Archive for July, 2012

Report on Boards` performance in Spanish public companies, 2011 (III)


On june 2012, PWC has released a report on the subject, whose items concern:

  1. Performance of Board, Chairman, Secretary and Committees.
  2. Independent Directors` Compensation
  3. Trends and Conclusions.

The report is based on a survey made among directors covering 77% of all Spanish public firms, (90% of the bigger are covered).

In previous posts we dealt with the first and second topic, so in this one we will update on the third one.

These are the big trends that can be recognized:

  1. Chairman and CEO separation: once elected by 95%, Executive Chairmen are now receiving not more than 75%-80% in average. Directors apparently agree with a trend for separation as they expect it to increase in next years. The reasons they enumerate are the need for a tighter control and risk supervision, the need for better interest conflict management, the proxy advisors’ pressure, and the USA guidance.
  2. Lead Director: 67% of firms that have not separated functions, have named a lead director, and in general directors think its role will increase.
  3. Women presence in Boards: it is reduced, (12%), directors think it will increase, but measures to be adopted are not clear, and particularly quotas.
  4. Who has an influence on Board`s decisions? The order is the following: Regulatory bodies, Analysts and Institutional Investors, Media and Credit Rating Agencies, and Proxy Advisors.
  5. 95% of directors surveyed think the current Corporate Governance Code, based on the “Comply or Explain” principle, has strongly improved corporate governance, so they do not think it would be wise to introduce additional imperative regulation.

These are the main conclusions:

  1. Although the Board is considered to perform well, and correctly develop its meetings, Board evaluation is said by directors to be deficient.
  2. Chairman, Secretary, and committees are well evaluated by directors; both Secretary and Nomination and Compensation Committees should engage in additional duties in the future.
  3. Although transparency on Compensation for directors has improved, (for the first time a report has been published in 2011 by all public companies), the same disclosure for executives is a pending task.
  4. There is a certain inconsistency between Corporate Governance reports and opinions showed in the survey. Perhaps a good way to improve Corporate Governance is through the analysis of these inconsistencies, among which, the following:
    1. Only 34% of firms have Ceo and Chairman roles separated, but 76% of respondents see Separation as a trend.
    2. Evaluation is also mostly said to be complied with, but it is a major deficiency in the view of most directors.
    3. Women presence is minor and its growth very slow, but it is also said to be a trend for the future
    4. Education for Boards is said to exist in most of firms, but is a concern for most of directors

Report by PWC on the Spanish public companies` Boards performance (II)

Report on Boards` performance in Spanish public companies, 2011 (II)

On june 2012, PWC has released a report on the subject, the main items being:

  1. Performance of Board, Chairman, Secretary and Committees.
  2. Independent Directors` Compensation
  3. Trends and Conclusions.

The report is based on a survey made among directors covering 77% of all Spanish public firms, (90% of the bigger are covered).

In a previous post we dealt with the second topic, so in this one we will update on the first one.

The Board performance evaluation is considered through the following perspectives:

  1. Board meetings: the evaluation is positive as per the meetings development, quality of debates, directors’s engagement in debate, etc. Perhaps because of the economic crisis, a majority of respondents say to have dedicated more time to its functions than in previous years.
  2. Proposals by the Chief Executive rejected: 66% of companies recognized to have rejected at least two proposals made by management, which is higher than in 2010.
  3. Board annual evaluation: although directors judge the evaluation better than in previous years, directors recognize a strong improvement is needed; and even if 82% of companies declare to have done it in 2011, 94% of companies have developed the assessments through interviews, and without the use of external support. This is clearly
  4. Most of Directors declares Strategy Planning as a theme that will require more time from Board in the future, followed by Risk Control.
  5. As for the Board composition, only 8.5% of directors are satisfied; additional functional knowledge, international profiles, industry knowledge are said to be needed.
  6. And finally, according to the survey, Boards should engage more on Risk Management, Business model sustainability, Corporate Social Responsibility and Reputation, Nomination and Compensation, and Interest Conflicts.

The Chairman and Secretary are also considered:

  1. Both Chairman and first Executive`s Evaluation require further effort and do not receive a good grade.
  2. Chairmen`s functions are well quoted, as the agenda management, the debate enhancement, and the information and reporting flow to directors.
  3. Secretary is seen to have a much relevant role than the strict legal responsibility it has; compliance, support to Chairman with agenda and information flow to Directors, have become part of its normal duties. The only deficiency involves the lack of role Secretaries are recognized for Corporate Governance matters.


  1. The Audit Committees are very well valued: they are composed by very experienced and professional people, doing a good task, and giving financial comfort to the rest of members.
  2. Nomination and Compensation Committee: its evaluation went down since 2010. The kind of subjects it deals with, and the increase in exigency by Board members is responsible for that poor evaluation. The most conflictive topics are Chairman evaluation and Succession to both CEO and Chairman.
  3. Corporate Governance Committee: it is basically Nomination and Compensation or  Audit Committees that are in charge of CG, and also the Secretary in 15% of cases. In general respondents think it should be the Nomination and Compensation Committee the one in charge for it, in case a specific committee does not exist.

Report by PWC on the Spanish public companies` Boards performance

PWC has recently (june 2012) published a report based on a survey to directors in Spanish public companies, in which it intends to offer some light on certain topics:

  1. How do public Spanish firms` boards perform?
  2. How are independent directors paid?
  3. Trends for future

The overall evaluation is very satisfactory, and a progress on relevant Corporate Governance aspects is shown.

I will limit this comment to the Independent director compensation, that PWC specifically intends to analyze, as it allows to inform about “only directorship” compensation, (so, executive functions apart).

According to the Spanish legislation, companies have published individual compensation for their directors, so primarily based on that, these are the main results:

1.- The  total compensation for the Mean Independent Director, (an average of total compensation for all functions, in board and commissions), for (whatever size) all companies amounts to 132.127 €, slightly below 2010.

2.- Separating pay for each function: Board membership is the highest paid, followed by Executive Commission, (51% of Board membership), and then Audit and Recruiting and Compensation Commissions, (30% and 26%).

3.- Bigger firms compensate more in percentage for Commission membership than for Board membership itself.

4.- The Chairman in a Commission is usually paid more than members, an average ratio being 1.5, (up to 1.8 in bigger firms).

5.- Compensation limits and  components:

– 88% of firms establish limits for board`s total compensation, (an absolute value or a percentage of profits).

– 88% of firms use a fixed fee, 58% offer attendance fees, and only 6% of firms offer a share on profits or stock based compensation for Independent Directors.