SPAIN
Unscrewing the Voting Rights Cap
When describing the Span- ish government’s legislative push this spring to remove
a popular takeover defense mechanism,
many people use the word tejemaneje, a
melodious term for backroom political or
financial scheming. So little is understood
about the government’s motive for what
is seen by many as an illogical move that
Spaniards are left to feast on rumors: The
most popular speculation is that the pro-
posal is a favor to a few important com-
panies. One unhappy lawmaker calls it an
attempt at “privatizing parliament.”
In early April the economic commit-
tee of the lower house of parliament ap-
proved an amendment that will eliminate
company bylaws that limit a shareholder’s
voting rights to a maximum percentage
of votes no matter how much stock the
shareholder owns. The option is designed
to protect minority shareholders, but it is
also used to stave off hostile buyers. The
final vote on the amendment is expected
before the summer. If successful, the mo-
tion will take effect mid-2011.
According to stock market regula-
tor Comisión Nacional del Mercado de
Valores, 15 companies—seven on the
benchmark IBEX 35 index—cap vot-
ing rights. Eight companies set it at 10
percent, including Iberdrola, S.A., Rep-
sol YPF, S.A., Telefónica SA, Banco de
Sabadell, S.A., and Banco Popular Es-
pañol, S.A. At the other companies, the
cap ranges from 3 percent at
Enagás, S.A. and Red Eléctrica
de España, S.A.U. to 33 percent
at S.A. Damm.
Removing the voting rights
cap came up when the Euro-
pean Commission was prepar-
ing takeover legislation in 2004,
explains Miguel Trías, manag-
ing partner of the Barcelona of-
fice of Cuatrecasas, Gonçalves
Pereira. However, after the
E.C. in 2007 gave member
states the choice of whether
to keep caps, many countries,
including Spain, decided not
to remove them. Currently the
rules vary across Europe. Caps
are the norm in France and It-
aly, while only a few companies
in the United Kingdom impose share-
holder voting limits. German companies
prefer to frustrate hostile bids via the
country’s system of preferential shares.
The Spanish government has said—
without going into much detail—that the
move aims to democratize boardrooms.
The Spanish press has dubbed the re-
form the Florentino amendment, in
honor of Florentino Pérez, the chairman
of builder Actividades de Construcción
y Servicios, S.A., the largest shareholder
in energy company Iberdrola, with 12. 6
percent. Pérez wants reportedly more
decision-making power in Iberdrola and
a seat on the board. Iberdrola management, however, does not appear keen on
the idea. A similar power grab simmers
at oil giant Repsol, where construction/
energy firm Sacyr SA (with a 20 percent
stake) has bickered with management
over strategy.
“This [proposal] seems like impulsive
legislation, and it makes me suspicious of
the government’s motives,” Trías says. “In
general, most lawyers are against having
these antitakeover mechanisms, but because there is no consensus in Europe,
many lawyers think that a country that
forces companies to give up their shields
ITALY
Don’t Google Me
When three executives of Google Inc. were convicted of violating Italian
privacy laws by a Milan judge earlier this
year, the American Internet giant wasn’t the
only company to take note. After the ruling,
under which the three employees received
suspended six-month prison sentences,
lawyers say other multinationals active on
the Italian market have been seeking legal
advice to better understand the possible
implications for their own privacy policies.
(Google is appealing the decision.)
“The Google case had no precedent,”
explains one lawyer who follows privacy is-
sues for an American law firm in Milan, and
who asked not to be named. “This is the
first time there have been criminal conse-
quences for the violation of privacy law.” Yet
things could have gone even worse for the
Google executives. Italian law allows prison
sentences of up to three years for privacy
violations, notes Gianluca Cattani, a Rome-
based partner with Delfino e Associati, the
Italian affiliate of Willkie Farr & Gallagher.
“Italian privacy regulations are among the
strictest in Europe,” he says.
The video remained on the Google site for
two months and was removed after a complaint from Vivi Down, an advocacy group
for people with Down syndrome mentioned
in the video.
Magi ruled that Google had no preventive obligation to control data being
uploaded into its system but that it could
be more vigilant in the screening process.
He also said Google had an obligation to
make privacy policies clearer to third-party
users. The privacy policy posted on the
Google Video home page at the time the
video was uploaded was hidden within the
general terms of use, making it “ineffective
for the purposes provided by the law,” the
judge found.
