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Barbari ad portas: golden leash prohibition as defensive weapon

Publicado en:Indret. Revista Per A L'anàlisis Del Dret. (3): 28-75 - 2022-01-01 (3), DOI: 10.31009/InDret.2022.i3.02

Autores: Lacave MS

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Resumen

This article analyzes the supplementary compensation system or “golden leash” that activists often use to incentivize their nominee directors in the boards where they are present. Spanish Corporate Law contains an overarching ban of any kind of third-party remuneration. Thus far, the current solution has stirred very little controversy in Spain. This paper offers a critical stance on the Spanish approach and solution. The view expressed in the article is that, among the Spanish rules on fiduciary duties (provisions to prevent directors from making conflicted decisions), there are two tricky instruments whose true aim is to prevent the nomination of minority directors to the board without the consent of the controlling shareholder(s): the permanent conflict rule and the prohibition of third-party remuneration. Their (actual, though undisclosed) function is to shield or secure the power of the majority to nominate the board and counteract the effects of the cumulative system. This regime places Spain at the top of the most unfriendly jurisdictions for shareholder activism among developed economies. The paper analyzes in detail the rationale of the ban -the fiduciary basis- and the authorization in the hands of the majority. The conclusion is that the golden leash can be beneficial for the corporation, and the waiver foreseen in Spanish Law is maladjusted to counteract the rigors of a very broadly configured prohibition. The paper advocates a narrow interpretation of the rule, limited to situations of conflicts of interests. According to this view, golden leashes should be legal if transparent and aligned to the interest of the corporation.

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