The difficult solution to the Gordian knot on the advice of Indra

Last Tuesday, May 21, the board of directors Indra unanimously approved resignation of independent director Elena García Armada to make way for Javier Escribano, group’s own representativeNotary. The defense company, with an 8% stake, became the technology group’s second-largest shareholder. only for the state Sepi (28% of capital), but ahead of other groups such as the Guipuzcoan Defense firm. Sapa (7.94%) and from Amber Fund (7.25%), who were already present at the council.

This decision makes it easier to decide on the placement of Javier Escribano on the board, but it two drawbacks already known in advance.

Two problems

The first is Until now, Indra’s board had 50% independent members.with eight out of 16. With the departure of Elena Garcia Armada and the arrival of its own member such as Javier Escribano, this balance is brokensince as of the general meeting of shareholders on June 27, the board of directors will include 7 independent and 9 non-independent, including executive (3) and own directors (6), that is, a total of 16, thus independents will make up 43.7%.

Thus, Indra will now not comply with the Listed Companies Code of Good Governance. which has hitherto complied with this aspect, although it has already violated it in another aspect, having more than 15 members – the maximum recommended by the Code.

Another problem is that When a man comes after a woman, the percentage of female members drops from the previous 37.5% to 31.2%. (5 out of 16), i.e. quite far from the 40% recommended by the Code of Good Governance. and that it will become a legal requirement when the law comes into force. Parity Law. It is because of these obvious shortcomings that the company itself noted on Tuesday that This composition of the council “is temporary” provide access to advice to an investor who is eligible, as well as “temporary as it must adapt and restore the necessary balance”. Indra explained that “he will ensure that there is a board whose composition and structure is consistent with the recommendations and principles of the Code of Good Governance.”

Design of the faces of Indra’s council a situation in which it appears difficult to reconcile the rights of major shareholders with compliance with the recommendations of the Code of Good Governance. It’s like blowing and drinking at the same time.

The main obstacle is that There is an important part of the capital (51.19% if you add Sepi, Escribano, Sapa and Amber) that wants to be on the board.. AND this will take precedence over recommendations because this is a legal requirement. With 16 members, the package required to claim each director is 6.25%. In fact, therefore, with those 28% who have Sepi will even be entitled to a fourth member compared to the three it currently has, further increasing the imbalance vis-à-vis independents.

Anyway, it is difficult to reduce the number of dominant vowels, that with the arrival of Javier Escribano there will be six of them, including three from Sepi, plus one from Sapa and another from Amber. In this situation, some sources indicate that Among the Code’s recommendations, some are not of greater importance than others, and therefore there is no higher priority in meeting the 50% independence requirement. which recommends not exceeding 15 members, since very large councils – and Indra already has 16 – become unmanageable.

Facets of Control

However, the decision made is not without its drawbacks when faced with another possibility that was expanded the council to 18and also gives access to one more independent user to recreate the balance of 9 non-independent and 9 independent.

Among these aspects, one can note the fact that maintaining a balance of 50% independents was one of the fundamental arguments that led the CNMV to reject the existence of a concerted effort by Sepi, Sapa and Amber to take control of the company. at the famous meeting in June 2023, when three shareholders “jointly effected the dismissals” of five independent directorsThis is stated in the regulator’s report.

Concerted acts are not a crime and, as stated, Rodrigo Buenaventura, President of the CNMV in his speech to Congress, if it were believed that these concerted actions took place, the result This would not be a “sanction, file or fine”, but rather an obligation to apply for a 100% takeover of the capital by Sepi.

In its investigation, the CNMV took into account that the fact that 50% of independents continue to exist is a contraindication to the hypothesis of concerted action.. The CNMV also indicated that another argument or contraindication to the agreement was the fact that “the powers of the non-executive president have not been changed”, which also changed recently. On April 30, the council decided to grant the president executive powers in the corporate sphere and dialogue with public administrations and governments. Although in both cases – the entry of Escribano and the executive character of Murtra – the decisions of the council were adopted unanimously. However, as Buenaventura noted, CNMV announced that in the future it will “monitor the situation and decision-making in the company.”.