Spain’s National Securities Market Commission (CNMV) has proposed simplifying its corporate governance code in an effort to increase compliance among listed companies. The draft is open to public consultation and includes measures intended to strengthen board independence, including limits on the chief executive’s influence and a greater role for independent directors.
However, the proposal is less forceful on these issues than earlier versions. The softer approach may help build support for the code and make it more acceptable to companies, but adoption of its recommendations remains uneven among both large and small listed firms.
Corporate governance codes are voluntary and rely partly on market incentives. For long-term investors, checks on executive power can provide protection, while the recommendations represent a relatively modest burden for companies. But the growing use of passive investment products such as ETFs may weaken incentives to engage with corporate governance. Proxy advisers, whose influence at shareholder meetings is increasing, are taking on some of the oversight role.
The debate comes amid concern about corporate structures that concentrate power in executives and leave shareholders with limited influence. When markets are rising, company leaders may find it easier to defend protections for management, even when shareholders question executive pay. The source argues that more robustly managed companies are better placed to succeed when market euphoria fades.
Sources: El País Economía.