The pandemic is causing a paradigm shift in the general meetings of Ibex-35 companies, according to Esade and Georgeson

The flexibility with which Ibex-35 companies have responded in holding their general meetings has led to a paradigm shift in the governance system of listed companies, which are now governed by a new, more technologically advanced model focused on different issues. This is one of the main takeaways of the report ‘El impacto de la Covid-19 en las juntas de accionistas del Ibex-35’ [the impact of Covid-19 on Ibex-35 company general meetings], prepared by the Esade Center for Corporate Governance and Georgeson, which analyses the formal aspects of how these sessions are held, the topics of the proposals put to the vote at them, and the most important issues to be addressed at the meetings in 2021.

According to Mario Lara, director of the Esade Center for Corporate Governance, the study shows that ‘our governance system works’. In his opinion, ‘We have overcome the traditional rigidity that characterised our regulatory system with unexpected agility and speed.’ ‘We are dealing with an undeniable paradigm shift, in which we have gone from a face-to-face model resistant to change to an eminently technological one that is much more advanced and is definitely here to stay’, he said. 

‘These advances were made possible by both the significant changes Spanish lawmakers have made to the regulations and the work carried out by the companies themselves’, added Carlos Sáez Gallego, Country Head for Spain at Georgeson. ‘Industry stakeholders have managed to adapt to the circumstances and act effectively to meet the challenges posed by the pandemic.’

A new, more technological and advanced model

From a formal perspective, the Esade and Georgeson study reflects the widespread postponement of general meetings in the 2020 season – whilst 79.4% of Ibex-35 companies had held their general meetings by May in 2019, only 51.5% had done so by the same month in 2020 – and their subsequent holding online, a circumstance that has placed Spain amongst the European countries with the most companies deciding to incorporate this formula into their sessions.

With regard to the matters discussed at Ibex-35 company general meetings, the study highlights that ‘important changes have taken place and the focus has shifted to issues that, in other years, would have been less important’. Amongst other changes, the report points to changes in shareholder remuneration (made at 20 companies, 60.6% of the index), changes in share buyback plans (14 companies, 42.4%), by-law amendments to adapt the internal regulations to the new virtual meeting models (11 companies, 33.3%) and adjustments in the remuneration of senior management (12 companies, 36.4%). It also underscores that many investors, who, under normal conditions, would not have supported a proposal to delegate to the Board capital increases without preferential subscription rights of more than 10%, this year have shown support for them in the face of the crisis and, in light of each company’s specific rationale, voted in favour of them.

Of the issues to take on most importance this general meeting season, the report highlights the more social dimension of the ESG criteria (environmental, social and governance), noting that ‘it has been clearly reinforced, as almost all Ibex-35 companies have taken social measures to help improve the situation of their stakeholders and society at large’.

New challenges and trends

With regard to future trends, the experts at Esade and Georgeson predict that the driving forces for next year’s meetings will be related to the updating of corporate risk maps, contingency and succession plans, board and senior executive compensation plans, board composition and the new skills and capabilities required, and the possible changes in the types of investors that make up the shareholders.

Digitisation will also be high on the agenda of all the boards and their main committees, especially from the point of view of cybersecurity and artificial intelligence – understood as a tool for the board to test proposals. ­Other, non-financial matters will also take on a more important role, such as the ESG criteria and the adoption of new measures from a stakeholder, and not just shareholder, perspective.