Spain, like other Western economies, has been shaken in the past months by a number of events. Some, like the financial scandals affecting large multinational corporations, originated outside Spain's borders; others, like a clutch of acquisitions of controlling stakes in competitor companies avoiding public offer (OPA) regulations, have a more local flavour; still others, affecting the way in which managers receive their remuneration (stocks and stock options), are Spain's reflection and reinterpretation of management trends that started abroad.
Spanish authorities and regulators have realized that the present situation must be redressed and that this redressing must affect three sensitive areas.
The first refers to corporate governance, especially in listed companies; the second refers to accounting principles and their harmonization with international standards, especially concerning consolidated accounts; the third alludes to new capacities to be granted to the regulator (CNMV) in order to establish better control of not very well justified movements made by the controlling shareholders of important corporations.
The newly-created Aldama Comission deals with the first area. The projected legal reform affecting mainly listed companies (the New Code of Companies) still being drafted. The new Financial Law, now in the Spanish Senate, will mainly deal with the second issue. Finally, a new regulation on the tax treatment of stock options, which will appear in the new Personal Income Tax Law (PIT) deals with the third issue.
The main worries in the three different areas have to do with two concepts; on the one hand, an effort to improve levels of transparency, that in the corporate world tend to be camouflaged in favour of image (particularly the CEO's image); on the other hand, a need for more protection of minority shareholders in the corporate world. At present, the annual General Shareholders' Meeting of a company – the only corporate event to which the minority shareholders are invited – is not much more than a liturgical exercise as full of arcane words and numbers as it is hollow of real commitment from the managers to diffused ownership.
But Spain is not the US. This summer has shown how corporate America has purged its mistakes, beginning with the auditors, continuing with big corporations and then with the submission of accounts adjusted to be accurate. During the autumn we will see how law firms, investment banks and even the regulator adapt themselves to a new and probably more radical environment.
Spain is part of the EU and will have to match its pace to that of the other members; and they do not share a common understanding in many of these matters. The Aldama Commission is replicated by the Winter Report which will produce a corporate governance recommendation for the whole EU; the White Book on Accounting Reform recommends the substitution of Spanish accounting principles with the international standard accounts, adapted by the EU, from 2005. Finally, the new capacities to be granted to the regulator and the final shape of many substantial measures that will affect the life of listed corporations will have to go through the filter of political negotiations particularly in the light of two keenly-awaited pieces of legislation: the Financial Law and the Code of Companies.
Luis Felipe Castresana
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