Spain's Code Gets Flak for Lack of Detail

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Byline: Kit Bingham

Spain's revised corporate governance code is short on detail and fails to reflect the expectations of institutional investors, according to a leading Spanish governance adviser.Soler-Padro, a law firm and governance consultancy, says the Aldama code - named after the official who led the committee that proposed changes to the Spanish governance code - fails to embrace international governance standards and even weakens existing practices.

Ramon Barriga, a financial analyst with Soler-Padro, says: "The Aldama code is a step backwards in some areas. This is neutral, or even negative, and responds more to the interests of companies rather than the needs of institutional shareholders." He says the Aldama commission was made up of several company chairmen but included only one investor.

Barriga criticises the code for providing few specifics. He says: "It's a generalist code. There are many important aspects of corporate governance that the code doesn't speak about." He says that Aldama makes no clear recommendations on executive pay, boardroom independence, or the separation of the chairman and chief executive roles.

The revised code also undoes some of the provisions of the previous Olivencia code. For example, guidance on age limits for chairmen and chief executives and on optimum board size is no longer included. Barriga says: "The code fails to address the significant governance issues that makes Spain a less attractive as a capital market than the US or UK."

Soler-Padro's criticisms are mirrored by recent research from Financial Dynamics, the corporate communications adviser, which found that analysts covering Spanish companies have concerns about minority shareholders' rights, combined chairman and chief executive roles and voting regulations. …