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Good Corporate Governance and Corporate Social Responsibility during the COVID-19 health crisis

| News | Corporate Law and M&A

José Ignacio Olleros states that good Corporate Governance is that which prioritizes, above the interest of the partner, that of the Company understood in a broad way

In the current Covid-19 crisis, it is especially important for managers to fulfil their duties of diligence and loyalty, which entails observing the best practices of Good Corporate Governance that must be especially observed at this time in the defence of the company's main asset that is crucial to protect: workers' health.

Among the recommendations to be adopted, I highlight, first, the adoption of measures aimed at ensuring the economic efficiency of society, to precisely promote the benefit and its continuity in the long term. It is clear that the extension of the deadlines for the drafting and auditing of the accounts provided for in RDL 8/2020 is an opportunity available for the directors to reflect on and rectify, if appropriate, the agreement initially envisaged on the distribution of results that is finally adopted by the General Meeting of the company in view of the current economic circumstances and the forecasts for the future. Likewise, the effect of Covid-19 as a "post 2019 accounting event" is of sufficient importance for its existence, as well as the consequences that may arise from it, to be reflected in the report, in the management report and in the statement of non-financial information.

Another measure of economic efficiency that should be considered for the sake of proper, transparent, unified, and ethical management of the companies is that related to the containment of the remuneration of the company's directors. It should be recalled that article 217.4 of the Capital Companies Law requires that such remuneration be reasonably proportionate to the economic situation of the company and consider the long-term sustainability of the company.

Secondly, I must stress the importance of strengthening the appropriate decision-making procedures of the directors, who should put all their efforts into the appropriate dedication and adoption of the necessary measures for the good management and control of the company. To this end, they will be obliged to demand and have the right to obtain from the company, or from external advisors, the appropriate and necessary information that will help them to fulfil their obligations. In the face of such an extraordinary and unpredictable situation as the present one, it will be necessary to increase the number of meetings of the Administrative Body without adhering to the minimum frequency of quarterly meetings foreseen in the Capital Companies Law. Also, by extension, the increase in the meetings of the different committees or working groups that depend on the Administrative Body, which should serve to broaden the base of participation in decision-making. The more people are involved in the action plans established by the Administrative Body, the greater the motivation and enthusiasm for their acceptance and monitoring by the whole company.

The new regulations recently approved by Article 40 of RDL 8/2020 provide for the possibility of holding meetings by videoconference or multiple conference even though the Statutes did not provide for it; this may force many companies to hold more efficient meetings than before. These telematic means will undoubtedly be valuable to reinforce decision-making and to "close" more quickly the approval and signature of the minutes and provide greater traceability and consistency of the decisive agreements adopted.

Can we come out of this crisis stronger? Let us be optimistic: this situation is forcing decisions under great uncertainty, which will give managers new skills and experience that will be valuable in the future. It will not be easy to make decisions without taking risks, but let's not forget that the Capital Companies Law confers some immunity to decisions taken discretionally by directors as long as they are taken without personal interest, with sufficient information and following an appropriate procedure to protect the social interest.

This crisis may also constitute a strengthening of the business ethics that must be pursued by the managers of companies, always giving priority to the greatest good or the least possible evil in the face of the moral dilemmas that they have to face in different areas (situations of insolvency, crisis dismissals, etc.). Those who make the decision should always put themselves in the place of the person who may be harmed by the measures to be taken. The state of non-financial information can be a more than suitable instrument for stakeholders to judge the effective assumption by the company of the values of business ethics and Corporate Social Responsibility policies.

Finally, we should not forget that Good Corporate Governance is that which prioritizes, above the interest of the partner, the interest of Society understood in a broad way (customers, suppliers, workers, educational communities, research centres and NGOs), which will lead to the adoption of increasingly consistent Corporate Social Responsibility policies, of active and voluntary integration by companies of solidarity policies for social improvement, whether it is a large listed company or a small SME in the food sector that wishes to channel its surpluses for social purposes. The adoption of such policies should not be considered as an expense, but as measures that will result in the good reputation of the company and the confidence that stakeholders will be placing in it, and a powerful subliminal message that will be sent to the market: that the company is working in the long term.

I echo the recent words of the Managing Director of a large multinational to say that it should not be unreasonable for a company to submit annual accounts to the General Meeting for approval with stable or even decreasing economic results compared to the previous year, if it has benefited broader layers of the company. Before the pandemic it might seem utopian, but the current circumstances will make it possible to "reset" the system. For, as Robert Bosch said, "It is always better to lose money than to lose confidence".

You can see the complete article at Actualidad Jurídica Aranzadi

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