Corporate governance has become a worldwide phenomenon, particularly after the recent economic and financial crisis. Currently, almost all countries are revising their corporate governance practices with a growing interest in the analysis of adequate directions for worldwide corporate governance reform.
This book provides a complete overview of corporate governance elements in Spain. Our survey reviews the recent evolution of the Spanish corporate governance system and highlights the main guidelines for its restructuring process. Thus, we target a broad audience of academia—practitioners and policy makers.
After our introduction, Chapter 2 presents two of the main features of the Spanish institutional context: its legal background and its orientation. Concerning the legal framework, Spain has a civil law system in which court decisions are not a source of law but are of interpretative value. In addition, Spain is a member of the European Union (EU) and, as such, follows the standards set out by EU directives and regulations. The privatization of large state-owned firms, economic and financial liberalization, the integration in the EU, and launch of the euro currency have all contributed to the modernization of Spain’s financial system.
Spain is considered a bank-oriented financial system in which banks play an active role relative to markets. The close link between banks and the governance of nonfinancial firms dates back to the early stages of Spanish industrialization. Banks have maintained close relations with nonfinancial companies and are not only creditors, but also reference shareholders or seated at the board of directors of these firms. Currently the Spanish banking system is going through a process of deep restructuring and consolidation that has not affected the outstanding role played by banks and their close ties with the governance of nonfinancial firms.
In addition, the Spanish capital markets have undergone a deep process of change and growth over the last two decades. Technical, operating, and organizational systems that support the market today have allowed important investment flows and provided the markets with greater transparency, liquidity, and efficiency.
Due to the bank orientation, the corporate governance system relies heavily on the so-called internal mechanisms of governance (Chapter 3). Unlike market-oriented economies, the corporate ownership structure in Spain tends to be concentrated so the main governance problem is likely to arise between major and minor shareholders. This leads to the prevalence of one-tier boards with a high presence of owner directors.
As far as stock markets are concerned, there is concentration on a relatively small number of players in the utility, telecommunications, banking, construction, and energy industries. Thus, the external mechanisms of control (Chapter 4)—primarily the market for corporate control—are less important than in the Anglo-Saxon environment. The low number of listed companies, the usually concentrated ownership structure, and the implementation of some control-enhancing mechanism as means to increase the control power of the main shareholder (along with the relatively illiquidity of the market) reduce the functioning of the market for corporate control.
The landscape of corporate governance in Spain is shifting since the Spanish government recently appointed a special committee for the reform of the corporate governance in the country. We expect that the conclusions and suggestions of this committee will translate into forthcoming laws or even a new Code of Good Governance coherently with the international renewal of corporate governance.