The recent publication of the handbook on corporate governance in boards of directors: “Research Handbook on Boards of Directors”, published by Editorial Elgar, in which 45 professors and researchers participated, mostly members of the Foundation’s scientific committee . Woman Forward, -which promotes the creation of value in organizations by promoting female leadership through research, and the commercial scandals of the last 5 years, linked to a significant absence of corporate governance, deserve to address some useful reflections to the business world.
Read the other gives the statements of an entrepreneur who, after receiving a suggestion from an advisor to hire an independent director to delineate the interests of the CEO and major shareholder of a company, those of minority shareholders and other parties stakeholders in decision making, commented on the following:
“Listen, I see only high costs for corporate governance and little benefit; now we are going to call on a non-executive director to leave the other partners alone, but in the end I will continue to make the decisions ”
In Spain, over the past 3 years, we have witnessed the competition of 3 listed companies, including two from the Ibex 35, for a flagrant violation of the basic principles of corporate governance and business ethics.
Abengoa’s annual report for 2014 included over 50 different types of risks, some of them with very poor explanations. He underlined, for example, that “the Corporate Finance Department prepares annually a Financial Plan which is approved by the Board of Directors and which includes all the financing needs and the way in which they will be covered”…. “The funds necessary for the most important cash needs are anticipated well in advance … .. the Company does not commit its own capital to projects until the associated long-term financing is viable. “
It is because of this and other information leaked in the market, which is why, paradoxically, Abengoa stocks appreciated by 116% between June 2013 and June 2014, a rise well above the revaluation of 35%. accumulated by the Ibex 35 over the same period, and which led Abengoa to replace Ebro Foods, which had replaced it a year earlier, due to rumors of excessive exposure to Abengoa. And another important paradox, why then did Abengoa not increase his capital? Or how is it possible that Abengoa declared a debt of 8,500 million to the Gestamp group during its negotiations, when the final debt at the origin of the bankruptcy was close to 30,000 million.
Even more shocking is Pescanova’s case. In 2012, five companies called American Shipping, Medosan, Epripel, ASF and El Porvenir, all based outside Spain, masked at least a third of Pescanova’s hidden debt, which according to a report by the audit firm responsible for the auditing firm, BDO, reached at least 1,408 million euros, nearly double the officially recognized liabilities. On March 1, 2013, the President of Pescanova, Manuel Fernández de Sousa, announced a pre-creditors insolvency proceeding. Three weeks before the announcement, there were 12 organizational changes related to the Fernndez de Sousa family. The chairman also sold 1.9 million shares, without reporting the sale to the Securities Market Commission (CNMV).
Fernndez de Sousa, sold around half of his stake in the company three times in December, January and February, just before the creditors pre-insolvency filing, resulting in a 60% drop in his shares in the society. . One of the shareholders of the Pescanova companies and a member of the board of directors, brewer Damm, said he was surprised and outraged by the disclosure made by Fernndez de Sousa to hide his sales from the CNMV, because in this way he could retain four seats on the board of directors, a right granted to him for his stake in the company with 14% of the assets, which they believed to hold until then.
Both companies operated and owned companies on 5 continents, without their board of directors reflecting a cultural diversity, nor with specialized advisers in other markets. Of course, gender diversity was also almost non-existent in both cases. Null in the case of Pescanova. We will leave the Banco Popular case a moment later.
Corporate governance is generally described as the process that determines the purpose of the organization and how its goals and priorities are decided. Therefore, corporate governance within its central structure deals with organizational functionality, as well as the distribution of power among its various interest groups. The scientific literature distinguishes three main components of corporate governance (Mazudmer, 2013);
Internationally, the picture is just as controversial. If we look at Volkswagen’s 2014 annual report, at the time of the “dieselgate” affair, we can see that according to the Council’s statement on its activity, it could not help but be informed about Que the activity of the company is telling the truth or not when the annual report and its website state that: “In 2014, the board of directors of Volkswagen AG regularly and in detail reviewed the situation and development of the company . We support the management with regard to the recommendations and suggestions of the German Code of Good Corporate Governance (DCGK) and the rest of the applicable regulations in the matter, and we discuss with the management matters of the administration of the company. The board of directors was directly involved in all decisions of fundamental importance to the group. In addition, he discussed with management strategic considerations such as”
This last aspect clearly brings us to a second question: how to proceed and on what basis to appoint directors. If we analyze the functional diversity of Volkswagen’s board of directors, we can see that there were no independent members, but all were appointed by the capital or interests they represented. Among the 21 directors, none was independent, since the two representatives of the unions, by imposition of German law and the Minister of Industry of Lower Niedersachen, who participates in the capital, could not be considered as such.
Corporate governance is currently the most important subject in boards of directors in general, and in Spain in particular, and should be taught in courses for future directors. And not just for obvious survival issues, but for management issues such as access to investment, attraction of talent, especially new generations, more sensitive to business ethics, and to the preferences of consumers, but also for the pursuit of excellence and the satisfaction of society as a whole and of the entire chain of stakeholders, as a strategy for brand differentiation and competitiveness.
The taking into account of the principles of corporate governance for many companies implies a new mode of operation, new precepts to be taken into account, new players to be heard.
The first element is described as the corporate governance philosophy underlying the objective that governs the company. The second element includes the roles and relationships between the management of a company, its board of directors and management, its shareholders and other stakeholders. The third and final element includes the regulatory and market mechanisms in which the company operates.
Gender diversity can help boards overcome various barriers to functioning effectively, but it also suggests complementary solutions to make them more effective. Gender diversity has been particularly important in the boards of the most effective companies, as it has become a competitive advantage and a source of value for the company. The complementarities of work between men and women and the new perspectives that diversity can offer in decision-making processes have led the boards of directors of these companies towards a broader, creative and innovative knowledge base. A more diverse work team will be better trained to solve problems, as well as to better respond to the concerns and diverse interests of different stakeholders.
Therefore, it is essential to consider that strategy, transparency, accountability and responsible business conduct are fundamental factors in formalizing basic corporate governance, in which a board of directors is established that allows for consider various scenarios and information to make decisions that can define the course. of the company in an environment like the current one that is constantly changing, in the most sustainable and ethical way possible.
12 centuries ago, in the year 830, the great Persian mathematician AL-Juarismi, who introduced numbers in the West, wondered about the value of the human being, already spoke of the value of ethics in business by presenting it like this:
If the person has ethics, then his value is equal to 1 If he is also intelligent, add a 0 and his value will be equal to 10 If he also has capital, add another 0 and his value will be equal to 100 If it is attractive adds another 0 and its value will be 1000. But if it loses ethics, its value will become 0, because losing the 1, and only the zeros will remain.
It’s that simple. Without ethical values and sound principles, only criminals, corrupt and worthless people remain in organizations.
The Woman Forward Foundation offers training courses, mainly intended for potential women directors, particularly focused on the commented aspects of corporate governance, related to the relationship with the various stakeholders in March. More information can be obtained at the following link: https://womanforward.org/formacion-en-liderazgo-femenino/
Click here to register for the training
 Author’s translation of the company’s annual report and website