The 2023 shareholder meeting season is drawing near. Pending the last round of presentation of results, the Ibex companies will go ‘face to face’ with investors to render accounts. Apart from the fact that inflation, interest rate rises and the war in Ukraine have conditioned the macroeconomic environment, the “hot spots” this year will continue to be the independence of the board, climate policy and, especially, remuneration.
The remuneration of Spanish executives has become a focus of debate for proxy advisors, known as ‘proxy advisors’. Among them is Corporance, the only one born in Spain, from which they impose that the salaries of the boards of Spanish companies are so “quite high”. “Many Spanish companies tend to compare themselves with American ones but they are not in the same league”, emphasizes Juan Prieto, CEO and founder of the aforementioned firm, who stresses that the reference market should be Europe, where the average salary is lower. in general. “Independence is hindered by high salaries,” he insists.
“There are companies that are transparent when they use the virtual format, but others are not”
In an interview with La Información, the ‘proxy’ points out that a significant part of the salaries of the Ibex heavyweights -Corporance calculates that five of the 10 largest values in the index- are disproportionate in relation to their capitalization. In addition, unusual long-term protection systems are used on the other side of the Atlantic. “In the United States, a pure capitalist system, there are great salaries and bonuses, but they fire you and you do not receive compensation (…). Pension plans and termination compensation are not standardized, but when they do exist, they are excessive, ”he points out.
For her part, Alicia Prieto, corporate governance analyst at Corporance, regrets that on certain occasions Ibex companies resort to different ‘peer groups’ (listed companies in the same sector) when they establish the remuneration policy of the board and when they set the remuneration to the shareholder She thinks it would be a good practice for the group to be homogeneous.
On the return to stock option policies (‘stock options’) that are beginning to appear in the calls for meetings for this season, Juan Prieto considers that, a priori, he does not see it as something harmful from the point of view of the government corporate, although it does highlight the importance of using salary means in the analyzes to ensure an equitable distribution. “If the leadership earns more at the cost of reducing staff or paying little… we are not distributing well,” he adds.
“Good corporate governance dictates that the chairman of the board must be an independent”
The positive note is that both detect a progressive improvement in this regard. “Even those that were less sensitive to investor demand are taking measures in favor of good governance to meet standards and are increasingly transparent in remuneration,” says Juan Prieto. On her side, Alicia Prieto also emphasizes that the listed companies are facing an increasingly high level of opposition in the boards in any aspect, which encourages them to react and gives as an example the increase in opposition to the board’s management. “Now investors using the board’s social management to show their dissatisfaction with a matter of the company that is not put to a vote at that meeting,” explains the analyst.
One of the points that raises doubts is the opportunity to hold meetings online once the pandemic has ended. “There are companies that are transparent when they use the virtual format, but others not so much.” In this sense, Juan Prieto calls for not taking steps back, since he considers that technological tools have not been used to encourage greater participation.
The problem of concentration of power
Another endemic problem in Spanish companies lies in the fact that on many occasions the chief executive of a company is also the chief executive of the board of directors, a concentration of functions that, in a Corporance opinion, may end up compromising the body. These decisions do not exist separation between management and control. “Good corporate governance dictates that the chairman of the board be independent,” recalls Juan Prieto. A figure that is not very common in Ibex companies, which are choosing to divide executive power between two people (president and CEO), but without incorporating the figure of the independent president. Plus, it doubles the cost.
Facing the meeting that will start in a few days, from Corporance they advance that they will place more emphasis on the need to promote the figure of independent directors and “be they really”. And a good way to ensure this is that the rewards are not excessive.
Another point that the ‘proxy’ will take into account this season is the representation of women. The listed companies are accelerating to try to reach the 40% of women who demand the CNMV Good Governance Code for this year, but in Corporance they are also looking at the progress being transferred to other management layers; for example, in intermediate positions. “You can’t put a patch on gender diversity,” says Alicia Prieto.
The ‘Say on climate’ stagnates
The armed conflict at the gates of Europe has turned the energy table upside down, skyrocketing the price of some raw materials and forcing us to improvise solutions in the face of the lack of Russian raw materials. A moment that Juan Prieto considers the transition after the number of companies that have presented a ‘Say on climate’ proposal to the board will stagnate in the 2022 season after the Spanish market was one of the most active the previous year . Despite this, from Corporance they defend that companies are taking the issue of sustainability more and more seriously.
About the new guide approved this Wednesday by the National Securities Market Commission (CNMV), which incorporates the so-called ‘stewardship code’, which obliges asset managers to report how they vote and detail the specific policies that their customers, Juan Prieto considers that this regulation was very necessary in the Spanish market. The founder of Corporance has been one of those who has collaborated in its preparation.