Archive

Archive for May, 2012

Separated Roles for Ceo and Chairman: the Spanish way.

In 2010, according to the CNMV`s report on Corporate Governance for the 35 IBEX,-main index in the Spanish Stock market-  companies, 15.9% of all directors are considered executives. In 28 of them, the Chairman is executive and not an independent director. Nevertheless, 18 out of them say to have established procedures to give one of the independent directors a certain leadership status among peers, so as to counter the power of the combined figure.

In 2012, some of these Spanish firms have been forced to hear voices from institutional investors that, (on their own or through the advisory services of ISS, Glass-Lewis or others), ask for a reform in the current prevailing governance system, the united role for a Chairman that is also CEO, or first executive of the company.

This is the case of Banco Santander, Bbva, but also other institutions such as Iberdrola, (energy), Telefonica, and so on.

In recent times, Mr. Botin`s reelection as a Santander`s Chairman has received lower support than ever, due to his excessive power and the lack of separation, (ISS recommended a negative vote).

Some firms have adopted the attitude in the past of having a relative duality: they named a COO, or Managing Director, with limited powers, less than a Ceo, and kept the Chairman-Ceo combined figure. The CNMV 2010 report suggests that some of the companies where the Chairman is an executive, daily functions are delegated in a different executive, (called Ceo, or Managing Director, even a Ceo non Board member); that is useful, also in international image, as when those two roles go abroad, the Chairman is still a Chairman, but the second presents himself as a Ceo, so that the company somehow shows the desired duality.

In recent times, Iberdrola, has followed this same path: instead of accepting a non-exec Chairman, the company has given certain (more limited that those of a Ceo) powers to a new created role, the “Consejero-Director General”, a Board member with executive responsibilities as a COO, or Managing Director.

This is the reality of Ibex as for this subject (35 companies):

– Combined and unique role: 18 firms

– Two separated roles, both executive: 12

– Two separated roles, both executive, where Ceo is not a Board member: 1

– Non exec Chairman plus Ceo: 4

What is more shocking is the fact that 12 companies have a separated role for President and Ceo, but that both of them are executives. Even in one case, the so called Ceo is not a member of the Board, (in fact there are no executive members in its Board).

This particularity of the Spanish companies is compensated, as many of them recognize to adopt certain measures in order to limit the power of the president: control by the Board of certain decisions, the existence of an Executive Committee, the relevance of the lead independent director, and so many others.

Advertisements