Actualidad Spain

Code of good governance for publicly traded companies

Code of good governance for publicly traded companies, 24th February 2015 (CNMV)

On 18th February 2015 the board of the CNMV adopted the new code of good governance for publicly traded companies, replacing the 2006 Unified Code that was updated in 2013.

The new code of good governance covers three core objectives:

  • Oversee the correct functioning of the systems for governance and administration of Spanish companies in order to enhance their competitiveness.
  • Protect the interests of shareholders and investors, generating confidence and fostering transparency regarding the companies’ activities.
  • Improve control over the companies’ internal bodies and encourage corporate social responsibility policies.

The code comprises 64 recommendations. Although these are not binding and compliance is voluntary, there has been a change against the 2006 code, such that it is now mandatory for all listed companies to report under the comply or explain principle. This means that their annual corporate governance report must describe their degree of compliance with the recommendations; and where they do not follow them, they must provide a reasoned explanation for this decision. This gives shareholders a benchmark against which to assess the company’s performance in corporate governance.

Section II of the code identifies the 25 core principles underlying the following detailed recommendations.


These recommendations, gathered in Section III, bring in significant new concepts:

  1. With respect to more general aspects, the code  recommends that the chairman of the Board reports to the General Meeting on the most significant changes in corporate governance since the previous General Meeting, and if applicable, the reasons why any of the recommendations in the code have not been implemented. The board is also expected to define and promote a suitable communication policy with shareholders and investors.
  2. With respect to the General Meeting of shareholders, the code recommends they be able to use the company website as a critical instrument for fostering transparency of information.
  3. With respect to the responsibility of the board of directors, the code establishes that its activity should be predicated on the pursuit of the corporation’s interests. These are defined more broadly than as merely the interests of the company’s shareholders. They include running a profitable business that is sustainable in the long term, which fosters the increase in the company’s monetary value, in line with the interests of its local communities and respecting the environment. With respect to the board’s structure and composition, the code recommends the inclusion of specific policies and targets to boost the ratio of female to male directors. It also deals with the composition and operation of the board committees, adding specifications regarding their specialisation and their missions. Boards of companies adopting the best practices in the code will confer powers on a board committee (which may be a committee focusing exclusively on corporate governance in the case of the larger corporations), to oversee compliance with corporate social responsibility and good governance policies.

The CNMV’s adoption of this code reflects widespread interest in improving corporate governance practices throughout Spain over the last few years. The process of strengthening the regulatory framework began in 2013 with the creation of a committee of experts on corporate governance. The following year it continued with the enactment of Law 10/2014 on the organisation, oversight and solvency of financial institutions, and Law 31/2014 amending the Corporate Enterprises Act in order to enhance corporate governance. This set of measures places Spain at the international forefront of best practices in the promotion and defence of good governance in its companies.