Based on “Recomendaciones de Buen Gobierno Corporativo para empresas no cotizadas” (“Recommendations for Good Corporate Governance for unlisted companies”), an excellent study realized by IE Business School and Grant Thornton, from Private Investments Network we want to point out several recommendations and best practices for unlisted companies that we have found most interesting.
“All companies have to ensure an environment characterized by quality and integrity of information that is used by the Board of directors to take the best decisions”, claims Antonio Garcia-Lozano, Consulting Leader at Grant Thornton.
Listed companies follow corporate governance policies that are essential for the relationship with shareholders and, a logical question that the study sheds light on is: why not follow such policies in unlisted companies in order to achieve high performing boards of directors?
“Unlisted companies make up 85% of the Spanish industrial landscape. Nevertheless, the majority of the legislation and recommendations in force, as far as good corporate governance is concerned, is directed exclusively to listed companies. Extending good corporate governance to more business segments implies strengthening the sustainability and development of our companies and, by extension, our economy and society”, says Tomas Garicano, director of Good Governance Centre, professor at IE Business School and Senior Advisor in Corporate Governance for Grant Thornton.
The study is aimed at unlisted companies with an annual turnover higher than 750 million euros or an average personnel of more than 1,500 workers. Following, we highlight the main recommendations:
- The partners have to establish a corporate governance framework that, taking into consideration the regulations in force, adapts to their needs, their size and to the complexity of their operations
- It is appropriate distinguishing amongst the governance activities, administration, approval and supervision, entrusted to the board of directors, and operational management activities, entrusted to the executive board and the organizational structure of the company
- The members of the board of directors need to allocate the time needed to perform the tasks, meet periodically, assist to convened meetings and rely on timely information, the necessary advice and adequate training
- To ensure the transparency of information, it is recommended that companies disclose in an official channel the required reports or volunteers (auditor independence, committee reports and audit appointments and remuneration, if any, related operations and corporate social responsibility)
- There should be an information system that allows reviewing of topics prior to meetings and gathering, facilitating communication between members and optimizing meetings
- It is advisable to maintain sufficiently comprehensive minutes. The minutes of the meetings of the board are a reflection of what happened in those meetings and the relevance and depth of the issues discussed. They should be broad enough to capture both the matters discussed, such as the views expressed by the directors and their decisions made, avoiding various communication versions.
- It is important to have a system of relations with shareholders, allowing one to know their opinions, interests, and expectations; particularly when they are not all represented on the board. The system should have a continuous relations approach over time, aiming for a periodic relationship that goes beyond the meetings of the board of directors or holding the annual general meeting.
- One should at least communicate: financial and non-financial information, internal and external, of the present and future; that includes at minimum the issues related to the present situation and financial prospects of the company, the strategic plan, and its implementation risks, regulatory compliance, market and competitors; and, aspects of internal management and human resources.
From Private Investments Network, we offer a tool that allows unlisted companies to follow these policies within a private and secure environment, providing solutions to enhance the relationship with shareholders and other internal stakeholders.
The features of our platform allow one to maintain a transparent, segmented, and secure communication, managing processes such as: meetings, tasks, metrics, documents and even capital increases.
If you would like to know more details about how Private Investments Network helps companies, click here.
