Spain |Conclusions of the CNMV’s 2020 Corporate Governance Report

On September 17, 2021, the Spanish Securities and Exchange Commission (CNMV) published its Corporate Governance Report on entities issuing securities admitted to trading in regulated markets for financial year 2020, which assesses and collects the annual corporate governance reports submitted by listed companies to the CNMV.

Generally, the degree of compliance with the Code of Good Governance guidelines (the “Guidelines”) by listed companies is significantly high, but it has decreased slightly with respect to last year (from 85.7% in 2019 to 83.7% in 2020). The companies’ degree of partial compliance was 9.5%. Consequently, overall, listed companies did not comply (fully or partially) with 6.8% of the Guidelines. All categories except for the Guidelines on general meetings had a lower degree of compliance.

According to the CNMV, the reason for this slight decrease is that several companies are still adapting to the new practices introduced in the Code after its partial amendment in 2020. Proof of this is that compliance with the most recently amended Guidelines has been nine percentage points below average. Take, for example, Guideline 55 of the Code, which was modified to include new contents in the sustainability policy regarding environmental and social matters. Guideline 55’s degree of compliance was much lower than in the previous financial year (from 81.9% in 2019 to 69.6% in 2020).

Overall, companies have still not reached the 30% female representation target on corporate boards. However, women’s presence in boards of directors continues to increase (from 23.4% in 2019 to 26.1% in 2020). Note that in Ibex-35 companies there was a greater increase: the percentage of women on the boards reached 31.3%. This increase mostly affected independent board members. Putting the figures into perspective, there has been a 14.1 percentage point increase since 2013, but approximately 10% of listed companies have no women on their boards. Also, female executive board members only increased by 0.1 percentage points from 2019, reaching 5.6% overall.

In 2020, the average age of board members was 60.5 years old, which is a minor increase compared to 2019. The average in Ibex-35 companies is a little higher, i.e., 61.6 years old. Regarding board member rotation, 30.5% of board members had been in their position for over eight years (compared to 29.5% in 2019). Executive board members had the longest terms, whereas independent ones remained board members for the shortest time periods.

As for the composition of boards of directors, the average size remains unchanged, at roughly 10 members. Board chairpersons continue to be largely executive chairpersons (50%), mostly in Ibex-35 companies, where they account for 52.9% overall. However, the percentage of independent chairpersons increased significantly up to 19.9% (from 13.4% in 2019).

The degree of independence reached at least 50% in 67.6% of Ibex-35 companies (the same as in 2019). Also, 73.6% of companies from the Spanish Continuous Market had at least one third of independent board members (74.2% in 2019).

Regarding general meetings, average attendance fell slightly, to 70% of the share capital in 2020. In contrast, the use of remote voting systems continued to increase: in 2020, 51.2% of listed companies used them. In fact, compliance with the Guideline on remote voting and remote attendance increased the most in 2020. This rise is mainly due to the COVID-19 pandemic and the restrictions on mobility affecting shareholders’ in-person attendance. Similarly, the Guideline recommending the live broadcasting of meetings on the companies’ websites no longer has one of the lowest degrees of compliance (increasing from a 44.9% degree of compliance in 2019 to 66.4% in 2020).

As for shareholding, 29.6% of listed companies had a controlling shareholder, who held the majority of voting rights or exercised control. The average free float of companies remained stable at 43%. In 30 companies, the floating capital was below 25%, whereas in four it did not exceed 5%.

Finally, only five Guidelines were complied with by all companies. It is worth highlighting the Guideline related to the protection of the corporate interest within the board and the one suggesting that the audit committee be able to call any manager or employee to perform its supervisory duties. The Guidelines with the lower degree of compliance were (i) linking variable board member remuneration to the delivery of shares; and (ii) that high capitalization companies have separate appointment and remuneration committees.