The main task of independent directors is to protect the company’s best interests without being sidetracked by their relationships with shareholders, executives or the company itself, hence the need to increase their statutory safeguards. This is one of the findings of the report:  “La relevancia de la independencia en los Consejos de Administración del Ibex-35 [The importance of director independence on boards of Ibex-35 companies], by the Center for Corporate Governance and Georgeson, which features two analyses, one of the legislation landscape, good practices, trends and national and international standards, and one which addresses the evolution of figures related to the independence of Ibex-35 companies, and also more than twelve interviews of independent and nominee directors in 22 of such companies.

In the opinion of Mario Lara, head of the Esade Center for Corporate Governance, “Listed companies need sufficient, robust independent directors on their boards to ensure that the best interests of all shareholders, whether or not they are represented on the board, are taken into account. They must also be competent and diverse in order to deal with the new challenges caused by the complex responsibilities of their post.” “If Spain’s governance model is to run smoothly, it must feature enough check & balance procedures to offset the large proportion of major shareholder or control groups on boards,” explained Lara.

“The number of independent directors in Ibex-35 firms rose to 245 in 2023, in keeping with increased pressure from investors and proxy advisors upon companies to include more directors of this sort,” added Carlos Sáez Gallego, country head of Spain at Georgeson. Meanwhile, in Ibex-35 companies the number of independent female directors as a percentage of total independent directors climbed steadily from 28.3% in 2021 to 53.6% in 2022.”

Challenges and obstacles

One of the findings outlined in the analysis section of the report “La relevancia de la independencia en los Consejos de Administración del Ibex-35” (The importance of director independence on boards of Ibex-35 companies) highlights that although the figure of the independent director is now indisputably established, it still entails considerable obstacles and challenges. The main obstacles are: restricted access to information, limited budgets for requesting outside advice, and overly frequent re-elections which prevent independent directors from protecting the company’s best interests. Meanwhile, the main challenges include the need to keep abreast of change and develop their own judgement about new responsibilities and risks in the realms of technology, cybersecurity and geopolitics, and the avalanche of legislation.

Quantitatively speaking, the analysis reveals that the percentage of independent directors has plateaued at around 55%, although nine Ibex-35 companies have yet to reach this level, and that even today the percentage of independent chairpersons remains low, at less than 15%. Another noteworthy detail is that the average mandate of independent directors has fallen over the last ten years to around 4.3 years, whilst that of nominee directors has remained 7.4 years, and that of executive directors has increased to 10.2 years. This reveals, according to the authors of the report, the need to strike a balance between the renewal of board members and the protection of ‘bothersome’ independent directors, hence the importance of being exacting and cautious when dismissing independent directors before the end of their mandate.

Recommendations by the Center for Corporate Governance and Georgeson include that the diversity in terms of gender diversity and experience expected of independent directors should also apply to nominee and outside directors, and they request a more thorough definition of overboarded directors, incorporating and adapting it to the circumstances of each company, taking into account their paid activities and particularly their executive responsibilities.

What directors say

The conclusions reached from the interviews of independent directors conducted for the report “La relevancia de la independencia en los Consejos de Administración del Ibex-35” (The importance of director independence on boards of Ibex-35 companies) tally largely with and expand upon those in the analysis section. When consulted specifically about the ideal duration of mandates, interviewees agreed about the minimum time for knowing the company (three years) and the maximum time for remaining independent (twelve years) and, although opinions varied regarding  the length of mandates, everyone agreed that the more opportunities there are for rotating independent directors, the more vulnerable they are and the greater the risk of directors regarded as ‘bothersome’ being dismissed.

The difficulties mentioned by interviewees included setting the board’s agenda, restricting discussion times, insufficient documentation provided and difficulties in accessing executives and advice or reports from experts. As for challenges, they added the need to increase the independence of boards and respond appropriately to the changes being made to boards, particularly in terms of responsibility, dedication, remuneration and independence.

As for recommendations, the independent directors interviewed for the report also requested greater safeguards for the independence of the board secretary, and for nominee directors with considerable participation to be more clearly differentiated from so-called lesser nominee directors.