There has been an unseasonal tension on some of Spain’s more exclusive beaches over the past month. August is usually a time for the great and the good of industry to leave the stresses of the cities behind them and unwind by the sea. But for the chairmen of some of the biggest companies, the holidays were spoiled by the knowledge that in the autumn they will be fighting for their jobs.
In Spain, boardroom change follows political change as regularly as the seasons. The ties between government and the corporate sector are no stronger than in other western economies, but they are different. In Spain, directors need the patronage of ministers, and not the other way around.
Spanish finance minister Pedro Solbes served notice on directors at the beginning of August. “I want to see managers who are honest, professional and defend the interests of their businesses,” he told Europa Press.
“The government is not pushing any one option,” he added. “But what we have been looking at, and in many cases have been surprised by what we have found, are the qualifications of some of the people who have been appointed to directorships.”
The Spanish media interpreted this as a warning to Spanish directors en masse, a reasonable interpretation given that the chairman of two of Spain’s biggest companies, Hispasat and Red Electrica de España (REE), had already been dispatched since Solbes’ socialist party took over in March.
In case there remained any doubt, Solbes added his own acid tribute to Hispasat’s former chairman, Pedro Antonio Martín Marín, who was also a minister in the previous Popular Party government: “I’d like to know exactly what were the major elements of technical expertise that led to the appointment,” he asked.
Opinion in the market was in line with the press, even if some felt that the finance minister was being a little heavy handed.
“This is clearly a political issue,” says Jaime Figeroa, director of fixed income at Credit Suisse in Madrid. “You can’t deny that corporate governance is not as well advanced in Spain as it is in some other countries, but all the same I think Solbes’ comments are a bit excessive. After all, we haven’t really seen many abuses in Spain.”
A finance ministry spokesperson argues that Solbes was trying to clean out the cronyism that has shadowed Spain’s largest corporations. “The political persuasion of directors isn’t as important as the fact that they are honest and act in the interests of shareholders,” the spokesperson says.
Nevertheless, when it came to choosing a new chairman for REE the board appointed Luis Atienza, a minister in the previous socialist government. “It does send out the wrong signal,” concedes the ministry spokesperson, “but we were looking for someone who had an understanding of Spanish industry and government.”
Solbes has a relatively free hand to intervene in REE. The government still owns 28% of the company. In other areas, however, things are more complicated.
In some of the state companies that have been part privatized, such as Repsol and Telefónica, the government retains a golden share. Until next year at least (the EU has called for it to be removed) the golden share gives the government a veto over key strategic decisions. It has never been used, but it is nevertheless a key bargaining chip.
Alarm bells
The government has no holding whatsoever In banking group BBVA but the authority of the finance ministry and the unofficial levers it can pull mean that Solbes’ comments have set alarm bells ringing.
ABC newspaper reported that Francisco Gonzalez, chairman of BBVA, went to see Solbes as soon as his comments were published. He has also requested a meeting with prime minister José Luis Zapatero.
BBVA declines to comment on the reports. The finance ministry spokesperson says the government has contacts with all of the country’s major financial institutions.
Gonzalez has cause for concern. He is a well-known supporter of the opposition Popular Party and he owes his position to its patronage. He also fired Miguel Sebastian from BBVA. And Sebastian is now prime minister Zapatero’s chief economic adviser.
But while Spanish chairmen certainly have plenty to fear from the new government, investors are confident that the socialist government won’t do anything to damage shareholders’ interests.
“Whenever there is a political change the positions of corporate chairmen are always called into question,” says Olympia Riquelme, a private banker with Safei, a fund management and brokerage house. “Solbes will make changes over time, but he has also reassured the market that he won’t do anything too radical too quickly.”
For most chairmen there is still time to persuade the government that they can do the job required. Others might have signed their last corporate Christmas card. But they will at least be able to make up for their disrupted summers. The sun can still shine and the beaches are quiet in December.
