Jordi Canals (Martorell, 1960) is a professor of Strategic Management at IESE and holder of the Chair of Corporate Governance. He was general director of the business school between 2001 and 2016.
Ask. What are the main challenges facing boards of directors?
Answer. The tasks of the management teams have not changed, what has changed are the circumstances. Now there is a lot of geopolitical uncertainty and technological changes have accelerated. The board of directors has the task of identifying these challenges, knowing very well what the company's objectives are and drawing up an effective roadmap to achieve them. To do this, it is key to mobilize teams, create work groups that work. When the triangle formed by shareholders, the board and managers collaborates in a company, things go well; If this balance is destabilized because the objectives or the deadlines to achieve them are different, that is when problems arise.
Q. Turnover in the position of CEO is increasing. Is so much change good?
R. This rotation, if done too frequently, is not good because it prevents the consolidation of projects that are usually long-term. It is true that, depending on the type of company and the geography in which it operates, mandates last more or less. In the US, for example, cycles are usually four years, while in Europe they last on average seven or eight. Additionally, tenures in family companies tend to be longer.
Q. In Spain, while in some companies rotation is accelerating, in others, there are CEOs who are perpetuated. Is there a risk that in certain cases the chief executive may have the company held hostage?
R. Here I refer to the triangle I referred to before. The board has the power to appoint the chief executive and he must surround himself with an adequate team to manage the company. In turn, shareholders have the key role of appointing board members. If the CEO has accumulated too much power, there is a structural problem. We are talking about a weak organization because someone is allowed to assume functions that do not correspond to them and because the board has abandoned its functions.
Q. Do you think that in Spain the corporate governance of companies has improved? Are the standards similar to other comparable countries?
R. In the last 40 years, corporate governance practices have improved greatly in global terms. The current system is not perfect, it has limitations, but the evolution is evident. In Spain we are below the most advanced countries in corporate governance such as those in northern Europe, but in some aspects we are better than France or Italy. The management teams have made notable learning in this matter, the boards are in the process of adaptation and where I see the greatest room for improvement is in certain shareholders, especially investment funds or venture capital. Being a shareholder of a company does not give you an absolute right, you cannot do anything. Shareholders have to learn how to act as shareholders in the 21st century, which is quite different from how shareholders practiced in the past.
Q. Speaking of shareholders, we are witnessing the return of state capitalism, with governments taking stakes in listed companies. What do you think?
R. I think you have to ask yourself several questions. The first is whether States have the capacity to make these investments without entailing an unnecessary financial cost at a time when there are challenges that require large sums of public capital. The second reflection is whether the entry into the capital of the companies can be done without their corporate governance being devalued. Suppose that a Government decides to become a shareholder in a company because it considers it strategic, does it also have to sit on the board of directors to influence it?
Q. How do you value the Government's entry into Telefónica?
R. I do not have all the information to evaluate the operation. Yes, I would like to know what the Telefónica board thinks about this. He hasn't spoken yet. If they published a reasoned note on why the State's entry is good, it is very likely that the rest of the shareholders would consider it valid. Currently, the most interventionist government is that of the United States. Biden has approved industrial laws such as the IRA or the CHIPS Act to protect his companies. And they have done it without having to enter their capital. I don't think the latter is necessarily bad, what I mean is that to influence a sector it is not necessary to take large share packages or sit on the board.
Q. Have the controls at Grifols failed?
R. Having a corporate governance system does not guarantee that, from time to time, there may be an accident. With the information we have, this is not a case of corruption or misuse of funds. Therefore, there is no crime. What there has been are bad practices in corporate governance and some confusion in the information that the company has been transmitting. Grifols did not know how to give a quick response to the questioning of its accounts and that has caused a crisis of confidence. But this information had been previously validated by the auditor and the CNMV itself. Furthermore, this crisis is caused by an investor [el hedge fund Gotham City] that he has certain interests and that he made insinuations about Grifols that are now being questioned.
Q. Puig is going public and has chosen a structure that differentiates A shares, with political rights, and B shares, only with economic rights. Do you think it is the best formula to gain the trust of investors?
R. This structure has advantages and disadvantages. The formula gained popularity, especially in the United States, in the late nineties of the 20th century. Many technology companies issued A and B shares because it was thought that the role of the founders was key in ensuring the long-term survival of the company and providing it with stability. Among the risks is that a single person can make very erroneous decisions without sufficient questioning.
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