards.

The four guiding axes of the review are i) promoting the presence of women on boards and in executive roles in listed companies; ii) increasing the relevance of non-financial information and addressing environmental and social aspects; iii) increased attention to non-financial and, particularly, reputational risks; and iv) clarifying some aspects of directors’ remuneration (particularly on variable payments and compensation).

The main developments include:

• By the end of 2022, the percentage of women on boards should be 40%;

• Promoting the number of female executives, given the importance of this to strengthen long-term gender diversity on boards;

• Promoting electronic attendance and voting at general meetings; The situation caused by the COVID-19 pandemic, along with the tendency to promote the long-term implication of shareholders, means entities should have systems for shareholders to exercise their vote (directly or by proxy) by electronic means. Furthermore, large cap companies are advised to allow electronic attendance and active participation at general meetings, if it is proportionate; 

• Increasing oversight of risks and non-financial information and boosting ESG matters;

• Increasing transparency on the reasons for dismissal and resignation of directors;

• The amounts that must be taken into account to calculate the severance pay limit are clarified;

• Greater transparency on deferred variable remuneration, recommending assessment of the suitability of including reduction clauses (malus); and

• Clarifying and extending exceptions to lock-ups affecting share-based remuneration.

Finally, in accordance with the 2020 Activities Plan, reviewed as a result of the COVID-19 pandemic, the CNMV plans to amend the Annual Corporate Governance Report (“CGAR”) and the Annual Directors’ Remuneration Report (“ADRR”) models for listed companies, following this review of the GGC and after incorporating Directive (UE) 2017/828 into the legal system.